Abuse of Dominant Position in Digital Markets: Challenges and Way Forward

Author: Amisha Singh, Third Year, Chanakya National Law University)

  1. Introduction

With rampant globalisation at an unprecedented level, we see a new wave of industrialisation that largely revolves around technology and within the digital domain. This then creates a scenario that requires the State to ensure that this growth is not centred around a handful of entities and every entrepreneurial move is given a fair chance in the concerned market. Having an obligation to maintain and regulate competition also becomes necessary when such entities operate in the domestic domain and create an undue disadvantage for indigenous entrepreneurs by their way of operation.

Recently, the Competition Commission of India (CCI) put the US tech giant, Google, under fire, twice for its anti-competitive actions and for abusing its dominant position in the Android Operating System market as well as its Play Store payment policy and came down with heavy fines of USD 162 million and USD 113 million respectively. The actions taken by CCI against Google depict the pressing issue of disciplining entities that abuse their dominant position in the digital market and the need to check the arbitrary operations conducted by tech giants that are unfair towards competitors, rivals as well as the consumers and put a curb on other creative innovations in the concerned market.

In this piece, the author explores the case of Google’s abuse of its dominant position concerning its Play Store payment policy, the repercussions of such abuse on the stakeholders, remedial directives given by CCI, and the challenges in implementing such directives. The author further aims to elucidate the global effects of this dispute and a way forward in regulating digital competition and dealing with the abuse of dominant position in digital markets.

  1. Factual background and necessity to regulate and maintain digital competition

In the Play Store payment policy case, it was discovered that Google’s online payments app ‘Google Pay’ was the only option accessible to be utilised as a valid payment method on the Google Play Store for app purchases and in-app purchases, thereby denying rival apps market access. It was also argued that Google directed the apps listed in Play Store to employ its payment system and Google Play Billing System (GBPS) as a precursor to being listed in the first place. Another issue was that Google was pushing OEMs to pre-install Google Pay on their Android-enabled smartphones, limiting competitors’ market access.

CCI stated that Google’s discriminatory approach in enabling only Google Pay to employ intent flow technology while the other UPI applications just have access to collect flow technology on the Google Play Store is unacceptable. As a result, rival UPI apps have been denied market access. The charging of a service fee of 15 to 30% for the app and in-app purchases was deemed to be unjust and discriminatory. The CCI also determined the discriminatory pricing component concerning Google’s own apps (for example, YouTube), where GBPS was not applicable, to be a violation of section 4(2) of the Act.

Tech giants like Microsoft, Meta, Apple, and Google which have dominant users in India and an influential presence in the Indian digital market require regulation to the extent that it does not disadvantage domestic competitors, dissuade innovation and creative ideas in the relevant market, and does not take away the freedom of choice from consumers. Change in the global digital economy requires Indian anti-trust laws to keep pace with global measures to promote competition.

CCI laid down certain directions for Google to facilitate better competition within the domain of payment apps like removing the restrictions on app developers to not use alternative billing services for in-app or any other form of purchase, any other form of anti-competitive conditions that hinder access of consumers from such apps. Google must maintain total transparency in engaging with app developers, providing services, and charging fees and publish an unambiguous payment policy. Google must provide a transparent strategy for data acquisition and retention. Furthermore, Google is expected to provide the app developer with access to the data created by the relevant app, subject to reasonable controls and adequate safeguards and not discriminate in any way against other UPI apps in India in relation to its own UPI app.

CCI directives are fundamental in ensuring a level-playing field for app developers and not being at the mercy of Google to operate, along with ensuring fair competition for other payment apps.

  1. Challenges in the regulation and maintenance of digital market competition 

While the directions given by CCI to Google are consistent with maintaining competition in digital markets against Tech giants, there are foreseeable hurdles along the way. Some of such challenges might be:

  1. Control of personal data 

Access to personal data must be considered as one of the parameters of testing anti-competitiveness. In the case of Matrimony v Google, CCI while recognised the possibility of abuse of dominant position in digital markets through monopolistic hold over personal data of consumers, did not order an investigation into such abuses, not holding Google accountable, taking no concrete decision to acknowledge abuse of control over personal data as one of the major parameters right beside the price mechanism. To define a multisided market, competition authorities must examine not only monetary transactions but also market data flows.

In digital sectors, competition authorities must use new criteria to define the relevant market. Germany, for example, revised its competition law in 2017 to adapt its legal framework and tools to the new features of the digital economy, and added a provision recognising free products or services provided by platforms as a market. It is essential to note that several times service providers while labelling a service as “free” exchange it for the indirect consideration of personal data of the consumer which further aids in revenue generation and conduction of business. Recognition of abuse on exclusive control over personal and market data needs to be done by competitive authorities.

  1. Unfair vertical expansion of business

Sometimes dominant platforms end up expanding in their business vertically and become competitors of the app developers and organisations that use their platforms. This growth increases their capacity to acquire more data and raise their competitiveness, as well as bestowing upon them the position of gatekeepers of online stores and application markets in which they are both owners and users. This condition might lead to aggressive and discriminatory behaviour by dominating platforms at any point. The situation of Google employing Google Pay mandatorily in Play Store purchases is one such case. Tech Giants like Amazon have come under fire for being a competitor as well as platform provider to other online sellers by both European Commission as well as Germany. Similarly, Spotify proceeded against Apple in European Commission for depriving consumers from making a free choice and having an unfair disadvantage in the market. Google has been heavily fined by the European Commission for abusing its dominant position by giving its own comparison-shopping service an illegal advantage, giving prominent placement in its search results only to its own comparison-shopping service, whilst demoting rival services. Since these are multidimensional markets in digital economy, it becomes challenging to devise a competent legal framework.

  1. Ambiguity of ‘adequate safeguards’ regarding UPI and security risks

The CCI has given Google ample scope to change its ways, declaring that the US internet behemoth should offer app developers with access to data created by the app subject to adequate safeguards. The question arises as to what qualifies as adequate safeguards and who sets them. Many untrusted applications purchased from the Google Play Store can harvest phone information and siphon all financial information on the phone, resulting in UPI fraud. 

Personal and financial information of consumers being accessible to app developers operating on Play Store requires deeper scrutiny since dissemination of competitively relevant data also will require the consent of the consumers and greater level of transparency as to how this data is used by app developers and other UPI service providers that will be alternatively available along with Google Pay to ensure consumer protection.

  1. Domestic problems of a developing digital economy

Most developing countries have relatively young and small competition authorities with limited resources for taking on competition cases in an increasingly concentrated global economy. E-commerce policies and regulations must be put in place in developing countries to ensure open and equal access to platforms under fair terms and conditions by local small and medium-sized enterprises.

Supporting local start-ups and domestic entrepreneurial activities can be done by regulation of digital competition through forming regional trade frameworks and arrangements that ensure non-exploitation at the hands of Global Tech giants operating at multi-market level.

  1. Global measures towards regulating digital competition and India

An apparent struggle to regulate and ensure digital competition is going on globally. For example, in 2021, South Korea passed a law which made it mandatory for Google and Apple to open their app stores to alternative payment systems. Similarly, the German FCO’s proceedings against Facebook mark the first case where a National Competition Authority (NCA) has dealt with personal data-related abuse of dominance in the digital economy. German Federal Supreme Court (FSC) held Facebook accountable for abusing its dominant position. The Australian Competition and Consumer Commission (ACCC) in its DPI Report concluded that Google and Facebook, who supply general search and social media services in Australia, respectively, have a substantial amount of market power. It advised keeping an eye on major digital platforms, addressing privacy and consumer data use concerns, and resolving bargaining gaps between these platforms and news and media publishers. European Commission and the UK have also been instrumental in regulating digital competition. CCI’s decisions hence hold the utmost importance of shaping competitive policies in India that are consistent with the on-going digital revolution. CCI needs to consistently align with the global intent of regulating digital market competition to ensure symmetrical opportunity to all the market contributors and protect consumers from arbitrary market decisions.

  1. Conclusion 

In traditional antitrust cases, the pricing competition and rivalry for bigger market shares are the focus. In the digital economy, quantity and scope of data confers market power and creates obstacles to entry for rivals. From a consumer welfare perspective, importance to data protection and facilitating free choice is essential while thwarting digital monopolization of data to protect domestic economies from the pit-falls of concentrated globalization. This requires countries to revamp their competitive policies and incorporate measures to deal with the challenges ahead. New parameters based on consumer data regulation; multidimensional markets should be considered to provide protection to consumers along with domestic operators.

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