Digital Markets: Upcoming Changes In Global And Domestic Jurisprudence
Digital technology has become an extremely important element in our lives and is
now even further deeply seated in our day-to-day activities due to the onset of
the Covid-19 world pandemic. A plethora of daily tasks and functions have
transitioned to the online digital sphere such as office work, daily
communication and purchasing goods amongst a myriad of other things. With
increasing importance of this sphere certain legal questions also arise around
the medium such as protecting the data of consumers and businesses, legal
liability around information posted on various platforms et cetera.
shall however limit itself to the legal questions and problems arising around
the operation of digital online platforms in the backdrop of competition law and
focus on metrics such as market power, online dominance in a digital eco system
and various possible anti-competitive behaviors that can ensue in the digital
forum. It would behoove us to know that the 10 largest technology companies in
terms of accumulated market capitalization are valued over 10 trillion US
In addition to the same, the world bank as well has showcased that
the digital economy now stands at an evaluation of 15.5% of the global Gross
Domestic Product (GDP), with a growth rate that is 2.5 times faster than the
growth the global GDP in the last 15 years. We can therefore surmise the
urgency of addressing anti-competitive issues in the digital space which is
gaining utmost importance in contemporary times.
It is needless to say the 'Big
Tech' companies have amassed a lot of competitive power which has to be
regulated by Anti-Trust competition laws by entities such as the Federal trade
commission (FTC) and the Justice department's Antitrust Division (DOJ) in the
United States alongside the European Commission in Europe and the Competition
Commission of India (CCI) in India. In the recent years there have been a myriad
of litigation cases against Big Tech companies such as Google, Apple, Facebook,
Amazon et cetera.
The United States and the European Union are introducing new
legislative proposals to better address the ever evolving and dynamic digital
markets; however, India has however not proposed any new legislations. This
paper shall explore the current anti-trust doctrine in European Union, the
United States, alongside discussing and comparing the new legislative proposals
of the European Union and the United States and separately looking at India's
tussle with digital markets by discussing recent CCI judgements.
The Need for Separate Regulation
Due to characteristics of the digital market such as self-preferencing,
exclusive access to data, network and lock in effects creating high entry
barriers, vertical integrations and price cutting there arise some concerns
which the current traditional antitrust laws are ill-equipped to address. A
platform starts to become dominant in its own digital eco system due to the
network and lock-in effects of a service.
Ergo, a higher number of users of a
platform creates a large customer base which then goes on to create an inherent
preference for a platform which has the most prominent and dominant
network. This leads to exponential growth of the platform without any
guarantee of increase in quality of the service provided by a platform and also
increases the market costs.
The increased market costs would now require high
investments from new platforms for building their own brand against the dominant
network platform and data collection by the new platform to stand the chance of
functioning in a digital market.
Business users also have a dependency on a platform with the largest customer
base and creates a dependency on the platforms service to sell their own
products or services to the end users in cases where the platform itself would
act as in intermediary.
An example of the same can be the Amazon platform on
which multiple business users are dependent on for selling their own products
due to Amazons large customer base. Taking advantage of this dependency
platforms such as Amazon can then further create dominance across other
sectors. For example, Amazon has entered the online entertainment market
creating its own music app 'Amazon Music' and Over-the-Top platforms such as
In another scenario, companies also compete alongside the product of the
platform on which they are selling their own products and or services. In such a
case, platforms can be seen practicing self-preferencing, in which they , by
using data of the competitors' sales are able to better customize their own
services and products towards a customer's needs in order to gain a competitive
advantage. The data of the competing companies help the platform to avoid
failures and disadvantageous strategies which leads to unfair competition
between the products of the platform itself vis a vis the products and services
of the companies using the said platform.
The Current Legal Frameworks and Their Drawbacks
The European Union, under article 101 of the 'Treaty on the functioning of the
European Union' (TFEU), emphasizes on prohibiting agreements which are
anti-competitive due to restricting preventing or distorting competition in the
single market. It further prohibits abuse of a dominant position by any market
player under Article 102 of the TFEU, regulates merger control under the
European Council Merger Regulation, with an ex-post case by case analysis
The current regime has been recognized to be ill-equipped to address
digital market concerns on multiple fronts.
Firstly, the online platforms are
dynamic and multisided, due to which they are diversified into multiple markets.
The current law triggers intervention in only one defined narrow relevant market
at a time.
Secondly, many companies have online platforms which produce
anti-competitive behavior but do not fit the contours of the present definition
Thirdly, the European Commission only triggers investigation
when the abuse of dominance has taken place by the time of which a great deal of
damage has already ensued. Fourthly, a high threshold of evidence in the TFEU calls for a detailed case by case analysis to prove an alleged misconduct
in which online platforms seem to evade scrutiny.
Lastly, some national
antitrust laws of member states have different thresholds which causes
inefficiency in addressing the anti-trust practices of the online platforms of
these Big Tech companies which function in a cross-border fashion.
In the United States, the 'Sherman Act' prohibits formation of cartels and
monopolizing illegally under Section 1 and 2 of the said Act. Merger control is
assessed under the 'Clayton Act' and the 'Federal Trade Commission Act'.
The United States antitrust doctrine stems from the Chicago school and focuses
on consumer welfare and short-term efficiency in market practice. The
current law of the United States is also not able to adequately address digital
Firstly, much like the European Union laws, in the United
States also the anti-trust laws apply once a violation or anticompetitive act
has occurred, that is in an ex-post fashion rather than addressing the concern
in its nascent stage. The network effects of a platform or company do not
come under scrutiny if there exists a possibility of competition for a dominant
position, but only when it becomes a case of "winner-takes-all".
outdated presumption of predatory pricing is unable to capture the modern price
cutting strategies of the companies with multisided online platforms due to
which they evade scrutiny. Digital market platforms by the virtue of being
in multiple markets are able to undergo losses for a very long duration for
building their dominance in a digital market space by using profits from digital
markets in which they are well established and the same is not captured in the
understanding of predatory pricing in section 2 of the Sherman Act, which
requires losses to be incurred in a short time span and in the same relevant
Lastly, much like the European anti-trust laws, the US anti-trust
laws also have a high threshold of evidence for proving anti-competitive
behavior due to which companies are able to evade scrutiny. For example, the US
anti-trust laws built on the bedrock of the Chicago school would not prohibit
certain mergers due to the understanding that vertical integration increases
Upcoming Legislative Proposals
With the above discussion it is now clear that the antitrust doctrines of both
the European Union and the United States are outdated, rendering them incapable
of addressing dynamic and evolving concerns of Big Tech companies and their
online platforms. Therefore to address these concerns both the European
Union and the United States have set out to introduce new legislative proposals
in order to deal with the problems at hand.
The Digital markets Act is a legislative proposal of the European Union which
will act in congruence with the existing European anti-trust laws, is
expected to come into effect by the year 2023 and will specifically address the
concerns of the digital online sphere. The proposal introduces a new legal
concept of a "gatekeeper" to classify online platforms which have formidable
control in their respective digital eco systems.
Under the Digital Markets Act a
gatekeeper has been defined under Article 3 as company platforms which have
significant impact on internal market with presence in a minimum of 3 member
states, act as intermediaries connecting at least ten thousand business
users to forty-five million customers or end users in the previous financial
year,and an entrenched and durable position by virtue of having a turnover
of more than 6.5 billion and meeting all the criteria for the previous 3
Once these criteria are met a company is presumed to be a
gatekeeper, and the onus of rebutting this presumption lies with the company
that has been classified as a gatekeeper under Article 3(3) of the Digital
Markets Act. Apart from these assessment criteria, a company can be presumed to
be a gatekeeper by a case-by-case analysis through market investigation
conducted by the Commission under Article 3(6). In market investigations the
Commission will assess on factors such as entry barriers due to network effects,
leveraging potential and market capitalization amongst other market
Once a company platform is established as a gatekeeper it has to follow two
lists of obligations under Article 5 and Article 6 in an ex-ante fashion. In
terms of positive obligations, a Gatekeeper has to grant access to user data,
create interoperability with the gatekeepers' service or product, allow for
business users to be able to connect with customers found on the gatekeepers'
platform via external mediums and have transparency in the advertising amongst
In terms of prohibitions a gatekeeper is prohibited from
preventing users to uninstall preinstalled apps, self-preferencing, preventing
customers from connect with business users from outside mediums amongst other
things. The two lists ensure in an ex-ante fashion which to act before an
anticompetitive behavior has occurred, that a gatekeeper does not exploit its
dominance without affecting a gatekeeper ability to enjoy its economies of
Some of the other relevant articles in the Digital Markets Act are Article 10,
16, 18,20,21,24, 26 and 27 which would be required to be understood to better
understand the application of the said Act.
Under Article 10 the Commission can
introduce new obligations to tackle future anticompetitive concerns that can
arise due to the ever-evolving nature of digital market sphere, alongside
granting more remedial powers under Article 18, the ability to access and
request information under Article 20, conduct physical inspection under Article
21 and monitor the compliance of a gatekeeper with the two lists under Article 5
and 6 under power prescribed to the Commission with Article 24. In the event of
non-compliance by a gatekeeper there are provisions for fining the company under
Article 26, Article 27, and structural remedies under Article 16 of the Digital
The United States
A bill was introduced in the United States on the 4th of February 2021 under
the titular name of Competition & Antitrust Law Enforcement Reform Act (CALERA)
to reform assessment criteria of exclusionary conduct and merger control by
proposing to introduce a plethora of changes, such shifting the burden of proof,
protecting whistleblowers, reducing the analytical threshold, mitigating the
importance of defining a relevant market in currently functioning the Sherman
act, Federal Trade Commission Act and the Clayton Act as well.
The Bill proposes
to reduce the legal test to "creating an appreciable risk of materially
lessening competition" from the earlier legal test of "substantial lessening
of Competition" under Section 7 of the Clayton Act. The change in
phraseology from the earlier "substantial" to simply "material" significantly
reduces the high threshold of the earlier legal test.
In terms of shifting the
burden of proof, now certain acts of merger are to be presumed to be illegal in
cases where, companies with more than 50% market share acquire a competitor, the
merger causes a "significant increase in market concentration", when the
value of a merger crosses 50 million US dollars between companies that are
together valued over 100 billion US dollars and when a transaction surpasses a
value of 5 billion US dollars.
This can be seen to be a shift towards more
structural analysis than the earlier consumer welfare approach under the Chicago
School, the assumptions of which have been now argued to create inefficiency in
enforcing antitrust doctrines. The shift in standard under Section 7 of the
Clayton Act as mentioned above, has been proposed to catch anticompetitive
behavior in its nascent stages.
Section 9 in CALERA seeks to introduce
Section 26A into the Clayton Act which would in the case of exclusionary
practices involving a company which has "significant market power" or more than
50% market share will add a presumption of "appreciable risk of harming
competition". In cases where the Section 26A is not applicable, Section 9 of
CALERA clarifies that there can also be a 'circumstances test' factoring in
structural considerations to assess whether a conduct is harming competition.
CALERA also seeks to reduce the importance of defining a relevant market which
is stipulated under Section 7 of the Clayton Act and section 1 and 2 of the
However section 4(3) of CALERA reintroduces the term "relevant
market" reintroducing its significance in assessing antitrust cases. CALERA
also seeks it increase funding for creating expert panels, better investigations
and better the functioning of enforcement agencies. Lastly, in the event of
non-compliance there have been made provision for civil penalties under Section
9(b) and 10(a) of CALERA.
Comparison of the European Union and the United States
On the face of things, as can be assessed from the above discussions, CALERA is
an update on the previous anti-trust laws such as the Sherman Act, clayton Act
and Federal Trade Commission Act In the United States, while the Digital Market
Act is set to act in compliance with the European anti-trust laws such as
Articles 101 and 102 of the TFEU alongside the EC merger Regulation as
propounded by Article 1(6) of this legislative proposal. Moreover, CALERA finds
application in all market sectors whereas, the scope of application of the
Digital Markets Act in the European Union is solely limited to
Furthermore, the Digital markets Act obligates ex ante, which
is before the anticompetitive behavior has occurred, two lists under its article
5 and 6 which are to be followed by those who are presumed to be gatekeepers. On
the other hand, even though CALERA seeks to tackle harmful mergers in the
nascent stages under Section 2(b)(2) of the said Act, it is still, with its
changes and additions to existing anti-trust laws dependent on a courts
case-by-case analysis in an ex-post fashion after the anticompetitive behavior
Hence one can surmise that the Digital markets Act by eliminating
the cumbersome process of the case-by-case analysis in the court post
anticompetitive behavior occurring, will deliver faster results than CALERA.
Both Legislations have are grounded in presumptions of anticompetitive behavior
in certain cases and propose to shift the burden of proof on the impugned
company and its online market platform. The Digital Markets Act presumes an
online platform to be a gatekeeper under Article 3, when they have a significant
impact on the internal market, connect business users to end users and have an
entrenched and durable position in the market, whereas CALERA presumes
ant-competitiveness of mergers in cases where, companies with more than 50%
market share acquire a competitor, the merger causes a "significant increase in
market concentration", when the value of a merger crosses 50 million US dollars
between companies that are together valued over 100 billion US dollars and when
a transaction surpasses a value of 5 billion US dollars.
Both legislations do
away with relying on single relevant market definition, albeit CALERA
reintroduces defining a relevant market under section 4(3) within the
presumption of a merger being anti-competitive and burden of proof being brought
forth. Lastly, both legislations are strengthening the existing institutions
tackling anti-trust issues with the United States increasing funding of creating
expert panels and improving investigations and the European Union centralizing
enforcement powers due to the cross-border nature of digital markets.
India and Big Tech
The impugned Big Tech firms such as Appleand Amazon, alongside 'Facebook
and Google' have faced antitrust scrutiny on account of adversely affect
competition in both the European Union and the United States. It is common
knowledge that due to India lacking its own jurisprudence in the realm of
competition law, the CCI predominantly relies on the jurisprudence of the United
States and the European Union.
Therefore, in India, Big Tech firms have come under the radar of the CCI under
similar circumstances as well. For example, the Rubtub Solutions case which
deals with online travel agents, had Treebo alleging that Make My Trip (MMT) had
abused its dominant position in the relevant market of 'online intermediation
services for booking hotels in India' by denying Treebo access to its large
online customers. This is a case of network effects in which customers prefer
the platform with the most dominant network which in this case is the online
platform of MMT.
Denial of access to the customer base would then require
platforms such as Treebo to build their own brand and create their own data
collection against dominant platforms such as MMT which can only be done by high
market investments and such a situation adversely affects competition. In the
Harshita Chawla case the CCI dealt with online social media platforms
WhatsApp and held the integration of WhatsApp Pay (Wpay) into WhatsApp Messenger
chat services as a case of Tying of the two products.
In the Delhi Vyapar
Mahasangh case in the CCI dealt with e-commerce platforms such as Amazon and
Flipkart which were engaging in acts of deep discounting, self-preferencing and
exclusive tie-ups. Moreover, a myriad of cases were dealt against Google, with
the Big Tech company being fined 20.42 million pounds in the Matrimony.com vs
Google case for abusing its dominant position by self-preferencing its own
Google services in the Google Search facility in 2018.
In 2019 the CCI held an
investigation against Google for tying and bundling, in the Mr. Umar Javeed vs
Google case wherein Google was asking manufacturers to exclusively
preinstall the Google Mobile Suit and various other Google services in the
Licensable operating system market. Most recently in the 2020, CCI ordered an
investigation against Google for self-preferencing and favoring its own apps in
the Play Store and Android Operating System market against other competing apps
in this segment.
All of the above highlighted concerns are also dealt with
under obligations and prohibitions of Article 5 and Article 6 of the Digital
Furthermore, with these rising concerns the CCI has produced market studies in
the merger and acquisitions segment of digital markets as well in order to
identify and discourage potential anti-competitive behavior in online digital
platforms. In these market studies a great deal of attention has been to the
uniqueness of the characteristics of digital markets and the need for immediate
enforcement as delay in action leads to irretrievable harm.
heading this discussion explained that "These problems are not attributable to
the conduct of any one company and are reflected in phenomena such as: (i)
excessive concentration in a sector; (ii) high entry barriers; (iii) lack of
access to data etc. The incentive to engage in anti-competitive conducts partly
arises as the platforms are the ones who determine the rules according to which
users, including consumers, business users and providers of complementary
services, interact on it.
Thus, in digital markets certain business restrictions
may be needed to preserve, protect and facilitate competition and to ensure that
platform rules do not impede competition without objective justification."
The CCI in its 'e-commerce market study' recommended "Promoting transparency
to create incentive for competition and to reduce information asymmetry",
and observed that "Network effects coupled with even small actions by the
platforms may exclude and marginalise rivals" amongst other factors which
imbalance bargaining power of market players. The CCI has in recognition of the
same recommended certain self-regulatory measures such as Search ranking,
Collection, use and sharing of data user review and rating mechanism, Revision
in contract terms and a discount policy.
'Search ranking' would require a
platform to set out main ranking parameters in its terms and conditions.
'Collection, use and sharing of data' would require transparency in relation to
the Data collected by the platform and its usage by third parties and related
entities. 'User review and rating mechanism' would require transparency in the
review and rating mechanism of a platform to insure informational symmetry.
'Revision in contract terms' would require a platform to notify its business
users about any changes that have been proposes in the said platforms terms and
conditions, alongside providing. Reasonable and proportionate time to enforce
the envisage changes for a concerned business user of the platform. 'Discount
Policy' requires bringing out clear and transparent policies in relation to
discounts rates that are provided by the platform for its products and suppliers
alongside illustrating the implications of a user of the platform in
participating or not participating in the provided discount schemes.
Furthermore, much like the United States and the European Union strengthening
its existing institutions with increasing funding for expert panels, improving
investigation in the United States and centralising powers in the European Union
due to cross-border nature of digital markets, the CCI in India is also soon to
be strengthened as well.
The Indian government in the monsoon session of its
parliament is set to revamp CCI t better tackle the antitrust issues of the
digital sector. The ministry of corporate affairs is set to make appropriate
amendments to the Competition act,2002 and strengthen the powers of the
CCI. It is possible for these changes to be in sync with the change in
Overall, it is abundantly clear that Indian digital markets have faced unfair
practices by the online platforms of the Big Tech Firms. Much like the European
Union's consensus one can understand that to better tackle the issue of online
digital markets, alongside the proposes self-regulatory mechanism some scholars
have also argued for the need of ex-ante regulation in formulation of assessment
of online digital platforms in India as well.
Both the European Union and the United States have a common objective at hand
which is to mitigate anti-trust issues in the digital market sector against the
Big Tech companies across the globe. Assessing from the asymmetries and
symmetries listed in the preceding paragraphs of the paper, one can deduce that
the approach of the Digital Markets Act is more head strong due to its ex-ante
implementation as opposed to CALERA still being ground in the case-by-case court
analysis which is an ex-post implementation.
It can be for this reason argued
that the Digital Markets Act will be better equipped to deal with Big Tech
companies and their anticompetitive behaviors creating a more overall
competitive market in the Single Market of the European Union. Lastly, India
while paying heed to domestic policy considerations as the self-regulations
proposed by the CCI's e-commerce report, should also promptly inculcate the
global jurisprudence to be better equipped to tackle anticompetitive behavior in
its nascent stages in the online digital markets sphere with upcoming changes in
the country monsoon parliamentary session.
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