Module 4: Power

Regulation of platform power

This section is concerned with the concentration of power by large digital platforms in relation to online ecosystems, advertising, and the concentration of data. It examines whether such power is regulated through, for example, competition law or digital markets provisions.

India

Introduction to India Competition Regulation

The main features of competition regulation in India resemble familiar competition law concepts around the world: prohibition of abuses of a dominant position, merger control and wide ranging investigative powers. We explain these in more detail below. 

The current key piece of legislation is the Competition Act, 2002. Prior to this law, the relevant legislation was the Monopolies and Restrictive trade Practices (“MRTP”) Act, 1969. The 1969 law was the first Indian legislation to restrain abuse of market power and was focused on curbing monopolies. In contrast, the 2002 law takes a broader approach to promote competition. Further, the 2002 law was drafted in line with international developments and reflected India’s reforms of Liberalisation, Privatisation and Globalisation in the 1990s. More recently, the Competition Act was amended in 2023 to transform the law to address “a new era of economic development and consumer welfare” and address emerging digital market issues. 

The Indian government is also contemplating an ex ante regulatory framework potentially modelled on the European Commission’s Digital Markets Act (DMA), to apply to ‘systemically important digital intermediaries’ (SIDIs). This is in the draft Competition Bill, 2024 and would complement the existing competition law regime in India.

Constitutional Basis for Regulation

Competition regulation in India is based on a constitutional basis. The Constitution of India says: 

Article 38:  (1) The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.

Article 39:  The State shall, in particular, direct its policy towards securing:  (b)  that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment;

Overview of the Competition Act (2002)

According to India’s competition regulator, the 2002 law “follows the philosophy of modern competition laws”. Under the Competition Act, anti-competitive agreements and abuse of dominance are considered as potential impediments to free and fair competition in the markets. Penalties are imposed when the regulator concludes an enterprise has engaged in anticompetitive practices resulting in appreciable adverse effect on competition (AAEC). 

Scope: The territorial scope of the Competition Act is interestingly not the entire state. It extends to the whole of India except the State of Jammu and Kashmir (section 1(2)). There is significant history surrounding this distinction, dating back to the Partition of India. 

Regulator: The Competition Act establishes the Competition Commission of India (CCI). The CCI is a quasi-judicial body responsible for the administration of the Act.

The key substantive regimes of the Competition Act are: 

1. anti-competitive agreements (section 3); 
2. abuse of dominance (section 4); and 
3. regulation of combinations (merger control) (sections 5-6).  

Anti-competitive Agreements

There is a general prohibition of anti-competitive agreements which cause or are likely to cause an appreciable adverse effect on competition within India (s 3(1)). The Indian law includes examples that are presumed to have an appreciable adverse effect on competition and those which may have such as effect: 

Examples from 3(4) - may be prohibited	Examples from S3(3) - presumed adverse effect on competition and therefore prohibited
Tie-in arrangement	Directly or indirectly determines purchase or sale prices
Exclusive dealing agreement	Limits or controls production, supply, markets, technical development, investment or provision of services
Exclusive distribution agreement	Shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way
Refusal to deal	Directly or indirectly results in bid rigging or collusive bidding
Resale price maintenance

Abuse of Dominance

S.4(1): No Enterprise or group shall abuse its dominant position.

In addition to the broad prohibition, the Competition Act provides examples of when there shall be an abuse of dominant position, including if an enterprise or a group: 

a) directly or indirectly, imposes unfair or discriminatory:

      i. condition in purchase or sale of goods or service; or

      ii. price in purchase or sale (including predatory price) of goods or service. 

b) limits or restricts:

      i. production of goods or provision of services or market therefor; or

      ii. technical or scientific development relating to goods or services to the prejudice of consumers; or

c) indulges in practice or practices resulting in denial of market access [in any manner]; or

d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or

e) uses its dominant position in one relevant market to enter into, or protect, other relevant market.

A "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to: 

• operate independently of competitive forces prevailing in the relevant market; or
• affect its competitors or consumers or the relevant market in its favour;

  Predatory price means the sale of goods or provision of services, at a price which is below the cost. 

Regulation of Combinations

The regulation of combinations requires first that the acquisition or merger is considered a ‘combination’ - which is defined in Section 5. Being considered a combination that is subject to regulation depends partly on the value of the acquisition or merger, with values set in both rupees and US dollars. This is equivalent to what is commonly referred to as merger control. 

Some categories of combinations consider value only within India, and other categories consider worldwide turnover. For example, any merger or amalgamation in which the resulting legal entity will have, in India, the assets of the value of more than rupees one thousand crores or turnover more than rupees three thousand crores will be considered a combination (s 5(c)(i)(A)). 

• rupees one thousand crores = 110.415.600,00 Euro
• rupees three thousand crores = 331,250,400.00 Euro

  Combinations are prohibited if they cause or are likely to cause an appreciable adverse effect on competition within the relevant market in India (section 6(1)).

  Procedure: If a combination is proposed, it must be notified to the CCI. The CCI has powers to respond to such a notice contained in sections 29, 29A, 30 and 31.9563 of the Competition Act. This includes the power to approve - or withhold approval - for combinations. 

  The Commission may inquire into whether a combination has caused or is likely to cause an appreciable adverse effect on competition in India within one year of the combination taking effect (s 20(1)). This can be based on a notification or otherwise.  

  To determine if there is an AAEC, relevant factors are prescribed by the Competition Act and include: 

• actual and potential level of competition through imports in the market;
• barriers to entry into the market;
• level of concentration in the market, and degree of countervailing power in the market;
• likelihood that the combination would result in an ability to significantly and sustainably increase prices or profit margins;
• extent to which substitutes are available or are likely to be available in the market;
• market share, in the relevant market
• if the combination would remove a vigorous and effective competitor in the market;
• nature and extent of vertical integration in the market;
• possibility of a failing business; and
• nature and extent of innovation. 

Competition Commission of India

Regulatory Powers

If the Commission determines through an investigation there has been an abuse of a dominant position, or an enterprise as entered an anti-competitive agreement, the Commission may make any or all of the following orders: 

1. direct any enterprise involved in such agreement to discontinue and not to re-enter such agreement  
2. direct any enterprise involved in such abuse of dominant position to discontinue such abuse of dominant position
3. impose such penalty not more than ten per cent of the average of the turnover or income for the last three preceding financial years
4. in the case of a cartel, the fine imposed may be up to three times of each enterprises’ profit for each year of the continuance of such agreement or ten per cent of its turnover or income for each year of the continuance of such agreement, whichever is higher
5. direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission;
6. direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any;
7. pass such other as it may deem fit. 

Structural Powers

The Commission may, by order in writing, direct division of an enterprise enjoying dominant position to ensure that such enterprise does not abuse its dominant position. 

In particular, the Commission can order:

• the transfer or vesting of property, rights, liabilities or obligations;
• the adjustment of contracts either by discharge or reduction of any liability or obligation or otherwise;
• the creation, allotment, surrender or cancellation of any shares, stocks or securities;
• the formation or winding up of an enterprise or the amendment of the memorandum of association or articles of association or any other instruments regulating the business of any enterprise;
• the extent to which, and the circumstances in which, provisions of the order affecting an enterprise may be altered by the enterprise and the registration thereof;
• any other matter which may be necessary to give effect to the division of the enterprise.

This power does not require the Commission to first prove there has already been an abuse of a dominant position, hence, does not have similar ex-post problems of EU competition law. This power could be exercised by the Commission in a preventative manner. 

Amendments to the Competition Act of 2002

In 2007, the Competition Act was amended to rectify administrative law issues regarding non-observance of the separation of powers. The amendments restructured the CCI to implement stronger separation of powers:

1. the Commission as a seven-member (one chairperson and 2-6 members) expert Body to function as a market regulator for preventing and regulating anticompetitive practices in the country and to carry on the advisory and advocacy functions in its role as a regulator
2. the Competition Appellate Tribunal (COMPAT) as a three-member quasi-judicial body to hear and dispose of appeals against any direction issued or decision made or order passed by the Commission. 

   Consequently, the CCI only became fully operational in 2009. This meant that the CCI lacked its own jurisprudence and instead leant on jurisprudence from EU, US and other mature competition law jurisdictions in developing the reasoning behind its orders. 

In 2023, the Competition Act was amended to increase penalties. Now, the CCI may impose a fine of up to 10% of the average global turnover or income of three preceding financial years on each of the parties found to have breached the law. This may include revenue earned by the company in India and abroad.

Case Law

Online Marketplaces in the firing line

Amazon and Flipkart are leading players in India's e-retail market which was estimated to be worth $57-60 billion in 2023, and set to top $160 billion in value by 2028, consultancy firm Bain estimates.

Amazon and Flipkart have been under investigation by the CCI since2020. The ‘probe’ included questions about: 

• the source of origin of their private label brands; and 
• whether product listing on their marketplaces could be manipulated through advertising. 

  The CCI has reportedly sent its findings to Amazon and Flipkart - to which the platforms have a right of reply - prior to making a final, public order. 

  Why has the regulatory action taken 4 years from investigation? 

  Apart from 4 years being well within the general timeline of competition cases in other jurisdictions like Europe, the process was extended by both Amazon and Flipkart making procedural challenges regarding the investigation itself. 

  In 2021, Amazon and Flipkart both challenged the CCI’s powers to investigate, (on two occasion in both a lower and higher court) but the courts upheld CCI’s power to investigate (2021 case). 

On January 13, 2022, the CCI passed an order to investigate Flipkart and Amazon for anti-competitive practices. The investigation related to its exclusive arrangement practices, deep discounting and also preferential listing on labels - and included a dawn raid. Broadly, the conduct of concern is preferencing sellers on its platform. Further, the CCI is considered if alleged discounting practices affected the competition ecosystem as a whole.

Alleged anti-competitive conduct:

preferential treatment of select sellers, particularly those with established partnerships, which allegedly results in higher search rankings.

deeply discounted pricing practices, possible predatory pricing, particularly in the mobile phone sector.

exclusive arrangements, like exclusive product launches

Case Status: The CCI has completed its investigation of both Amazon and Flipkart and reported it has identified anti-competitive conduct in breach of the Competition Act. The companies now have an opportunity to report their respective reports prior to the CCI determining fines and other orders (predicted to be issued in November). It is predicted any regulatory action will be appealed to a court, based on even the legal basis for the initial investigation being twice appealed. 

Rideshare services also targeted

There are three cases by the CCI against Uber: 2015, 2016 and 2021. These cases are against the Indian, Dutch and American Uber entities. In the most recentUber case, the CCI alleged contravention of both anti-competitive agreement and abuse of dominant position prohibitions by resorting to predatory pricing with an intention to drive out its equally efficient competitors like Meru. Specifically, this was Uber’s below-cost pricing strategy. Ultimately, no breaches were substantiated. 

The decision can be summarised as: 

• No finding of dominance, so abuse of dominance not applicable. The relevant market was the “market for radio taxi services in Delhi-NCR (National Capital Region)”. This was a distinct market from “ the conventional taxi market in India largely comprised of tourist taxis and kerb-based taxis” - due one not being substitutable for the other. Uber was not considered dominant, largely due to competitor Ola. This means section 4 (abuse of dominance) cannot apply. 
• Performance incentives in agreements between drivers and Uber did not foreclose competition. Uber did not restrict drivers from also being active on other platforms. While Uber did offer performance based incentives (with network effects), these were not considered anti-competitive. 

The 2016 Uber decision also did not find dominance (also due to Ola’s presence in the market) and no contraventions of the Competition Act. 

United States

Introduction

The United States (US) has generally been less eager to pursue competition or antitrust enforcement against digital platforms in comparison to the European Union. Additionally, the US is perceived as having a lax approach to antitrust in stark contrast to most other jurisdictions. However, in late 2020, a sterner approach towards antitrust arose in the US with the filing of complaints by the Department of Justice (DOJ) and several states against Google. This has been followed by further actions indicating that antitrust enforcement in the realm of digital platforms is a growing priority for the Biden administration, such as Executive Order 14036, also known as the Executive Order on Competition. Regarding platforms, the order specifically encourages the Federal Trade Commission (FTC) and the DOJ to use their powers under antitrust law to “challenge prior bad mergers that past administrations did not previously challenge” in, amongst others, the tech sector.

Basis of Antitrust in the United States

The FTC describes the basic antitrust law framework in the United States through referencing the triad of the Sherman Act, FTC Act, and Clayton Act.

The Sherman Act is a foundational US antitrust law passed in 1890. It emphasizes the importance of free competition and prohibits unfair monopolies. Generally, the Act prohibits anti-competitive agreements and conduct that (attempts to) monopolize the given market. It empowers the DoJ to enforce the Act. The basis of the notion of protecting competition is not to prevent monopolies in of itself, but the potential adverse impact of monopolies on consumers. 

Congress passed two additional antitrust laws in 1914, including the FTC Act and the Clayton Act. The former created the FTC and the Clayton Act addresses unlawful mergers and acquisitions. The FTC Act also bans unfair means of competition and unfair or deceptive acts or practices. Violations of the Sherman Act also count as violations of the FTC Act, thus allowing the FTC to enforce against violations under the Sherman Act. The Clayton Act prohibits mergers and acquisitions when the effect “may be substantially to lessen competition” or “tend to create a monopoly.” The Clayton Act was amended by the Robinson-Patman Act of 1936 to prohibit discriminatory prices, services, and allowances.

Both the Sherman Act and Clayton Act were amended by the Hart-Scott-Rodino Antitrust Improvements Act. Most importantly, it required that companies intending to undertake a significant merger or acquisition must notify the government in advance. Additionally, it created a means for private parties to sue for triple damages under the Clayton Act for harms caused by conduct which violates either the Sherman or Clayton Act.

States often also have their own antitrust laws, though these three acts form the basis for antitrust law in the United States.

Past and current approaches to antitrust in the tech sector

Previous antitrust cases including Microsoft in 1998 were brought by the DOJ on the basis of ‘regular’ antitrust law, with no specific digital market provisions. Microsoft was a key case wherein the DOJ considered that Microsoft was using exclusionary practices to maintain its monopoly in the operating systems (OS) market. This posed further problems as Microsoft tied its web browser, Internet Explorer, to its dominant OS which had anticompetitive effects particularly for its main competitor, Netscape, whose competing browser was considered by the DOJ as a basis for a potential competing OS. 

Though this case managed to open up the market, antitrust enforcement in the tech sector in the US has been lacking, in part due to the laissez-faire understanding of consumer welfare underpinning US antitrust law. For example, the FTC undertook an investigation of Google in 2013 regarding self-preferencing practices. However, the FTC ultimately closed the investigation as the self-preferencing could be understood as an improvement for users. Additionally, the judicial atmosphere seemed to be against regulating these platforms; Monti claims cases would have in any case met “defendant-friendly courts.”

Enforcing antitrust against digital platforms seemed more palatable in 2021, when two (ongoing) cases were brought against Google. However, this still mostly uses normal avenues of antitrust enforcement against the firm, rather than tech-specific provisions. For example, one of the cases addresses Google’s anti-competitive practices in the general search market. The DOJ claims that Google’s monopolisation of both the search and its advertising markets are closely linked, letting the DOJ address anti-competitive effects on both sides of the market. 

Despite the lack of specific tech sector provisions, certain legal innovations are occurring. For example, in the Google complaints, the DOJ identified a connection between a decrease in consumer choice and the lack of data protection and privacy for consumers. It identifies that“companies such as Google that offer low data protection can harvest more data that will allow them to cement their dominant position.” This facilitates demonstrating anticompetitive effects on consumers from behaviour specific to the tech sector, without necessarily relying on a specifically tailored provision.

From general antitrust to specific platform regulation: shifting regulatory approaches

The House Committee on the Judiciary, after a 16-month investigation, released a 450-page report in 2020 asserting platforms’ anticompetitive conduct. This signalled a shift towards antitrust enforcement against big platforms followed by an increased legislative fervour to regulate platforms and prevent anti-competitive behaviour. In 2021, numerous Bills were proposed in the US to address digital platforms as part of the bipartisan legislative agenda "A Stronger Online Economy: Opportunity, Innovation, Choice," which was created after the House Committee on the Judiciary’s investigation.

American Choice and Innovation Online Act, H.R. 3816, 117th Congress, 11 June 2021. Newest version:: H.R. 3816, 117th Congress, 21 December 2022.

Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act of 2021, H.R. 3849, 117th Congress, 11 June 2021. Newest version:: S.2521, 118th Congress, 26 July 2023.

Ending Platform Monopolies Act, H.R. 3825, 117th Congress, 11 June 2021.

Platform Competition and Opportunity Act of 2021, H.R. 3826, 117th Congress, 11 June 2021. Newest version: S.3179, 117th Congress, 4 November 2021.

Competition and Antitrust Law Enforcement Reform Act of 2024, S.4308, 118th Congress, 9 May 2024.

Monti highlights that these legislative efforts represent a shift for the US from a relatively lax approach to an “accelerated enforcement of antitrust law.” However, questions remain from a legal procedural perspective as the Bills do not delineate their relationship with the backbone of the US’s antitrust framework, the Sherman Act, at this stage in the legislative process.

All Bills (excluding the ACCESS Act) use certain thresholds to determine which platforms and tech companies fall under its obligations. These thresholds include:

• At least 50,000,000 US-based monthly active users, or 100,000 US-based monthly business users
• Market capitalisation of over $600 billion.

  These conditions are cumulative. Platforms fulfilling these conditions are referred to as “covered platforms” in the relevant Bills. The DOJ and FTC must designate a platform as a “covered platform.”

The American Choice and Innovation Online Act

The American Choice and Innovation Online Act is an attempt to prevent platforms and large tech companies from “abusing their market power to harm competition, online businesses, and consumers,” according to the senators pushing this Bill.

The Bill would prohibit platforms from self-preferencing, intentionally disadvantaging other firms’ products or services, using non-public data from a business user to provide itself an advantage, and interfering with pricing decisions set by another business user. Such prohibitions are found in Section 2(a) and (b) of the Bill. It envisions empowering the FTC and DOJ to oversee enforcement of the law.

Note that Section 2(c) outlines affirmative defences wherein such behaviour may fall under the Bill if the covered platform can show through “clear and convincing evidence” that their conduct falls under the listed exceptions. The first is when the conduct does not actually harm the competitive process, the second is when the conduct was tailored, necessary, and the least discriminatory way possible to either prevent a violation of or comply with federal or state law, or protect user privacy or other non-public data. Lastly, the conduct may also fall under an exception if the covered platform can show it increases consumer welfare.

Section 2(f) outlines remedies for when covered platforms are found in violation. Violating platforms can be fined up to 15% of their total US revenue for the previous calendar year, or 30% of the revenue affected by the unlawful conduct during the relevant period. These may be followed by various other remedies in addition.

Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act

The ACCESS Act aims to promote competition through reducing consumer switching costs between online communications services, primarily through requiring interoperability between services. The Bill addresses large communications platforms, and large communications platforms providers, defined in Section 2(7) and (8). A large communications platform is one that generates income “directly or indirectly from the collection, processing, sale, or sharing of user data,” and has more than 100,000,000 monthly active users in the US. Providers are those that provide such a platform.

The Bill establishes a general duty for providers to maintain tools to allow for the secure transfer of user data to either a user or a competing communications provider in a commonly used, accessible format (Section 3(a)). It requires any competing provider to secure received data (Section 3(b)). This duty does not apply when a large communications platform provider provides a service that does not generate income from data.A general duty of interoperability between communications platforms is also proposed in Section 4. Model technical standards for interoperability will be published no later than 180 days after date of enactment by the Director of the National Institute of Standards and Technology (Section 6(c)). 

The FTC will oversee enforcement (Section 6(e)). Violations will be treated as an unfair and deceptive act under Section 18(A)(1)(B) of the FTC Act 15 U.S.C. 57(A)(1)(B) (Section 6(f)(1)).

Ending Platform Monopolies Act

This Bill proposes to promote competition and economic opportunity in digital markets through removing conflicts of interest resulting from “dominant online platforms’ concurrent ownership or control of an online platform and certain other businesses.”  It would be unlawful for covered platforms to “own, control, or have a beneficial interest” in a business other than their platform that uses the covered platform to:

• Sell or provide its products or services (Section 2(a)(1),
• Offers a product or service that the covered platform requires a business user to use to access the covered platform or for preferential status on the covered platform (Section 2(a)(2)),
• Or causes a conflict of interest (Section 2(a)(3)), which covers situations expounded on in Section 2(b)(1) to (2). This includes when a covered platform’s ownership of another business incentivises the covered platform to advantage their own products or services, or disadvantage competitors’ products or services.

  The FTC and DOJ are in charge of enforcement, and a violation will be considered an unfair method of competition under Section 5 of the FTC Act 15 U.S.C. 5 (Section 3(b)). Civil penalties are present based on revenue of the calendar year or duration of the unlawful conduct, with an opportunity for civil litigation by the FTC to seek relief (Section 3(c) and (d)).

Platform Competition and Opportunity Act

The Bill seeks to promote competition and economic opportunity by establishing certain acquisitions by dominant online platforms as unlawful. Section 2 establishes a general presumption of unlawfulness of covered platforms acquisition of the whole or any part of stock or share capital of another person engaged in commerce and equivalent activities, or the whole or any part of their assets (Section 2(a)(1) and (2)). For an acquisition to be lawful, the covered platform must provide clear and convincing evidence the acquisition falls under one of the exclusions in Section 2(b), which, most interestingly, include that the acquired assets do not compete with the covered platform or “constitute nascent or potential competition” or enhance the covered platform’s ability to maintain its market position. Competition must be understood in this Act also as competition for a user’s attention (Section 2(c)).

Additionally, the Bill recognises that acquisitions resulting in additional data may increase the market position or the ability to maintain the market position of a covered platform (Section 2(d)).

Competition and Antitrust Law Enforcement Reform Act of 2024

The Bill aims to reform antitrust laws to better protect competition through amending the Clayton Act’s standards for unlawful acquisitions, deterring exclusionary conduct (particularly for dominant firms – Section 2(a)(5), and enhancing the DoJ and FTC’s enforcement powers.

The Bill has a starting point that the Clayton Act’s effectiveness has been diluted and must be restored, and that enforcement powers and budgets have not grown in pace to current antitrust concerns. Section 4 addresses unlawful acquisitions and outlines sweeping amendments to the Clayton Act to increase its scope and reduce barriers to proving an anticompetitive effect from a merger. For example, Section 4(b)(1) states Section 7 of the Clayton Act should be amended to replace the threshold of “substantially to lessen” competition to “to create an appreciable risk of materially lessening” competition. 

Additionally, it adjusts merger thresholds in a way that seems to address specific risks arising from big tech firms. Such firms often acquire small startups and integrate those services, flying under the radar of merger and acquisition regulation due to the low market share of the acquired startup. The Bill, in Section 4(3)(6)(B)(ii) provides that a court should review an acquisition when “the person acquiring or the person being acquired has assets, net annual sales, or a market capitalisation greater than $100,000,000,000.” 

Regarding exclusionary powers, Section 10 proposes to amend the Clayton Act by inserting a Section 26A on exclusionary conduct. This would include a presumption that exclusionary conduct presents an appreciable risk of harming competition when the person(s) acting have either (A) a market share greater than 50% as a seller or a buyer in the relevant market, or (b) otherwise has significant power in the market. Additionally, when a defendant operates a multi-sided platform business, it does not require establishing that the exclusionary conduct presents an appreciable risk of harming competition on more than one side of the multi-sided platform.

Responses to Proposed New Regulatory Approaches

Of course, the approaches of some of these Bills are more radical than others on their impacts on big tech firms. None of these bills have been passed and it is now unpredictable to determine which will pass in the wake of Trump’s 2024 election win, and the Republican control more generally over numerous federal institutions. Additionally, big tech Chief Executive Officers (CEOs) have been reported sidling up to Trump, with Elon Musk’s endorsement the strongest, possibly hoping for Trump to extend tax cuts to big corporations implemented during his first term.