Regulating Big Tech

Laws should be framed with extreme care

The Parliamentary Standing Committee on Finance has submitted a report suggesting that new digital competition regulations be drafted to prevent Big Tech companies indulging in anti-competitive practices. The details of any such regulation would need to be carefully worked out to avoid stifling innovation. There is rising global scrutiny of Big Tech companies such as Google, Apple, Facebook and Amazon, for their alleged abuse of market positions and misuse of user data. The Competition Commission of India (CCI) is already in the process of setting up a special group, the dedicated Digital Markets and Data Unit (DMDU), to monitor digital markets. Digital markets present special challenges as market dominance here can be exploited in ways different from those in brick-and-mortar businesses. Access to these markets can be contained through blocking, or charging huge commissions, or by enforcing restrictive contracts that prevent products being sold via other channels. All of these have occurred with mobile app marketplaces.

The platform owner may also offer its own products, setting up conflicts of interests and hurting competition. Discrimination between the display and treatment of own products versus those of competitors must be prevented. This is especially relevant with search engines and marketplaces. Above all, dominant platforms garner lots of user data which they can analyse and exploit in many ways. The use of data must be carefully monitored. The CCI has fined Google twice — to the tune of Rs 936.44 crore and Rs 1,337.76 crore — in separate cases this year. It is investigating Apple for its in-app purchase system. The Supreme Court has greenlighted the CCI’s probe into WhatsApp’s privacy policy, which relates to allegations that the messaging platform shares user data with its parent Facebook. The report suggests ex-ante regulation, which would be cautionary and based on anticipated changes. It has also said there is a need to frame a definition for “systemically important digital intermediaries” or SIDIs — businesses that require tighter regulation. Such a classification could be based on metrics like revenues, market capitalisation, and the number of active users.

The committee has suggested the CCI induct “skilled experts”, academics, and attorneys, to ensure it closely monitors SIDIs as well as emerging SIDIs. In addition, it has suggested SIDIs submit an annual compliance report describing how they have fulfilled their obligations. The committee has identified at least 10 such anti-competitive practices that it wishes to curb.  For example, it wants anti-steering provisions to prevent a website such as a search engine or marketplace from steering users to products or services offered by itself or a related entity. The panel has also highlighted the need to curb deep discounting of products, bundling and tying together of services, and the need to prevent Big Tech using personal data (directly or via third-party services) for targeted advertising. The latter practice has led to a war between Apple and Facebook after Apple created tools that users may deploy to prevent Facebook taking data off iPhones. Encouraging competition and allowing the play of market forces is important. But over-regulation could also prevent innovation and growth. So, this is like walking a tightrope. Moreover, the scope of the CCI to protect personal data and prevent its abuse is limited in the absence of a personal data protection law. While the committee’s recommendations are unexceptionable in theory, this must be navigated carefully in practice.