Below, we have provided the full transcript of the panel discussion, The Future of Mobile Ecosystems: Enabling a Choice for Market Players & Consumers in India, from the first chapter of our series, Towards a Competition Enabling Framework in Asia Pacific: Opportunities & Challenges.
Aditya BHATTACHARJEA:
Good evening, good morning, or good afternoon, depending on where you are when you are hearing this. It is my very great privilege to be moderating this extremely distinguished panel to discuss the competition issues related to the mobile ecosystem, especially with reference to India. The topic is very vast. As I understand it, the mobile ecosystem at its core consists of manufacturers of mobile devices, the semiconductors that go into them, the telecom or internet service providers that provide the access to the net, the developers of operating systems and the app stores that are embedded in these devices, the app developers who place their apps in the app stores into those devices. That is the core of the mobile ecosystem.
But of course, it is that ecosystem that gives us all access to the myriad services that we avail of from these devices. And especially in the last six months, we have learned the hard way how dependent we are on that little device which so far was just a convenience for chatting or for occasional transactions. We have really come to depend on this access for our daily needs, more or less. E-commerce social media, of course, payments and therefore the financial institutions that we access through the devices. We haven’t been able to travel much, but in better times, travel booking; ride hailing, online search. Something that is becoming more and more important in my profession, that is education, what is called ‘edtech’, that is companies coming up to provide a kind of parallel teaching or educational experience for students who for whatever reason cannot access their classrooms. Entertainment, since we have a lot of time on our hands at home. Food delivery, cloud storage, telemedicine and of course what we are doing now, video conferencing.
So our lives have come to depend on accessing this new world through the apps on our mobile devices. And as practitioners or academics dealing with competition policy, we are aware of some of the issues that surround this ecosystem and which have started to come before the Indian competition authority, the Competition Commission of India. As I said at the beginning, it is a vast subject. This ecosystem is rich and diverse, almost like a biological ecosystem from which I presume the term comes. I feel rather daunted at even beginning to address some of these issues, but I’m in the fortunate position of being the moderator of this discussion and being able to hand over the baton successively to the very distinguished panelists who have agreed to join me on this panel.
I will just introduce them each briefly and then open the floor to them one by one to share their thoughts on competition issues in this domain. And then we will have an open discussion at the end. To begin with, we have Mr. Vinod Dhall. Mr. Dhall was the first member and for many years, the acting chairman of the Competition Commission of India after it was founded. He was responsible for creating what we might call the competition ecosystem in India in terms of the basic functioning of the commission, its initial set of regulations which guided it on its journey even after he stepped down. He is now a leading practitioner, antitrust attorney and argues cases and advises clients.
Another member of the commission a few years later is Dr. Geeta Gouri, whose background was in regulation. She was a member of the Electricity Regulation authority in the Indian state of Andhra Pradesh. She is an economist by qualifications and she was what is called Indian parlance Member (Economics) in the commission. The Indian Competition Commission has usually had one member from an economics background and Dr. Gouri served in that role with distinction in her time. Next, we will have Mr. Rahul Singh who is a partner in Khaitan & Company, a leading Indian law firm. He is a practitioner and will bring the insights of his frontline experience on the other side from Mr. Dhall and Dr. Gouri, that is arguing on behalf of his clients which he has done with distinction for many years.
And finally, we will have my fellow academic professor T.S Somashekar, who is a professor at India’s premier law school, the National Law School of India University in Bengaluru, and writes actively on competition issues, both for academic journals and more popularly.
So I summarized the constituent items or the components of the mobile ecosystem. And of course, each of these by itself could be the subject of a full discussion because each of them potentially involves the entire range of competition issues beginning with market definition, horizontal agreements, vertical agreements, abuse of dominance, and mergers. And to add a further layer of complexity, they are all interconnected with each other in this ecosystem. So to help us through this jungle–because the best example of an ecosystem is the Amazon rainforest–we need intrepid explorers to guide us through this ecosystem, and the competition issues that have arisen and which may arise in future in India. Let me begin by inviting Mr. Vinod Dhall to share his views. Mr. Dhall.
Vinod DHALL:
(silence) I forgot to unmute myself. I was saying, thank you very much Dr. Bhattacharjea for this introduction. And I was saying that we are missing an introduction about you. You have been one of the most prominent economists involved with competition law other than the economist members and you have sort of helped and guided and assisted the commission from the very early days which I remember when I was there. So thank you so much. As we all know, I am not an expert or a business operative in this area of mobile ecosystem. And in fact, my own experience with mobiles is very limited, using my iPhone for the normal purposes and not very much like the young people of today use.
But as you rightly said, the mobile ecosystem has become an integral part of the lives of everyone and more during this pandemic when we have become more dependent and even have begun to learn more about it. So, and that is now actually the dilemma of competition authorities to some extent. That this whole system is so much a part of our lives of citizens generally and they have become so settled down into this ecosystem that to uproot them or to do anything which might result in diluting their experiences with this ecosystem or uprooting this ecosystem from within their reach is something which no authority, much less a competition authority can afford to do.
On the other hand, it is true that the ecosystem the way it is, the competition authorities are looking at what is going on. They feel that many of the things or at least some of the things which are happening there are not in the spirit of the competition law or a violation of the competition law and therefore, something ought to be done about it. So this is the fine balance that the competition authorities have to achieve; how to see that the competition principles are abided by but without diluting the fantastic experience that the citizenry on the whole is enjoying through this system.
How to navigate these conflicting objectives is a dilemma with the competition authority has to contend with. Now this exists not only in the developed world, in the Western world, but equally in the developing world. If I may say so, in fact, in the developing world, this issue is more acute because while in the advanced economies there may be players who are able to explore opportunities to displace the large players, in the developing societies, that feature is present to a much lesser extent. And therefore the challenge to these players is weaker.
This is also reflected in the cases which are going on, whether they are in Europe, now in America and they have been in India. Dr. Gouri will be dealing with those cases, so I don’t want to intrude onto that area, but the same kind of cases which are going on here have also been going on in Europe and finally the plunge has been taken even by the US authorities. Now what are the features of this ecosystem which make it so unique in the world? One of course is what we might call the economies of scale.
The bigger these players are, whether it is Google or Facebook or Amazon, whoever, the bigger they are, the lesser is the cost in reaching out and providing services to the customers and to others who are using these facilities. Virtually, the cost of providing an extra customer is zero. So the economies of scale also enable these low costs, paid of course through the data that we surrender, but the costs are so low and that also accounts for the widespread and increasing use of this system.
The second is what we might call economies of scope; such a variety of services are being offered at least by the big players, the ecosystem which they have developed for each one of them. So if you look at Amazon, apart from their platform, they have the Amazon cloud, they have the Amazon Prime. And similarly, if you look at Google, you have the Google Play and you have Google Search and you have the Google Maps and you have the Gmail and Chrome and all of that. So there is a whole ecosystem which has been developed by these big players. Any person who is using this facility is using all the services that are being provided and that makes it even more difficult for a single product player or a single service player to displace these giants.
And the most outstanding feature, which of course I should have mentioned at the very beginning, is that these are technology-driven and they are innovation-driven. The speed of innovation in this area has been mind-boggling. Of course, except for the vaccine for the Corona which has dazzled the world in a year’s discovery. But otherwise the speed of innovation in this area is amazing. I was reading a ICRIER report which talked only about the mobile manufacturing sector. And there they said that the innovation cycle is one of the shortest, that’s three years. I am sure in the rest of the services the innovation cycle is even shorter.
And then of course you have the network advantages, what we call the network externalities. So the larger the network, the more the people can use it. Finally, there is the role of data. These giants have collected so much data and combined it with artificial intelligence that it is very difficult for a challenger to displace them given the amount of data and artificial intelligence which they are carrying. So a kind of locked-in effect does take place and which enables these big players, gives them both the ability as well as the incentive to preempt markets. The resources at their disposal, the data which is available to them and the networks which they have spread out, it is so easy for them to leverage this situation to keep an iron grip on their markets. And foreclose the markets for their rivals.
Now, this doesn’t mean that the competition law does not apply to this sector. The core principles of competition on which the whole law rests are equally applicable to this sector as well as to any other sector. So those principles, if they are being breached in any way, it is incumbent upon the competition authorities to rise to the occasion and tackle the situation. But there’s one peculiar feature here. All these services in the ecosystem are so intertwined with each other. They’re so intertwined with each other that applying the normal principles of competition law including defining the relevant market and including defining or determining dominance, all of them become a little more complicated or should I say vastly more complicated?
So if a company is selling gray cement, it is so easy to see what is their market share and whether they are dominant or not dominant. Are they abusing their distributorship exclusivity, etc? But that is quite difficult over here. And therefore there have been experts. I saw a European paper while preparing for this session which says that rather than spending more time on defining relevant markets, on determining dominance in the traditional way, the competition authorities should give equal importance or devote equal importance to the overall effect of the activities of these people. How are they foreclosing competitors? How are they exploiting customers? That is an area which should be given greater emphasis rather than the traditional mechanical approach to competition law.
They have also suggested that, a bit of a startling recommendation and this is as recent as 2019, it is better for the competition authorities to use the presumption against the players, require the players to show that what they are doing is not anti-competitive, is not exploitative rather than the competition authority having to prove in the normal method of competition law that it is having an adverse effect on competition. So it’s a bit of a startling recommendation, I would say, but it shows what are the challenges and the obstacles that competition authorities are facing in approaching this sector and that explains what I make all the late start by the competition agencies.
The European commission was the first off the board. They have fined Google, they have fined also Apple in a case, and some other inquiries are also going on. Once they started, many other competition authorities have started: in Italy, in Germany, in South Korea, in UK. UK has sent out a warning that if these sectors are not regulated by the regulator, then it will become incumbent upon them to act against these players. And that points to one more thing, that competition authorities alone may not be able to solve the issue. You tell something to Google, you should not do that, or Amazon, you should not do that. But it doesn’t automatically apply to the entire sector, to all the players who are there in that sector and maybe wielding influence in similar ways.
So the competition authority will go a company by company, entity, by entity, anti-practice by anti-practice but regulation combined with competition law is something which can really address the situation. I do not want to use the word tame these players. In fact, I think that such tendencies or such mindset that because they are so big, we need to tame them is not advisable. Or that we need to teach them a lesson. That kind of approach would be very damaging, it could kill innovation in this sector and instead of doing good for the economy, doing good for the consumers, it may do great harm. So that’s a fine tightrope walk which the competition authorities have to keep in mind.
And also the kind of drastic remedy which was suggested at the time of Microsoft about 10 years back, 12 years back, to split Microsoft into two companies should not be the automatic or the preferred remedy. In Microsoft it was decided to split it into two companies: one being the operating system, the other being the apps. Well, luckily and fortunately, this was given up through a kind of settlement between the US authorities and Microsoft. And since then two things have happened: Microsoft has continued to grow, it has continued to provide what I might call outstanding kind of services and applications to society. At the same time Microsoft has learned a lesson. Brad Smith who is their general counsel, at least he was there till recently has reportedly gone on record on compliance; he’s become their compliance ambassador. He’s gone on record to say, “We have learned a lesson. There is no point in fighting against society or fighting with regulators and trying to change society in our image rather than changing ourselves in the image of regulators and compliances.”
It can be very tempting even in developing countries to pass such a drastic order. But that I think would be a very wrong approach from the competition authorities if they try to damage these companies rather than to rectify the situation. So in India, there are a few cases going on. As I was saying, that similar cases are going on in Europe. There is this case of the Android where the allegation is that Google is compelling device manufacturers to download the entire suite of apps. A similar case was there in EU which resulted in the biggest penalty in the history of competition law, almost $5.1 billion.
There is the other case of self-preferencing and that seems to be a kind of disease which is there in all these cases, whether it is Amazon or whether it is Apple, self-preferencing. In India, the penalty was for giving preference to Google’s flight search app. In Europe, the penalty has been for giving preference to Google’s shopping app. So you can see that the problems are similar and the weapons available to the competition authorities are similar, but in my view in such a high innovation-driven, technology-driven industry, forbearance and restraint in using the authority’s powers is also extremely important.
With this I would end my time. I can see the signal from the chairman. This is my little bit of initial remarks on this issue and, of course, we can discuss this at length. Thank you.
BHATTACHARJEA:
Thank you, Mr. Dhall. That was a wonderful introduction to the subject, covering a wide range of issues and the experience of competition authorities in different countries. I would like to invite Dr. Geeta Gouri to share her views, and perhaps also her experience as a member of the Commission which handled some of these cases in the early years. Of course, there’ve been many more since you stepped down, but I think you were there when they started coming before the Commission. So, maybe you could tell us about how the Commission handled it then and how it should continue to handle it now. Dr. Gouri?
Geeta GOURI:
Thank you, Aditya. And, after this very good cover of the entire situation by Vinod Dhall, I think I will now have to get into the nitty-gritty. And, when I say the nitty-gritty, there are some things that we just cannot escape. And what is it that is very important? I think I will start with two distinguishing features of what is happening with the anti-trust cases in India.
BHATTACHARJEA:
Yes. Yes. Yes. Yeah.
GOURI:
So what happens in this situation is that CCI has a tendency to follow the EU cases, and I have no idea why we do it. We adopted the EU competition law. Vinod Dhall spoke about it, but let us also remember that what we require in India is what is useful and what is appropriate to our country. What happens in EU and perhaps the impression one gets is that the EU, is biased against American firms. Many of the arguments that have come up in the antitrust literature I would like to assess them in the Indian context.
The second development that is also, very important is that we’re, again, shifting away from consumers to competitors. With disruptive technology as in the case of digital markets many of the arguments and allegations that have come up should be looked at it as to whether consumers have been harmed or whether consumers have benefited. I have been writing extensively about the fact that protecting competitors is not protecting competition. .
Before I take up the arguments in some of the cases of Competition Commission of India (CCI) , there is a background to understand why I keep referring to the two features stated above namely EU bias and need for examining consumer benefit/harm. , Many of you have heard me state the same arguments in earlier discussions. This is digital India not only because of the COVID effect, but it is digital India because of the number of apps that people use on the smartphone. Not on the iPhone, which is also a smartphone, but the simple, cheap smartphone. And, also, the number of people who use it in Tier II and Tier III cities, you have an entire mobile ecosystem that works not only on laptops, but also works on cheap phones.
And, when looking at the mobile ecosystem, I would like to just talk a little bit of the operating system and within the operating system, I will also talk about the Google cases and how should one go about looking at it. , Many of the decisions that have to do within the CCI itself is to try and understand first, in digital India, whether our software technologies, and whether our app developers are affected, second, how Indian consumers are going to be affected by the decisions of the Commission? The Commission is a small player in relation to broader macro policies of the Government in terms of effects many of the decisions of the Commission do have an impact.
I would, very broadly, just give the background about the mobile ecosystem, what I call as the economics and politics of platform markets. We have to deal with platform markets is and have to understand what a platform market, and from platform market we’ll then have to go into data markets. And then we’ll have to go on to markets of ideas which are that of patents.
These emergent markets cover the entire mobile ecosystem, and each of them operate very differently. And, leaving out the traditional product market, you are getting into the realm of firms who are going to be very huge players. How do you control them? How do you put one against the other? There is the question of the lead and laggard of technological development, and the question of the consumer sustainability and how it has to be played out is very important.
Let’s start with startups on Indian platforms. At a glance there are more than 1,500 apps and startups. I was taking a look at it. There are startups in all sectors. we have everything on pps. There is Zomato, and Swiggy for food, apps for home decoration, you get everything on the app. In fact, I found out about the operating systems on Google search itself, I didn’t even have to bother to read up any economics textbook. As competition is heating up, lot of foreign players are coming in; whether it’s Amazon, Flipkart (Flipkart is foreign, because it’s registered in Singapore); you have Uber, you have Airbnb. There have been mergers and acquisitions which is very interesting because I find the Commission has been very proactive in mergers and acquisitions much more than in the abuse of dominance cases. Then, we also have companies like Myntra being taken over. You have Amazon coming in, amidst a lot of policies towards online firms, that have been issued by the Government.
Let me also look at it a little further with, for example, Practo. What an important app that is. Would it have ever come up earlier? It’s possible to look at all health problems through Practo or Uber, which has taxis to take a patient to the hospital. So these are disruptive technologies, and in these disruptive technologies, look at the operating system, which is one of the most important feature, as I’m not even going into the question of who has the bandwidth; that becomes another issue. I look at the operating systems and the number of apps that have come up, and find they are all Android based. Sometimes it is better to use t what other have innovated to gain advantage within the Indian framework. Having stated this, some of the issues that were raised by Aditya were very relevant. A few quick to do my responses to them before I take up the cases of the Commission itself.
One is on the question of the operating system. The allegation [inaudible 00:31:50] and this is what the European Commission has also alleged is Android has more than 90% of the operating system. In India, we also have our own operating systems. We have different types of operating systems, but the business model is to utilize what is more convenient and cheaper. I talked to a lot of apps firms. I’ve asked them, “What do you use? Do you use Linux?” and be done as an operating system. . They say, “No. We’re not interested in that (Linux). We just use Android and we use the Google Play Store because we’re interested in going ahead. If there is something that is cheap, there’s something that is convenient, why change?” Please, we should also understand that Android is the only operating system that can work on cheap phones. And it’s an open operating system. It’s true that you might not get the full GMS from Google, but then for example, China took a part of Android and worked on it and developed their own operating systems.
This is something that we can think about in India, too, where many of the others use Linux; the Windows-based ones.
Many of the cases filed in CCI on abuse of dominance, are predominantly by competitors. These are firms who are wanting to fire from the shoulders of the Commission. Do I go and complain to the competition commission as a normal consumer? Even if it is a class of consumers, as in the in the initial DLF case but not in the first Google case.
There have been very interesting minority decisions. It is the minority decisions which are always very interesting because they do not follow the trend of what the European commission said, or even what DoJ said, but tried to look at it objectively within the Indian context.
Now, about the number of several app developers in India? I think competition is upbeat. I just spoke to this young boy yesterday, my daughter’s friend who is in IT and he’s starting an app and he said, “Madam, I’m not going to go into anything. I’ll go and use Android. It’s cheaper. It’s easier for me.” But you also have things like the Indus Operating System. Indus Operating System is a very good one, but it is Linux-based. We also have Bharat Operating Systems which is, again, Linux-based, and this is enough. You have two indigenous operating systems which are already acting as competitive constraints to Google. People who are very good in Linux don’t use Android, they go into the Linux system. People like me stay with Android.
Then you also have the gaming applications. I didn’t realize that the gaming applications, for example, this entire game, Dream11, you can download it from Windows and make it an app. And that’s completely indigenous. So when there are so many indigenous ways of working through this, when we are talking about the Big Five, there’s always competitive constraints that are coming from the others, not so well-known maybe small operators. And, when you look at the statistics share, the Android market share inIndia is about 68%, the Windows share of operating Microsoft is about 20%, and the remaining .5, .3, .1, .2. And, I’m sure, if there is enough competition picking up, the indigenous ones will be coming into account.
What should be the ingredients of a future policy and how should we get into the competition issue? Maybe I should come back to this a little later, because I’d like to deal with the cases of the competition commission. There are some problems that are involved in it and I’m trying to see what happens with the Google tax. Google has levied a tax and Apple has levied a tax. The Indian consumer is only interested in “Kitna Maal” roughly translated “How much do I have to pay for any app?” And, if this Google tax is going to add to it, they will lose out on it.
But, at the same time, there have been developments like the equalization tax that the government has levied and, therefore, we do have a concept that is coming up which is not so much as internet, but splinternet. We may be going in for protectionism of the platform market, protectionism of the operating systems, and protectionism of the entire system what I call as digital protectionism, which is very different from the earlier protectionism. Here, a value judgment has to be taken if the government of India feels is appropriate. Well, it’s a trade-off between having an open system and to having a protected system. This time everything is repeated of what was repeated in traditional product market, on a platform market And perhaps extended in the data market. because we not only have the data privacy law (draft), but we have the non-personal data privacy law (draft).
A lot of concerns have been raised and CCI has come out with some very interesting studies. There have been studies on the E-commerce, which is worthwhile looking at it, where they have looked at parity clauses, which are very important. They’ve done a very good study on the healthcare system where the approach is on how to reduce uncertainty in the sector.
Let’s now look at some of the arguments that are doing the rounds and many of you would be wanting to know, and people might feel that I’m trying to defend Google or Facebook. No. I’m not defending anyone. I’m just trying to develop the economic arguments and how do you go about looking at it? Now, the most important thing is, as I told you is of following the EC decision. The European countries are different from India. The European consumer is very different from Indian consumers. So I think we should try and get out of this European Commission approach. I have stated this many times and in all my lectures. This is a major concern because all the cases that are filed, including the first Google case, are ditto picked up from the European Commission and put in the Indian context. It is natural to wonder what’s the big deal about these filings with CCI?
And then the majority decision is exactly what the European Commission said; we do not get to know, in terms of economics, how to assess harm. Is there harm to Indian consumers? What is consumer harm? How do you define welfare? And this is very important because when you look at it and how platforms have I grown and the decisions to be taken by CCI. There are four steps in understanding and establishing abuse of dominances; you have to be able to categorize the conduct, you have to be able to define the market, you have to be able to define dominance, and then you have to be able to assess harm. What does the European market do? It leaves out categorization or classification of conduct and then goes immediately into market definition. The market definition, also, is something that can be very dicey in a two-sided market. And that requires much more understanding that on two sides of a platform, there will always be two markets.
So, in the first case, we in CCI defined two markets. We defined what we call the general web search, and we defined the web advertising search. But what is a general web search? Do I go on to the web just surf on and on and on? There’s no such thing as a general web search; there is search. So how do you define the market of a search engine? And, the second aspect that becomes very important, which is the consumer you’re looking at and how is competitive harm going to be taken into account? Now, this approach, when you look at it, it means that one has to see where can innovations come in and how do we get them to innovate further? There’s been several cases after that, all of them following the European model. I mean, can’t we think of cases which we in India are of priority in terms of scope and reach t rather than taking the European cases? But look at it. When you go further, what is the allegation? The allegations, when I check what are allegations under investigation by EU, that most phones only use Android. They don’t use others, but why do they use Android? Can’t we come up with an operating system? Can’t Indus Operating System, which they’re doing now, come up with something easier and cheaper because we need to have our own apps? Does it require protection? Is there so much of network effects that these large players create barriers to entry? Yes. That is disruptive technology. There’ll always be someone with some other disruptive technology. If there can be an Indus Operating System, which gets some amount of support, you can definitely go into other operating systems to be able to do it.
The idea here, which I am trying to get at is that the decision that has to be taken is between an open digital system or a protective digital system. And the competition law, unfortunately, even the modifications that have been done into it, stay within the same framework. They have one chapter which talks in terms of the digital platform and the platform markets, but as in the present Competition Act in the assessment t in Section IV (Abuse of Dominance), theword used is, “Shall,” which means the most important thing in the four steps outlined above is to define a market, estimate the market share establish dominance, and then the i abuse.
It is a per se approach where the rebuttal is on the opposite party. Can we not modify it? Other countries are modifying it in the context of the fact that there are going to be large players. There are other ways to get out of it. To create a situation in a country like India, which is digital, has a lot of network talent, has a lot of software technology developers, and to remember what is most is known in these markets is the’ rule of the three’.
Finally to it, there’s also cases which could bring more clarity on points raised. They can be taken up much later. I have spent time on the first case of Google as it gets repeated in different ways. The allegations that Google web designs are in favor of its own properties. The first question to ask does this business attract consumers on businesses which are biased towards one’s own properties.
If Google has been innovative it is because they’ve been allowed to be innovative. Recent investigation initiated by DOJ has aroused considerable interest among anti-trust authorities.
Arguments have been put forward on Google as a default option at all search points. I have Bing on my laptop with Google Chrome as the default website. I hope for the time an Indus Operating System becomes the default mechanism through innovative web designs.
A call however, has to be taken in India whether protectionism of digital markets is the appropriate way forward. This approach has to be seen in the historical context whether protectionism helped the product market economy to grow and now, with the digital market, whether this sort of protectionism will help Indian digital advancement to take place. I stop here because there are a lot of cases and they can come up later in the questions.
BHATTACHARJEA:
Maybe we can come back to some of those cases in the general discussion. Thank you, Dr. Gouri. You’ve shared with us your experience and been very frank about your own somewhat dissident perspectives, which I was aware of, as a member of the commission, and you continue to express those opinions as a commentator even after you stepped down. I agree with you heartily on the way in which Section IV on abuse of dominance was drafted. I had pointed this out in some of my earliest writings after the Act was passed in 2003. Actually, it was a Canadian professor, my friend, Professor Thomas Ross of the University of British Columbia, who first pointed it out that the way it’s drafted is to make all of the listed conducts, per se violations of the Act.
And, fortunately, in the actual practice, the Commission has not abused its dominance in interpreting it, but it has done so by setting a high threshold so that even if there are two players in the market, they are providing effective competition for each other, so neither of them is dominant even if some of those listed practices are observed in their business conduct. Anyway, we can come back to this. I’ll just point out that I tried to get the review committee of which I was a member to recommend a change in this particular formulation, but I did not succeed. Anyway, let’s move on to a different perspective from the other side of the floor. Rahul Singh, who has represented clients before the Commission and has probably perhaps argued some of the cases that Dr. Gouri referred to. Rahul, if you could now share with us your perspective on these issues.
Rahul SINGH:
Sure. Thank you very much. Good evening, everybody. I’m delighted to be here. Thank you to CPI for organizing this. So, let me actually begin by sharing my screen, actually. I’m not sure whether that’ll be visible to all of you, but let me try and see if that’s possible. So, I hope you can see this and you can see a Calvin and Hobbes cartoon over here which is in today’s newspaper. And I’ve stopped that share screen only because I’m going to increase the font size and repost this to make sure all of you can possibly read this. And, why am I doing all of this? Well, you will see just in a moment. Well, hopefully, it will make some sense to you.
So this is Calvin and Hobbes is talking about a mask. He’s asking something to his mother, but he’s wearing the mask in a reverse manner. And, finally, mother gives up and says that, “It looks like your thoughts are a runaway.” And then this is what Calvin says, by the way, “I read they wear these in India.” India, okay? “Here, I made a mask for you, too.” This is today’s Indian Express. Of course, I have a soft copy, I use that privilege.
But why am I referring to all of this? Well, reverse masking in India. So that’s my prop for today just because Watterson thought that he should put that in Calvin and Hobbes. I’m sure this looks like bit of a prescient thing to do because I’m sure he didn’t realize that mask will be a reality one day, regardless of which particular jurisdiction we are in. And why am I using that as a prop?
Because of course, masks are supposed to be three Layered. So, there are three distinct points to make. And let me actually begin with the first one. So the first point is, I’m just coming from the perspective of a behavioral law-and-economics set of aspects. But essentially they’re asking us now constantly, people who work on psychology, and in intersection of psychology with economics, they’re asking us constantly not to be intuitive, but to be deliberative.
My first question is what could that possibly mean, for the purposes of Indian competition jurisprudence? The first layer of Indian mask as Calvin and Hobbes says, it is supposed to be one in a reverse manner in India. So maybe, hopefully let’s look at that as a first question and see what does that possibly mean in Indian context? And then, before I move on to the second and third question, let me do one more Screen Share, and show something else to you which is quite interesting.
And I think this has to be done after doing the presentation mode, I suppose that should be better, but let me see this, it works or not. It looks like it works, right. Quite interestingly, by the way, this mobile ecosystem also seems to have three layers. So three seems to be the magic number for today. You can see that this is hardware. Some of you have already mentioned all of these phone instruments, the mobile phone, the pad or tablets. And this is also iPod, which is not so much visible anymore.
Then there are these operating system and application stores. There are examples like iOS and Android, and finally those microprocessors, the chip sets, which you will see quite interestingly, not so much of a concern in Indian context, possibly because we don’t have competitors in this microprocessor context, which could possibly be Indian, because these are all dominated by multinational corporations.
[Moving the cursor on screen] So maybe these two are of interest in hardware and operating system and application store. So, these are the only two things which are shown on the share screen. And with that, let me move on to my second and third point, which are interrelated activities.
First one, or second point as I mentioned, after raising the question related to not being intuitive, but to be deliberative. From the perspective of Competition Commission, what could that possibly mean? One is here in Indian competition jurisprudence might be seen very new and therefore it might be tempting to borrow from other jurisdictions, whether it is the European union or whether it is the US, or maybe sometimes because I look at a lot of these cases, I read them, it’s the misfortune of lawyers that we have to read hundreds and hundreds of pages of these judgements.
We can’t really skim through them. We have to read every single word that is written by the Supreme Court of India. I’m citing here cases like, Excel Crop Care. Very interestingly, the Indian Supreme Court cited the precedent from South Africa, to interpret section 27 of Indian Competition Act. I’m using that as a prop for my second point. My question really is, if we compare, let’s say the Constitution of India with Indian Competition Act. With the Constitution of India as well, a large part of it is seen as just copied from other jurisdictions.
Sometimes they say three-fourths of the Constitution is just copy, literally. Like in tech jargon it would be Control C and Control V today. Or if you use MacBook, it will be Command C and Command V today. But this is of course, way back in 1947 to 48. They’re writing the Constitution, they are borrowing from other jurisdictions.
When we look at Constitution of India today now, after 70 years or so, people talk about Indian constitutional jurisprudence. And the question really is this, competition act is a 2002 enactment, parliament passes that or president signs it on 13th January 2003. But, enforcement of conduct related provisions start getting enforced only from 2009 onwards, the merger control provisions start getting enforced from 2011 onwards.
For people who are not familiar with these kinds of dichotomy, which might be peculiar to Indian context, we can just leave that aside because these are just quirks of Indian jurisprudence.
But my point here is slightly different which is, after almost a decade of enforcement of Indian Competition Act. Where the Competition Commission of India has reviewed at least 750 enforcement cases. And a similar number of merger control cases. So that’s 1,500 cases.
Let’s say from law-and-economics the interdisciplinary methodology that is neither law, nor economics. From let’s say perspective of people like Posner or people like Coase, what they will ask; are these cases not enough use cases? Are these not cases enough, as test suites for the purposes of Indian competition jurisprudence? After so many of these cases, is it still really necessary for us to rely upon what’s happening outside of India?
Or just like Indian Constitution, can we also speak of maybe green shoots? Because majority of you are economists here? So green shoots of Indian competition jurisprudence, and if there are green shoots of this Indian competition jurisprudence, where are they to be seen? And that’s my second question of the three-layered mask.
With that, let me move on to the third question of the three-layered mask which I had started. And with that I’ll end, and those are food for thought.
My last point here is this, and this is being slightly more reflective, on the Competition Commission of India as an agency.
Now the question is this, in terms of interdisciplinary law and economics methodology, there is something called Public Choice Theory. What is it that we talk about when we say Public Choice Theory, when classical economics assumes that human beings are rational?
Why is it that the same human beings, when they get on to Competition Commission or other agencies, they are not seen as let’s say acting in their own self-interest? But somehow magically they are seen as acting in public interests? And this is Public Choice theory. Is it about time to pose this question to Competition Commission based upon, let’s say the 1,500 cases of evidence that we have?
Is it also time to be reflective about the idea of Public Choice Theory and see whether this is what is ongoing in cases, are they more reflective of Public Choice Theory? Or are they really reflecting what Indian competition law is? Which could possibly be, maybe closer to a consumer welfare standard because the word ‘consumer’ is defined in Indian Competition Act interestingly.
Now equally interestingly, you will notice that the word ‘competition’ is not defined. For whatever set of reasons it had, the committee which drafted the legislation had experts, like the drafting committee, that one committee did not have our [today’s] moderator’s, benefit as one of the members, but it had other experts to look at these definitions of consumers and competition. But regardless of the access to expertise, they decided not to define ‘competition’.
And therefore, let me stop there in terms of the three questions. What have I done? I’ve basically raised three questions for the purposes of consideration. The first one, and this is from my three layered mask, which had started from Calvin and Hobbes cartoon.
The first question which I had asked was from behavioral law-and-economics kind of a context, are we really moving from, let’s say fast intuitive thinking, to slow deliberative sort of analysis? The second question which I had asked was let’s say instead of looking at other countries as a source of our jurisprudence, is it time to look at our own? Let’s say Indian competition jurisprudence, if it is, what will that be based upon?
And the third question is, is it time to also look at, from the perspective of, public choice theory to go on to the standard of consumer welfare?
I’m not sure how much time I have, but if I have one or two minutes, the last point, which I will make in terms of our own collective self-reflection, is that you see when we speak of Indian jurisprudence, what would that mean?
Would that mean that we should look at Indian Competition Act more seriously? There are provisions which talk about the expertise from all sorts of fields. Not just law, not just economics. Also talks about, let’s say expertise in the field of maybe consumer policy or competition policy. Is it time to look for people from other fields as well? And make sure that Indian competition jurisprudence, at least for the next decade or so, benefits from let’s say expertise of other experts, from other disciplines, let’s say standards, which otherwise have not been utilized until now.
And here, let me actually, on my last note, let me cite Mahatma Gandhi, who might sound little anomalous for the purposes of competition law. But we are all in India and this is CPI organizing, and so I would love to quote Mahatma Gandhi if I could. And Mahatma Gandhi said that “You know what, I want to keep the doors and windows of my house open, because I want to let wind blow from all sides. But I refuse to be blown away from my feet from any of those winds”. Is Indian Competition Commission, let’s say, if not anything else, can they think of listening to Mahatma Gandhi? Thank you so much.
BHATTACHARJEA:
Thank you, Rahul. Three very provocative questions, but only partial answers. So we may come back to you and to the other panelists to provide more complete answers. I’m sure no one will be able to agree on the answers, but that is the nature of a lively discussion. Finally, I would like to invite professor Somashekar, who will give perhaps a more academic perspective. The first three speakers were really practitioners in different ways. Somashekar will have the advantage of being an observer from the sidelines for many years, and seeing how the practitioners have contested many of these cases in the commission. And let’s hear what he has to say.
T.S. SOMASHEKAR:
Thank you very much Prof. Aditya, for the kind introductions and thanks to CPI as well for inviting me for this discussion here today. One of the benefits of being the last speaker, is that you gain from the wisdom of those who have gone before you. So I’m going to try and actually take a very practical CCI sort of an approach towards the situation that we face today. So that if there is a possible student audience out there they could also have a glimpse of how these sorts of cases could be analyzed.
So the question is about, two different operating systems. We have the iOS and we have Android. And, in India, Android based phones have about 96% of the market share. Apple’s IoS has about 3.5% and the rest are just a very fractional amount. Consider the number of smartphone users in India – more than 700 million unique users, a rapidly growing market, and put these two together, you have a massive market, which Android phones dominate. I’m not saying dominate in the competition sense yet. But I’m saying, Android phones have a massive percentage of the 700 million unique phone users. Whichever way you look at it, given the significant internet life that we’ve begun to adopt – we use the internet on the smartphone for various types of activities, transactions, and so on. This has created an enormous market from various different perspectives.
So now the first thing that we need to understand, is if Android phones have the large percentage of the market share, can we say that therefore Google is dominant in the smartphone OS space? We move to section four of the Indian Competition Act. There are issues that also come up from a merger perspective and also from agreements perspective. But I’ll just try and focus on the dominance issue here.
But perhaps I’ll also address some merger related issues and maybe even agreements related issues which may inevitably will come up when you discuss dominance related questions. But just before I go ahead, I would like to point out one issue that we, and even the regulators face. We face a huge, enormous, information asymmetry. We have no clue what these tech companies are doing.
The regulators, by the time they catch up to find out what the tech companies are up to they are already in a lag again because the latter have adopted something else. That is something that we must realize when we tackle this particular scenario. Is Google therefore dominant? Can, we say that? Let’s have an understanding; there’s Google’s Android – constantly developed, and there are other stock versions of Android. These stock Androids are no competition for Google’s developed Android, for simple quality reasons. It’s Google’s operating system which speaks between the apps and the hardware. And that is how Google’s Android does a really fantastic job. No denying, we all are all beneficiaries of the fantastic innovations that we get from Google.
The way in which Google’s Android speaks between the apps and the hardware, ensures a tremendous amount of benefit for app developers. There is speed, and there’s also the benefit of data analytics that the app developers get. Google has this enormous source of data, which it can use to deliver better services to app developers. App developers value this particular treasure trove of data and the analytics that come through this particular platform.
So very clearly, Google’s Android has no challenger. There is no other alternative for App developers and smartphone manufacturers in India. Smartphone manufacturers are predominantly based on Android, iOS is out of the question for them. Any other operating system is also out of the question.
The choices for smartphone manufacturers is restricted to Google’s Android. Now one company did try to develop an alternate operating system. Samsung tried it, it just didn’t work out. Because app developers just simply did not want to undergo the cost of developing modifications or features necessary for another OS. So Samsung pretty soon closed it. It couldn’t survive.
To be very clear, the market for operating systems has considerable barriers to entry. It’s not going to be easy for new competitors to come in it. Witnessing Google’s Android OS market share, for nearly a decade, has increased substantially globally and it has become the largest operating system. And in India, it has been steady and very high over the same decade.
Google’s stable market share as the largest player edges us towards saying that Google has dominance. But there are other factors, you don’t just look at market share. Of course, you’ve got to define the relevant market. So I’m sticking to saying that it is market for operating systems. And then I proceed to see how this definition can lead to understanding potential abuses. What are the other factors that define dominance?
Google has significant economic power. There substantial network. And then you also ask the question, is there any countervailing buyer power? But consumers of course have no countervailing power, app developers have no countervailing power, and smartphone manufacturers also don’t have any countervailing power.
For instance, the smartphone manufacturers are forced to pre-install apps. They’re forced to adopt the Chrome or other apps that Google has developed. Now that in itself is an indication of Google’s Market Power in the market for OS. In a very simple manner, therefore Google is pretty dominant.
It has, significant amount of Market Power. Don’t ask me to define significance, that’s something over which the EU competition authorities too got into a bind. But it has market power necessary to act independently of competitors, in its own interest. What can it do when we say it has got dominance, we speak of two different things. We are speaking of it behaving in two different manners, one exploiting and second excluding.
These are the two types of behaviors that you can see coming out of Market Power. So the question is whether Google abused its Market Power. Let’s take app developers, and let’s see both from an exploitative perspective, as well as from an exclusionary perspective. From an exploitative perspective, we could ask if Google charges very high prices?
Google needs app developers. It needs many app developers, because that provides a tremendous source of data. All the data that goes through apps, sits with Google. And Google uses that to provide analytics. And Google can also use that to develop its own apps. That’s a huge advantage for Google. So Google wants apps to come to them. So they don’t place any entry fee. But for those who have a payment requirement, you need to pay for downloading this app. And then you have in-app purchases. For both Google charges 30%. And that’s something they want to introduce in India, and have delayed up to next year, giving them to develop a proper interface and so on. Apple has a similar charge – 30%. That’s really interesting. 30%, in the US – they (app developers) protested! They said, “This is too high a charge, it is excessive. We’ll get squeezed out of the market”!
So the question here is, what is an appropriate price? Google charges 30%, Apple charges 30% in the first year, and then they drop it down to 15%. Is this exploitative pricing? Is this going to squeeze out these people from the market? But if we say this is excessive then we have to point out what would be a ‘fair price’ in this context. That is the moot question. Is this resulting from market power (or platform economics)? If you want to stay with them, you got to pay or you get knocked out.
The next one is, exclusionary behavior. Have any of these operating systems behaved in an exclusionary manner? There are clear examples: Apple chucked out some top apps which dealt with parental control, and screen time management .
11 of the top 17 apps were knocked out in one go based on the reason that they did not meet certain data privacy requirements. And they did not seem to justify that. They got knocked out. And they suffered huge amount of losses. Although they (the apps) are large in terms of downloads, a hit in terms of $5 million or $10 million is massive. It’s not easy for you to recover. And simultaneously, please note, Apple announced the release of its own Parental Control App. Is that exclusionary? Definitely needs a look.
Now let’s come closer to home. A couple of months back, Google chucks out PayTM (a leading fintech/ewallet service app) saying that PayTM was violating certain principles. Here it appears that Google plays both the judge and the executioner. When you chuck out someone like PayTM (the largest payment app in India), and have a competing Payment App, that’s going to raise eyebrows. What were the processes that you followed before you did this? You knock out a form from payments for one month, and you consider network effects. The immediate effect may be a loss of network size.
People will say, PayTM is not functioning. I’m just going to shift to other apps. Is it going to be Google Pay? Is it going to be Phonepe? Is it going to be any of the other payment apps? That’s a different question. Unless switching costs were high from PTM i.e. if PayTM had developed switching costs to retain its customers, there will be an impact.
And once people shift the other apps, you have allowed for competitors to come in. The question is, whether Google benefited from doing this. And please remember, I’m talking about information asymmetry here. Did Google (or any of these platforms), have the necessary analytics to show that if this were to happen, they the closest substitute for people who are using PayTM would be Google pay? If I have the data, I know it’s going to help me. This is the kind of information asymmetry that we have. So both from the perspective of exploitative, as well as exclusionary practices, we seem to have some instances here, which obviously need to be closely looked at.
Now can a App Developers move to other platforms? Is very difficult. It’s exceedingly expensive to move to other platforms. For the simple purpose that you cannot customize it for several different platforms. It’s very expensive. Only the large (well financed) apps can do that. But even they may do it for one or two platforms, but they’re not going to look for a third platform. Right? So they’re going to stick with the dominating Operating System.
Apps based on Android OS will find it difficult to shift out of as they lose out on the enormous benefit in terms of Google support. So it’s either it’s a sort of lock-in. There’s another aspect which we need to look at in the Android Operating System.
If I want to download an app I go to Google Play Store. Right? If I go to Google Play Store, I look for an app and immediately I see a series of apps are there. The most downloaded, the number of stars and so on. Now, if there are some apps which have the same number of stars. How does Google Play Store discriminate between them? What is the methodology? So here’s one thing that happens. If you were to advertise on the Google search engine and show un pages people view, if your app were to be advertised there, you have a higher chance of your app being chosen in the play store.
What does this mean for small app developers. If that is a route for them to develop an app and be up there then it’s going to be very expensive. So is that actually beneficial for small app developers? Does it provide a very democratic environment for competition? I’m using two different words. Does it allow them to come up there? We really need to have a look at this methodology of how people search for apps and what is displayed and comes up.
Remember, this is the same thing that has happened even on e-commerce platforms. In e-commerce platforms as well when you search for something, what is displayed is not necessarily what is the best. It could be on the basis of who advertises there or any other metrics. But also when you shop and move out with your basket ready you see other preferred sellers put down there with the intention of changing your preferences. These other preferred sellers, essentially they come from the advertised. The ones who pay more for that particular service.
So all that I’m trying to say is that it becomes expensive for app developers to actually move into the Google ecosystem and succeed. So now I come to consumers. So I’ve spoken about apps. I’ve spoken about smartphone manufacturers. How for all of them, it’s a little difficult. For consumers, yes there’s a huge amount of benefit. The amount of innovation that has taken place is really good.
But here we have a hypothetical question, a counterfactual question. Would innovations have been better with the dominance of Google’s Android, or globally iOS and Android? Now that is the question that we need to answer. Moving to mergers and acquisitions. Look at the number of acquisitions that these companies have engaged in. If you look at that, you’ll probably say, “look, wait a minute, most of the dynamic efficiency or the benefits that we get through dynamic efficiency seems to be technology, which has been developed outside the ecosystem.” So what exactly is happening here?
Google didn’t develop Android inhouse – it developed Android after it bought it, in 2004 or 2003. So Android was never really Google’s own. But Google saw the opportunity of Android. And saw that smartphones are going to be the predominant source of internet search and use. That’s what Google did. Of course, it developed it. And there’s a huge amount of innovation, etc. But the question is what would have happened if not for this.
Now let’s take another illustration. Now for you to succeed on the online business, you need to have an digital presence. That’s how you absolutely do well. Google caters to these – predominantly the way in which Android apps succeed is through this online presence. You have a great online presence. It works well for you. Now, there are several other stores in India who don’t have online presence. I’m not saying that competition law should favor competitors. If they cannot compete well they are knocked out, that’s how it is. They need to adapt to the system.
But if you’re talking about a system where you need to allow smaller players to survive and compete through alternate platforms, who’s going to provide an alternate platform to these smaller players, if they cannot afford the present option? Now, this is not a competition question. But then you have a new entrant – Jio. Now Jio is proposing an alternative for all these people, the local kirana (grocery) stores who have not been serviced so far. That’s not something which we saw Google trying to do. Google has been predominantly servicing internet-based companies. And we cannot blame Google for that.
I mean, we cannot say, “Google should cater to them as well.” But then you see an innovation coming about through Jio. But how can Jio possibly challenge these other large players? What we are seeing is essentially that it’s only large well-heeled, well-funded companies that can really take up the challenge and provide competition, which is so essential for innovation. Now, I know there’s a debate out there, as to whether large companies will further innovation quicker than competitive markets That debate is still out there. We do see a tremendous amount of money being put into innovation by these large companies. But we need to consider the counterfactual question – would it have been better (in competitive markets)? And if you look at the acquisitions, perhaps there’s a point to they’re saying that many of these outside ecosystem innovations have been swallowed up. Okay, so I’ll just stop that there’s more. But I think my time’s up.
BHATTACHARJEA:
Thank you, Somashekar. That was perhaps a good basis for a brief, for an ‘information’ to be filed before the CCI on some of these practices now, which should really cause us some concern. We might not be so enthusiastic about all the benefits we get from the exciting new world of apps that we can access on our phones. We should be aware of the business practices that may actually be constraining our choices in the future.
Well, we have about 10 minutes left for a discussion. I know all of you had some things left to say from your individual interventions. I’m not sure we can do justice to that. By the way, I just wanted to thank Someshekar for using a term, which I was waiting to hear, switching costs. An economist, that is something which I think is very important when we’re talking about this kind of competition and ways to restrict it.
Yeah. I so coming back to what we should do in the remaining 10 minutes. I know Dr. Gouri had a point, which she wants to reserve for the discussion. Rahul raised three questions. And as I said, maybe we need to give fuller answers. So let’s hear from them first. And then depending on how much time is left, I have a question which I’d like to pose to the other two members of the panel. But let’s see if we have the time for that. Dr. Gouri wanted to mention some more cases.
GOURI:
You see my point that I’m trying to bring up is that one has to understand the business model. , I’ve very carefully heard Somashekar, very effectively put forward arguments of exclusivity . These are business models and I can’t understand why a businessman will try to make something which is not being exclusive or the other case of not allowing competitors to come in. It is for other competitors to come in. And it is for the competition commission to try and see if there are barriers to entry being created.
And the argument that is always given to barriers to entry is, there are some costs. There are network effects. There switching costs. And therefore, people can’t shift so easily. But please remember that what Google does is its own business for its own benefit. If it doesn’t benefit, it will not go ahead. Under the fact that they’re innovating continuously means that there is competitive constraints coming up. And this I’d like to link it to what Rahul said, on the question of public choice. How do I look at welfare? And are we going to look at welfare in terms of total welfare? Or are we going to look at it in terms of consumer welfare?
And in the Indian Competition Commission, we have been looking only at total welfare. And that was a problem of Section IV, too. That is also the problem of section three. We have not talked about it in terms of consumer welfare and how to define it further. They’re big, it’s the rule of the tree. And it’s very well-known in each of the systems that are given, including the slide that was put by Rahul. There’s always only three people in each of them.
And if you have not been among the earlier ones who come into those three. Then try to see if you could help others to come up in the other ways. Mahatma Gandhi is right. If we close our windows and we become protectionists, we may not grow. At the same time, whatever could be the fault of these companies, be it Amazon, with Google, with Facebook.one has to find out what is the problem there? And whether these arrangements are anti-competitive or not. This is a global, inter global world. This is the political economy of protectionism. Let’s not become digitally protectionism.
We have to have much more play and a much more gain taking place. And I think this is very good to these arguments are taking place. And there are ways in which we can handle. But I come back again and again, to the point, let’s bring consumer back to the center stage. A competitor cannot be a consumer and we have been protecting competitors continuously Snap-D says, “Yes, whatever the government is doing is good for me, because I can grow.” But that’s not competition. We have faced competition, a lack of competition and protection in the earlier years. Let’s not for digital India. Let’s not do it for our software. Let them face the competition. And for a regulator, it is very important to be careful not stepping and kill everything by being overprotective.
BHATTACHARJEA:
Thank you, Dr. Gouri. Rahul, very quickly. Do you have any further answers to the very provocative questions you raised, especially public choice. If you would please.
SINGH:
So I like asking questions. So if you permit me, I’ll ask one more. And maybe there is an answer there. Right? Which is this one. So all of you must have, but I don’t know whether, you know, maybe I can take a poll. Do you know that there is a very popular editor, of an Indian news channel, which also runs a website has recently been heavily penalized by a regulator.
DHALL:
Yeah, ND-TV.
SINGH:
So one of you know, Mr. Dhall says, yes. All of you are nodding. But do you know it from their website? Or do you know from their competitors, newspapers and lips?
DHALL:
No, it’s in the public domain, Rahul.
SINGH:
Right? So, therefore, so, but if you go onto their own website, the news doesn’t exist.
DHALL:
Why would they, mm-hmm (affirmative).
SINGH:
So is that self-referencing? Or is that irrational behavior? And if it is, let’s say either, regardless of whether it is self-referencing, self-discriminatory behavior, or let’s say it is some kind of a rational behavior. Why is it that, all of us know about this news. Because there are enough competing news channels, competing newspapers to give us that news. Right?
There is no barrier to entry for somebody else to publish a news in digital media. Right? For instance, today there are so many of these newspapers, which are only digital, not physical at all. Right? So question really is this for, let’s say, when we are looking at this mobile ecosystem. So there is much being said about barriers to entry. There is also, you cited this idea of switching costs and all. Right? What about, let’s say also looking at contestability of the market from the perspective of absence of exit barriers. Right?
So both, let’s say look at entry barriers, as well as exit barriers as a consumer, let’s say Facebook as an Indian entity. Do I have some kind of a mechanism to exit Facebook? Now you know, that competition commission in a merger control order looked at market for eyeballs. Right?
But Facebook is not really asking me to spend time on their website at all. It’s the consumer choice to spend whatever time they do on Facebook. And therefore there is also equally an absence of exit barrier if we are so focused upon our law-and-economics analysis. So let me stop there. And then, let other people speak.
DHALL:
I want to just comment, with the permission of the Chairman, on two points which were raised here. One of course is this issue of why should we borrow from other jurisdictions? You see competition law in the sense embodies universal principles. The basic principles are the same. And if you see the structure of the laws that also in all the countries is broadly the same. There is abuse of dominance. There is cartel. How to define market power and how to define relevant markets.
More or less principles don’t differ from jurisdiction to jurisdiction. So if a Google case has come up in Europe, taking a specific example, on the issue of forcing the device manufacturers to load its entire suite of apps and thereby, imposing on the consumer switching costs. Now, when a similar Google case comes up here in India, while the EC order need not be copycatted but the remedy could be similar.
When you are looking at it, in terms of effects, in terms of dominance, broadly speaking, the principles are the same. You may come to different conclusions that Google is not dominant in the Indian market, or that the Indian consumer is different from the European consumer. But the analysis will follow more or less a similar path.
The second thing, I want to point out is the European study that I had mentioned. One of the observations is that these platforms, whether it is the operating system platform, whether it is the e-commerce platform, they are now so huge that the responsibility has to be imposed upon them virtually to act like a semi regulator. That is to say, be transparent. That is to say no discrimination. That is to say no self-preferencing.
Thus, this is yet another principle which is being thrown up here. Almost as if these are public utilities, and therefore they carry this responsibility and you can punish them for discriminating. Let’s say Amazon does self-preferencing or it gives a greater benefit to one of its own companies or related companies.
So I don’t want to take much time because I think we are almost at the end of the session, but these were two things, which I just wanted to point out.
BHATTACHARJEA:
Oh, thank you, Mr. Dhall. Yes, you’re right. Unfortunately, we are at the end of the allotted time. We’ve many more issues that could have been taken up. I myself wanted to raise the issue of whether these particular platforms should be treated as an essential facility.
DHALL:
Oh, Yeah, yeah.
BHATTACHARJEA:
Given that there is a rule of three, there is what we call a winner take all (or most) tendency in network markets. Is there a case to promote national champions in the Indian context? We’ve all agreed on the need for an Indian jurisprudence, but is there a need for that jurisprudence to be more forbearing in allowing Indian firms to come up in areas where they can provide a challenge to these so-called tech giants from abroad? But these are questions which cannot be resolved in the scope of even a full debate. And certainly not in the remaining minute, which I should use only to thank all-
DHALL:
That would be more a question of industrial policy.
BHATTACHARJEA:
Yes. I know that’s being debated. But of course, on the face of it, the competition act has a principle of competitive neutrality. And the very preamble says it is to promote competition amongst all global players.
GOURI:
Yeah.
BHATTACHARJEA:
So it cannot explicitly discriminate.
DHALL:
With that, mm-hmm (affirmative).
BHATTACHARJEA:
But maybe in its decisional practice. Just like Dr. Gouri says, Europeans are keen to bash American companies. So, can the Indian Competition Commission be a little more solicitous towards Indian companies? I don’t know. I don’t think so. From the consumer’s perspective, I shouldn’t be bothered whether I’m being ripped off by an Indian giant or an American giant or a European giant. I’m still being ripped off.
GOURI:
Right.
DHALL:
Yeah.
BHATTACHARJEA:
All right, so let’s call it an end there. And thank you all very much for this very lively and engaging discussion. And I know it’s part of a series being hosted by Competition Policy International, in four different jurisdictions, with a Round-up discussion involving one representative from each of them. I think Dr. Gouri is there from India. And perhaps she can carry some of our views to that international discussion. Thank you all very much.
SOMASHEKAR:
Thank you.
DHALL:
Thank you everyone.
SINGH:
Thank you.
DHALL:
It’s been a great pleasure being here with you people. And thank you Chairman.
GOURI:
Yes, thank you Aditya and thank you CPI. I’ll carry forward some of the ideas.
