The draft Digital Competition Bill, 2024 is so heavily influenced by European regulation that it feels like yet another example of premature imitation. Which is strange considering that we can so easily leverage our DPI to deliver much more nuanced outcomes.
Regulating the intersection of data protection and competition is hard. Dominant platforms can leverage user data to create monopolies, limit user choice and raise competition concerns. As India prepares its own data protection law, it should try and avoid regulatory overlaps and strike a balance between data protection and competition regulation.
Issues of privacy and competition often overlap and we need a coordinated approach between regulators. That works in the US and EU where both the privacy and the competition regulators are active. In India, where we are yet to establish a privacy regulator, the competition commission will step in and regulate privacy aspects of data businesses from a competition perspective. There is a risk that privacy will be decided from a competition perspective. We need a data protection authority asap.
The Competition Commission of India has argued that since privacy is a non-price factor of competition, the competition regulator can regulate it. Privacy is a specialised area that should not be entrusted to a regulator that brings a purely economic lens its regulation.
The National Payments Corporation of India (NPCI) is considering reviving a proposal to limit transactions per entity in the Unified Payments Interface (UPI) ecosystem to prevent market dominance by a few players. Currently, three major players dominate the market, with two accounting for 77% of transactions. The NPCI aims to mitigate systemic risks and promote competition. There are alternative measures like leveling the playing field, regulating data control, and allowing more participants, rather than imposing transaction limits, to ensure a diverse and competitive UPI ecosystem.
In 2011, a biology book was listed on Amazon for $1.7 million, eventually reaching $23 million due to two sellers’ algorithms reacting to each other’s pricing. This incident underscores the challenges and potential regulatory issues as businesses increasingly rely on algorithms. It has gained attention in legal contexts, including Indian courts, where cases challenge the legality of pricing algorithms used by ride-hailing companies.
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.
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.
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.
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.
