With Digital economy, a new course for competition law

The explored, and yet unexplored digital technologies of the present era open gateways into greater forms of data harvesting and control, as well as providing creative opportunities for its monetization. This has also fuelled the rise of unfair competitive practices in the digital realm, which need to be managed with a radical and highly dynamic approach.

  • Today, a number of anti-competitive practices are governing the digital landscape. These refer to acts and omissions violating ethical business norms by putting the consumer at a disadvantage.
  • This could be by collusion and/or restricting the trade of businesses working on an equivalent plane and/or restricting the trade of businesses working in a different industry but remain relevant to the operations of the predatory organization.
  • In an online space, a networking platform may have justification for certain practices due to the complex balancing act they conduct between parties. This complexity, combined with the many parties and people involved with those parties makes current competition measuring tools such as price testing and market share, redundant. 
  • As the yet unexplored technologies of the future open gateways into greater forms of data harvesting and control, as well as providing creative opportunities for its monetization, regulatory frameworks have to dynamically evolve to keep this activity in check.

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Competition law has existed since the Romans sought to regulate the corn trade. With the advent of modern economics, as propounded by Adam Smith, the market became the all-encompassing force that pervaded lives. Companies rose in stature and size by taking advantage of the early capitalist rat race and devising ways to monopolize the market, some even going to the extent of employing unfair means. Today, the same unfair means, albeit in a different form, are being utilized to capture a greater number of consumers through a different, less regulated medium – the digital space.  

A calls for increasing regulation

On the back of severe quarantines around the globe, consumers settled into the new normal of relying on apps and contactless services for even the most mundane tasks. Brick-and-mortar giants such as Walmart and Target made aggressive strides into the e-commerce space. This speaks volumes about the growing consumer reliance on the digital economy

The recent changes in legislation in South Korea and Australia, have reignited debate about the scope of competition law and its limitations in dealing with the digital space. Previously, it was considered that the present antitrust framework and its provisions suffice for the control of dominant organizations, but perspectives around this have changed.

Some primary concerns with competition in the digital realm include:

  1. The increased opportunities for economies of scale and scope. 
  2. Difficulty in determining the extent of digital influence as compared to physical influence.
  3. The complexity of algorithms that are not fully comprehended. 
  4. The uphill task in relation to consumer data protection. 

Global response

South Korea’s amended Telecommunications Business Act will bar app market operators from forcing certain payment systems on mobile app development companies. This was in response to the onerous, and arbitrary terms and conditions that govern the Apple App Store in particular. Similarly,  the Australian Government asked the ACCC to develop a mandatory code of conduct to address bargaining power imbalances between Australian news media businesses and digital platforms, specifically Google and Facebook.

Regulators cannot afford to be unconcerned about compliance with regard to the above differences between the physical and digital space. The above four primary concerns add a layer of difficulty to the challenge of crafting an anti-trust framework that reels in internet giants. 

In regard to the first concern, the digital world, not restricted by tangible realities, holds greater potential for upscaling and expansion. This certainly offers opportunities to budding companies, but on the flipside, has seen an unbridled increase in the market share of existing titans. As mentioned before, traditionally brick-and-mortar entities such as Walmart and Target have made forays into e-commerce. Their dominance as retailers, coupled with large investments in advertising their online ventures, has resulted in their consumer base simply shifting to their phones to purchase from the same shops. The small semblance of an opportunity for growing retailers that presented itself at the start of the pandemic, seems to be largely compromised. 

In regard to the second concern, the digital space being vast and open, it is hard to determine the exact influence of powerful companies. Dominant internet and application-based businesses are typically multi-sided, i.e., they serve as networking platforms between two or more parties. General constraints imposed by these platforms affect all these parties and the degree to which they can be considered unfair towards them can determine the quantum of penalty.

However, in an online space, a networking platform may have justification for certain practices due to the complex balancing act they conduct between parties. This complexity, combined with the many parties and people involved with those parties makes current competition measuring tools such as price testing and market share, redundant. 

In regard to the third concern, algorithms curating content today form a huge part of public opinion and behaviour. There is a lack of understanding about these lines of code as they use data from varied sources and the exact process followed to interpret such data is not open to scrutiny. Given this fact, it is not inconceivable that these algorithms can be manipulated to the advantage of their makers.

The argument that suspicions cast on these lines of code is unwarranted is a specious one for if one were to presume that the algorithms work as presented, it still limits consumption of content to simply a few organizations, considering the fact that the curator sitting behind the screens assorts and recommends content on the basis of the quantity of clicks. The vicious cycle continues – one click leads to more and more clicks, thereby leading consumers to be encapsulated within the sphere of just a few corporations, completely unbeknownst to us. 

In regard to the fourth concern, India has taken admirable steps to safeguard consumer data, by taking cognizance of the fact that predatory organizations can harvest and use it for illicit purposes. However, the measures taken simply do not deal with the huge scope and potential for utilization of consumer data. Consumer data can be used to create ever smarter algorithms, making it aware of intimate behavioural patterns and commercializing it in the form of personalized advertising and misuse of position and resources for unfair gains.

This is arguably the most dynamic and problematic concern pertaining to the explored and yet unexplored digital technologies of the present era. They open gateways into greater forms of data harvesting and control, as well as providing creative opportunities for its monetization. Any framework designed to keep this in check will have to constantly evolve along with it, and cannot be even remotely effective with traditional approaches.

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