Balancing innovation and fair play needed: CCI chairman Ashok Kumar Gupta

The Competition Commission of India (CCI) has discovered prominent digital tech giants are using their ecosystem to stifle competition through a network effect. Ashok Kumar Gupta, outgoing CCI chairman, tells Shrimi Choudhary the regulator wants to ensure that every player gets an equal and fair chance to succeed in its market segment while ensuring that it doesn’t use the network effect to push smaller players out of markets. He says the new competition Bill, being reviewed by a parliamentary panel, will provide greater certainty to new-age businesses. Edited excerpts:

Do you think recent action against some digital giants will curb anti-competitive conduct without discouraging new-age markets to innovate?
 

We are clear enforcement should not impede innovation. But the point here is that it is a technology market that is transient and keeps replacing entities. Of late we found it was not happening. They (prominent players) have got enduring power because of network effects. They have a multi-product ecosystem. And once they become dominant in one, they start using that dominance to enter adjacent markets and start fending off others. We are ensuring an equal and fair chance to every player.
 

The CCI has taken on big tech during your tenure. What are the challenges you faced and how do you see the CCI’s role evolving in this space?
 

Digital markets have characteristics that make them vulnerable to anti-competitive practices. For instance, their most peculiar feature — the network effect — provides data collection advantages and creates a lock-in effect that would eventually result in entry barriers.

It would also limit the possibility of potential displacement of market power. Consequently, the markets may become more concentrated with large players, and small players would become competitively unviable. But having high market power is not frowned upon in an antitrust framework. Taking such a stance would damage incentives to innovate. The CCI has to strike a balance between innovation and fair market practices. To achieve it, we try to balance between short-term static gains and longer-term efficiencies. Our approach is not static and varies from case to case. We follow a nuanced assessment where the facts of the case and the underlying market and technology take centre stage. Our approach is calibrated in nature so that intervention remains effective and targeted; it does not restrain innovation and would in turn help the market to regulate itself.
 

The existing principles and rules of competition law are sufficient and provide enough flexibility to address anti-competitive practices emerging in the digital space. In cases where there exists a regulatory gap, for instance in merger control where transactions escape the jurisdictional threshold of the Competition Act, the amendment Bill is introducing a deal value threshold as an additional notification criterion. This would bring the acquisition of low-turnover, asset-light and data-rich digital enterprises within the fold of a merger review.
 

Case-by-case antitrust adjudication allows for a nuanced, evidence-based analysis of the effect of a specific business conduct. However, the requirement of gathering “sufficient” evidence to discern the complex effects of conduct and establish liability, ensuring procedural fairness in the investigation/adjudication process, and a judicial review of decisions make this a long route to effectuate regulatory interventions in markets. In fast-moving digital markets, protracted litigation and delayed interventions could prove to be expensive or even futile.
 

Thus, several jurisdictions are in favour of complementing competition law enforcement with some form of ex-ante regulatory framework to ensure timely and effective action against risks of anti-competitive practices by critical/large digital platforms in fast-evolving digital markets.
 

Some recent proposed acquisitions in the fintech space fell through due to delays in regulatory approvals. Your take on this?
 

We need to be sensitive to market demand while approving proposed acquisitions. We need to definitely see whether the combined entity meets all parameters but we should deliver the results fast. Our delays could have an adverse impact and that realisation should be there.
 

The Competition Bill is with the standing committee. Would you have any inputs?
 

The Competition Amendment Bill has been mooted keeping in view the significant growth of Indian markets and a paradigm shift in the way businesses started operating in the last decade. In fact, the Bill itself was an outcome of recommendations made by an expert panel set up by the government to suggest modifications in the law in the light of economic development, the emergence of various business models, and the experience gained so far. The thrust of the proposed amendments is to provide regulatory certainty and a trust-based business environment. The committee will start hearing the matter from this month-end and has sought CCI inputs on that.
 

The proposed amendments introduce the deal-value threshold as an additional criterion for notifying mergers; exempt stock market purchases from Standstill Obligations; bring commitment and a settlement framework in the statute book; and reduce timelines for facilitating a faster review of merger notifications. The Bill also broadens and deepens the scope for inter-regulatory consultations — a crucial area for reforms to avoid regulatory overlaps, considering the overarching and cross-cutting role of technological markets requiring interventions by different regulators.
 

What do you think will be the major focus areas of the CCI for the next three years?
 

Intervention in digital markets will be key area to watch. Concurrently, at policy level, we need to study the feasibility of adopting an ex-ante framework on the lines of the Digital Markets Act of the European Union.
 

The CCI is addressing competition concern in digital markets through our antitrust enforcement measures, which are essentially ex-post. However, the need and rationale for ex-ante regulation to supplement these efforts of the CCI cannot be over-emphasised in view of the experience gained and difficulties faced by the CCI in effecting timely market correction in digital markets.
 

The recovery rate of the CCI has been low. Why so?
 

Most of these have been stayed by courts or set aside…We are more focused on the market correction part and not the penalty.