Regulating Big Tech

Source– The post is based on the article “Regulating Big Tech” published in the Business Standard on 26th December 2022.

Syllabus: GS3- Indian economy and growth

Relevance– Issues related to fair competition in market

News– The article explains the issues related to anti-competitive practices by big tech companies prevalent in digital markets.

The Parliamentary Standing Committee on Finance has submitted a report. The report has provided a suggestion that new digital competition regulations be drafted to prevent Big Tech companies indulging in anti-competitive practices.

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 CCI is already in the process of setting up a special group, the dedicated Digital Markets and Data Unit, to monitor digital markets.

What are the challenges related to anti-competitive practices in digital markets?

Digital markets present special challenges as market dominance here can be exploited in ways different from the conventional business practices.

Access to these markets can be contained by blocking or charging huge commissions. It can also be done by enforcing restrictive contracts that prevent products from being sold via other channels.

The platform owner may also offer its own products. It sets up conflicts of interests and hurts 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.

The 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 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.

What are the suggestions by the Parliamentary Standing Committee on Finance for new digital competition regulations?

The report suggests ex-ante regulation, which would be cautionary and based on anticipated changes.

There is a need to frame a definition for “systemically important digital intermediaries” or SIDIs. These are the businesses that require tighter regulation. Such a classification could be based on metrics like revenues, market capitalisation, and the number of active users.

It has suggested the CCI to induct skilled experts such as academics, and attorneys, to ensure it closely monitors SIDIs as well as emerging SIDIs.

SIDIs should 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 for targeted advertising.

What is the way forward? 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.

Print Friendly and PDF