The competition law and data advantage conundrum

Competition law is challenged by the unique dynamics of internet platforms, which prioritize growth and customer lock-in over short-term profits. These platforms often operate at a scale that traditional businesses can’t match, and their data advantage allows them to tailor services precisely. While this leads to better user experiences, it also results in a winner-takes-all dynamic, limiting customer choice. Regulating these platforms is complex, as breaking them up might deny consumers the benefits they offer, and traditional competition remedies may not be applicable to the digital market.

Of digital competition and data transfer principles

The UK’s Digital Competition Expert Panel report addresses digital market competition, expressing concerns about the harmful effects of concentration due to network effects in digital platforms. It recommends developing systems based on open standards for greater data mobility and openness, similar to India’s financial data transfer systems. The report also suggests establishing a new Digital Markets Unit for competitive conduct and reevaluating merger regulations to consider future innovation and competition impacts. However, the feasibility of accurately predicting the outcomes of tech acquisitions is questioned, suggesting that implementing effective data transfer systems might suffice to enhance market competition.

For the digital world, customer is truly king

Over the past five years, the internet has seen the growth of large technology platforms in various sectors, leading to concerns about competition. Social media and aggregator platforms create a lock-in effect, where users and suppliers feel compelled to join popular platforms, leading to potential monopolies. Traditional competition law views monopolies as harmful, but these platforms challenge this view by improving consumer choice and service quality. However, this shift in market dynamics may harm smaller suppliers, suggesting a need for regulatory protection for these market participants.

Intermediating supply and demand

Traditional market models, focusing on supply control of scarce commodities, are outdated for the internet age. Modern tech companies grow by enhancing user experience and creating demand-driven platforms. This self-perpetuating cycle benefits consumers, challenging the need for market fragmentation. Indian competition authorities should independently assess the best approach to truly benefit consumers, even if it diverges from global norms.

Colluding Algorithms

Auto rickshaw drivers often charge more than the metered fare in response to market dynamics, similar to surge pricing in ride-hailing apps. This raises competition law concerns, as algorithm-driven pricing could lead to unintentional collusion, setting higher equilibrium prices. The challenge for regulators is to adapt antitrust laws to address potential collusion by autonomous algorithms, which can independently develop strategies for profit maximization, including tacit collusion, without overt intent or agreement.