Digital markets and competitive behaviour
The article has been authored by Aparajitha Nair, journalist, Hindustan Times.
With the investigation against Google in the Matrimony.com case by the Competition Commission of India (CCI), the entire discussion around digital markets and the subsequent competitive behaviour saw much emphasis.
In its 2018 passed decision, the CCI had imposed a fine of ₹135.86 crores against Google for having abused its dominant position in the market and being involved in search bias vis-à-vis Google flights service. Consequently, similar investigations were also started against market stalwarts like MakeMyTrip, Amazon, Zomato and Swiggy for the alleged vertical integration through competitor restraints, deep discounting and preferential listing. Additionally, on August 5, 2022, the government also proposed amendments to the competition law to catch up with new-age business models and to broaden the scope of anti-competitive agreements.
There are several issues which have gone unnoticed in the competitiveness of the digital markets. When the playing field becomes extremely competitive, it leads monopolies. The market then becomes dominated by the countable few big players. Further, when these big players foray into other fields and markets to compete, it gives them a a disproportionate competitive advantage. Processes like bundling and tying become the go-to methods for these big players, which disrupts the level playing field for other companies. The lack of a proper understanding of these concepts in the other companies is also an issue of concern. This also leads to another issue of data usage. When the key players of one market move into another, the data gathered can be used as leverage in the new playing field. This is basically the utilisation of privilege by the big players. Last, the key players with their significant market worth often try to force pricing, discounts and commissions on to their customers, which is also anti-competitive.
The digital markets differ from the traditional ones, and hence the economics of it is driven by increased returns to size. Traditional markets like those of fertilisers do not have fast reducing marginal costs. To deal with these rising concerns, there is a need for regular dialogue and conversation amongst the stakeholders of the digital market like the ministry of corporate affairs and CCI along with the consumers, partners and vendors so that the ecosystem of the digital market can be understood better.
It is also important to understand how the competition law for the traditional markets differ from those for the digital markets. The phenomenon of monopoly is predominant in the digital market where the top players completely dominate the ecosystem. Regardless of the field, the top players dominate and become prominent. This leaves no growth space for other players in the field. The bundling and tying associated with one market is then diverted towards another by the top players. Hence, the contestability of the markets also comes into question. The accumulation of data and the unfair utilisation of it by the big players makes the entire atmosphere inhospitable for others.
Similar issues are becoming evident across the world. Moving forward, the focus has to be on building on the platform neutrality at a global level. With about 600 million internet users, the Indian market hosts one of the most critical digital ecosystems. To balance innovation with contestability and fair play, we need to strengthen policy making. For a proper policy to be put in place, the perspectives of the stakeholders need to be taken into account. It is also important to note that the consumers do well when the markets flourish and that happens when contestable competitive markets offer a level playing field to all the players.
The article has been authored by Aparajitha Nair, journalist, Hindustan Times.