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.
Brazil
Introduction
On November 10, 2022, the Draft Law No. 2,768/2022 was introduced in the Brazilian House of Representatives (Chamber of Deputies), proposing ex ante regulatory measures to regulate digital platforms. However, as it is still under deliberation, Law No. 12,529/2011, the Competition Law, is the main legislation governing competition in digital markets.
Law No. 12,529/2011
Purpose
Law No. 12,529/2011 structures the Brazilian System for Protection of Competition (SBDC) and sets forth preventive measures and sanctions for violations against the economic order. It is guided by the constitutional principles of free competition, freedom of initiative, social role of property, consumer protection and prevention of the abuse of economic power.
Brazilian System for Protection of Competition
The SBDC is formed by (i) the Administrative Council for Economic Defense (CADE) and (ii) the Secretariat of Competition Advocacy and Competitiveness, linked to the Ministry of Finance.
CADE
As the Competition Law governs both the prevention and repression of violations against the economic order, CADE, the authority responsible for its enforcement, operates on two main fronts: (i) concentration control through analysis and decisions on mergers and acquisitions; (ii) analysis and litigation of anti-competitive practices.
Concentration Control
Articles 88 to 91 of Law No. 12,529/2011 comprehend provisions on the so-called control of economic concentration, through the analysis of mergers and acquisitions.
An act of economic concentration (generally) is carried out when: (i) two or more previously independent companies merge; (ii) one or more companies acquire, directly or indirectly, by purchase or exchange of stocks, shares, bonds or securities convertible into stocks or assets, whether tangible or intangible, by contract or by any other means or way, the control or parts of one or more companies; (iii) one or more companies incorporate one or more companies; or (iv) two or more companies enter into an associative contract, consortium or joint venture.
Pursuant to Article 88 the parties involved in the act of economic concentration shall submit a ‘premerger notification’ to CADE if certain (cumulative) revenue criterias are met: (i) at least one of the groups involved in the transaction has registered, in the last balance sheet, annual gross sales or total turnover in the country, in the year preceding the transaction, equivalent or superior to seven hundred fifty million reais (R $ 750,000,000.00); and (ii) at least one other group involved in the transaction has registered, in the last balance sheet, annual gross sales or total turnover in the country, in the year preceding the transaction, equivalent to or greater than seventy-five million reais (R $ 75,000,000.00).
Accordingly, notifiable acts may not be consummated before being reviewed.
The review of an act of economic concentration may be carried out either (i) in the ordinary procedure, which (generally) shall be performed within, at the latest, 240 days, as of the application protocol or amendment thereto, or (ii) in the fast-track procedure—depending on the convenience and opportunity, based on the experience acquired by the bodies comprising the SBDC in the analysis of mergers and in the identification of those that have less potential to violate competition.
The opinion to be issued by CADE may follow three different directions of recommendation: (i) approval of the transaction, without any restrictions; (ii) approval of the transaction, conditional upon structural or behavioral restrictions, such as, but not limited to: divestment of assets, assumption of access obligations and non-discrimination of competitors, among other antitrust remedies; (iii) total ‘rejection’ of the transaction (veto).
Violations of the Economic Order
Article 36 of Law No. 12,529/2011 establishes that a conduct is considered a violation to the economic order whenever it has as objective or may have the following effects, regardless of fault, even if not achieved: (i) limit, restrain, or in any way injure free competition; (ii) control relevant markets for goods and services; (iii) arbitrarily increase profits; and (iv) exercise a dominant position abusively.
§ 3 of Article 36 presents an exemplificative—and not exhaustive—list of practices that are deemed as violations to the economic order, among these the following may be mentioned:
At the administrative level, conducts considered as violations to the economic order result in the following penalties: (i) in the case of a company, a fine of 0.1 % to 20 % of gross sales, in the last fiscal year before proceedings, in the business field in which the violation occurred, not less than the benefit gained (if estimable); (ii) in the case of other individuals or legal entities, where the gross sales criterion is not applicable, a fine between R $ 50,000 and R $ 2,000,000,000; (iii) if an administrator is responsible for the violation, a fine of 1 % to 20 % of that applied to the company or the legal entity (see above).
In case of recurrence, the fines may be doubled.
In addition to that, Article 38 establishes non-financial penalties and Law No. 12,529/2011, as amended by Law No. 14,470/2022, the right to double compensation for those that prove that they have been harmed by a conduct characterized as a violation to the economic order, in return for damage suffered as a result of the violations.
Furthermore, Article 85 provides that CADE may, under certain circumstances, obtain from the defendant a ‘cease-and-desist commitment’ related to the practice under investigation or its harmful effects, if duly grounded, for convenience and at the proper time, and if it understands that it complies with the interests protected by law.
CADE’s Case Law on Digital Markets
In Naspers/Delivery Hero (2018), a horizontal merger case, which lead to the consolidation of iFood as Brazil’s leading online restaurant delivery platform, CADE restricted the market definition to the online segment cleared the merger despite the applicants’ high market share, because there was a reasonable expectation for increasing rivalry in this incipient, innovative industry. However, later events, such as UberEats exiting the market and iFood’s exclusive practices, showed this expectation may have been overly optimistic.
In Mosico/Buascapé (2019), a horizontal transaction between price comparison and web advertising platforms, the CADE was cautious in defining the affected market because of the two-sided-platform business models and rapidly evolving digital markets. Thus, it adopted a flexible approach by referring to the former Commissioner Bandeira Maia’s 2019 opinion in the Google Shopping conduct investigation, in the sense that in dynamic industries, relevant market definition should be taken as ‘an auxiliary guidance’ and not seen ‘as an end in itself’, indicating that market argents should not expect strict relevant market definition to shield potentially anticompetitive effects of mergers or conduct from the authority’s scrutiny.
Finally, in Viação Águia Branca/JCA (2023), a joint venture between passenger intercity bus companies, which offered logistical services to operators while serving passengers directly, the CADE imposed because of the dual-sided business model behavioral remedies to mitigate anti-competitive risks (e.g. pre-approval for future partnerships and bans on specific routes).
In conclusion, CADE demonstrates an increased interest in promoting competition enforcement in digital markets, indicating no need for legislative changes to address digital economy challenges. Instead, it is increasingly applying available procedural and substantive tools, such as interim measures and settlements.
The Draft Bill No. 2,768/2022
In its Article 1, the Bill establishes provisions for the regulation, supervision, and sanctioning of digital platforms—particularly those with power to control essential access—providing services to the Brazilian public.
In contrast to Law No. 12,529/2011, enforcement of the Draft Bill No. 2,768/2022 will be the responsibility of the National Telecommunications Agency (ANATEL), traditionally charged with regulating telecommunications service providers, rather than the CADE.
Article 4 of the Draft Bill No. 2,768/2022 providing the objectives of this, is reminiscent of Article 170 of the Constitution of the Federative Republic of Brazil (see above).
Article 5 of the Draft Bill No. 2,768/2022 establishes (vague) requirements that apply to all digital platforms, which are defined in Article 6(2), regardless of whether they hold power to control essential access or not (e.g. ‘fair competition’).
Pursuant to Article 9, digital platforms shall be considered to have ‘power to essential access control’ when they generate an annual operating revenue of at least R $ 70,000,000.00 from offering services to the Brazilian public.
As a result of this categorisation, the platforms in question are subject to various obligations: (i) transparency and provision of information; (ii) isonomic and non-discriminatory treatment in the provision of professional users and end users; (iii) appropriate use of the data collected in the exercise of its activities; and (iv) not refusing to provide access to the digital platform to professional users.
In addition, these platforms are required to pay an inspection fee corresponding to 2 % of their yearly gross operating revenue.
Furthermore, the ANATEL has the authority to prohibit certain conducts and impose a fine of up to 2 % of the revenue in the last fiscal year on platforms that violate the rules set out in the Draft Bill No. 2,768/2022.
Lastly, Article 13 appears to establish an exception to the limitations on CADE’s authority by referring to CADE’s jurisdiction in cases of acts of economic concentration involving digital platforms. However, one must consider this provision in the context of the revised wording of the General Telecommunications Law, empowering ANATEL to ‘exercise legal authority in relation to digital platforms, specifically in the areas of control, prevention and suppression of violations of the economic order’. Therefore, the compatibility between CADE's competition law enforcement and ANATEL's implementation of the Draft Bill No. 2,768/2022 might raise some doubts.
China
Anti-Monopoly Law (2008)
Historical context
In the People’s Republic of China, the main legislative framework is the Anti-Monopoly Law (AML), which was introduced in August of 2007 and entered into force in 2008 (source). While it was China’s first real competition law, it came a little late to the scene compared to other jurisdictions. Most of the AML’s concepts and definitions are based on the EU’s competition regulatory framework. The AML’s main purpose was to address the steep market barriers and discouragement of competition by powerful state-owned enterprises (SOEs). These SOEs often engaged in harmful behavior for their competitors and consumers alike. The 2008 AML drove industrial innovation, reformed supply-side transactions and supported the emerging platform economy (especially the e-commerce sector) (source).
First case of private competition litigation (2014)
An important indication that China’s traditional, protectionist, and socialist economical model was becoming more competitive was the Qihoo 360 v. Tencent case. Qihoo 360 – China’s leading anti-virus software company – alleged that Tencent – China's largest social media and gaming company – bundled their anti-virus software with it’s social media services, resulting in an abuse of their dominant position. While both the lower court and the appeals court dismissed Qihoo 360’s claim, this case was a milestone in Chinese antitrust. The vast amount of economic evidence presented by both sides makes it an valuable jurisprudential source for competition law. More importantly, this case marks the first time that private companies engage in litigation with one another over antitrust practices. Before this 2014 case, most antitrust cases were brought by enforcement authorities and involved abuses of power by SOEs (source).
Enforcement
Three separate authorities were responsible for the regulatory enforcement of the AML: the Ministry of Commerce, the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC). While the Ministry of Commerce handled regulated mergers, the latter two oversaw antitrust investigations. These three entities were ironically, often in regulatory competition with each other. This regulatory overlap and fragmentation was addressed in 2018, when the State Administration for Market Regulation (SAMR) was created. Today, the SAMR is China’s primary competition authority, although it does share some overlap with the NDRC and the Ministry of Industry and Information Technology (source: Zhang, Angela Huyue (2024). High Wire: How China Regulates Big Tech and Governs Its Economy. Oxford University Press. doi:10.1093/oso/9780197682258.001.0001, p.23). The SAMR is subject to the guidance of the Anti-Monopoly Commission, which sets up the competition policies and enforcement coordination, and which, in turn, reports to the State Council of China (source).
Changing economic landscape
From 2018 to 2022, some major developments shaped the Chinese economic and competition landscape. Concerns were raised around 2018 about the rapid growth, the size and negative effects on competition of e-commerce platforms like Alibaba, which filled the vacuum that the regulation of SOEs left in the economy. Alibaba and Meitan were fined for respectively 18 billion and 700 million Yuan for abuse of their dominant market position (source). In 2021, China collected was a record amount of fines and ‘confiscations’ for violations of the rules on monopoly agreements and market dominance (source).
In December 2020, the PRC’s government released the draft Guidelines for Anti-monopoly in the Platform Economy to prevent monopolistic behavior, among other things (source). These guidelines were finalized in February 2021, but have been reported to be difficult to implement (source). Still, they provide the SAMR with guidance for enforcement of competition laws in the tech space (source). The Guidelines were the foundation of the 2022 revision of the AML. They provide some additional factors to be considered when defining the relevant market in the platform economy (e.g. market entry, lock-in effects, or network effects). Moreover, they provide some insight into how the Chinese government aims to tackle data and algorithmic ‘collusion’ as a form of monopoly agreements (source).
AML Revision in 2022
The AML was revised in 2022. It now includes higher fines for violations, sets out more rules against abuse of market dominance by administrative authorities and it includes specific prohibitions on the use of certain technology for anti-competitive behavior. Additionally, six (draft) provisions were added to the updated 2022. These provisions focus on, among other topics, the abuse of intellectual property rights to exclude and restrict competition, they prohibit monopoly agreements and the abuse of dominant market positions and they aim to suppress abuse of administrative powers to exclude and restrict competition (source). When reading these amendments and updated provisions, it becomes clear that China’s competition enforcement is aimed at curbing the power of tech and platform companies. Before we delve into the more platform and technology specific provisions of the updated AML, let’s discuss the general aim and scope of the law.
Scope and definitions
Article 1 states that the AML “promulgates to prevent and restrain monopolistic practices, protect fair market competition encourage innovation, enhance economic efficiency, safeguard consumers’ interests and the public interest, and promote the healthy development of the socialist market economy.” The law is addressed to 'undertakings' which can be natural or legal persons, or unincorporated organizations that trade or manufacture goods or provide services (Article 15). Interestingly, the AML has an extraterritorial reach since it does not just apply to monopolistic practices in economic activities within China: it also applies to such practices outside of the mainland that “eliminate or restrict competition in China’s domestic market” (Article 2). (source). Monopolistic practices, then, are defined as to include: i) conclusion of monopoly agreements, ii) abuse of dominant market positions and iii) concentrations of undertakings that may have effect of eliminating or restricting competition (Article 3). Note the use of ‘include’, which implies this list of practices is not exhaustive. 'Monopoly agreements', in turn, are defined in Article 16 as: “agreements, decisions or other concerted actions that eliminate or restrict competition.” More specifically, Article 17 prohibits competing undertakings to conclude monopoly agreements which:
• fix or change the price of goods;
• limit the quantity of goods manufactured or marketed;
• divide the sales markets or markets for raw materials;
• restrict the purchase of new technology or new equipment or restrict the development of new technology or new product; and
• jointly boycott transactions.
Such monopoly agreements against competitors are often referred to as ‘horizontal’ (source). While this list may seem exhaustive, Article 17(6) stipulates that other monopoly agreements as determined by the State Council anti-monopoly law enforcement agency are also forbidden. When undertakings are not in competition with one another, they are referred to as ‘counterparties’, and they are still prohibited from entering certain monopoly agreements. Such agreements are ‘vertical’ (source), and are referred to in Article 18 of the AML as:
• those that fix the price of goods resold to a third party
• those that limit the lowest price of goods resold to a third party;
• other monopoly agreements as determined by the State Council anti-monopoly law enforcement agency.
However, when such an agreement is not ‘eliminating or restricting competition’, the agreement may still be permitted. This is also the case when the undertakings can show that they are below a certain market threshold. Some other examples of exemptions are mentioned in Article 20. This shows a less stringent regime for vertical monopoly agreements, which is often called a ‘safe harbor’. In March 2023, the SAMR published the final version of four 'Provisions' on 1) merger control review; 2) prohibition of monopoly agreements; 3) prohibition on abuse of dominance; and 4) Prohibition of Elimination and Restriction of Competition through Abuse of Administrative Power (source). However, these provisions do not specify when an undertaking reached the threshold as set out in Article 18. In earlier drafts 15% was proposed, but the SAMR has removed this percentage from the final version of the provisions. This leaves undertakings that want to engage in vertical agreements with many uncertainties.
Another point of note is the AML explicitly aims to combat anti-competitive behavior of administrative organizations or organizations that have been authorized by law for certain public affairs. The prohibition for these organizations to “abuse their administrative authority to eliminate or restrict competition” is enshrined in Article 10 and Chapter V of the AML (Artt. 39-45) (source).
Finally, a 'relevant market' is described in Article 15 as referring to “the range of goods or territories in which undertakings compete for specific goods or services during a certain period of time.” Chapter III sets out the prohibitions and provisions related to abuse of dominant market positions. Such a position is defined as “the market position held by an undertaking that enables it to control the prices or quantities of goods or other trading conditions in the relevant market, or to hinder or affect the ability of other undertakings to enter the relevant market” (Article 22) (source). More specifically, a dominant market position is presumed when an undertaking controls 50% of the relevant market. For two or undertakings, that should be, respectively, 66,67% and 75% of the relevant market. When it comes to merger and acquisitions control, Chapter IV stipulates the relevant provisions governing the concentrations (mergers and acquisitions) of undertakings.
Specific provisions to combat tech and platform power
Article 9 of the AML prohibits undertakings from using “data or algorithms, technology, capital advantages, or platform rules, etc., to engage in the monopolistic practices prohibited by this Law”. Additionally, Article 22 reiterates that an undertaking with a dominant market position cannot use data, algorithms, or anything set out in Article 9 to engage in abuse of their dominant position (source).
In these two articles, the AML is incredibly vague on the more technical aspects of platform and tech regulation through the lens of competition law. However, the SAMR’s aforementioned Provisions, published in March 2023, provide more details for interpretation. There are also two sets of Guidelines: the 2021 Guidelines for Anti-Monopoly in the Platform Economy (discussed above) and the 20123 Classification and Responsibility Guidelines.
‘Guidelines’ for Anti-Monopoly in the Platform Economy (2021)
The Guidelines prescribe that the relevant market is not always indicative in the platform economy. Investigations into platforms usually need to define the relevant market, depending on the role this relevant market plays. Importantly, what was missing from these guidelines (and still is) is the ‘safe harbor’ threshold for vertical monopoly agreements. Next, the Guidelines offer additional factors for defining this relevant market, and names lock-in or network effects as examples, as well as user groups. They also focus on the relevance of multi-sided platforms, and define 3 approaches to define the relevant products for such platforms (for more information, see this source, p.4). Finally, the Guidelines address ‘data and algorithmic collusion’ for monopoly agreements. Hub-and-spoke agreements are specifically mentioned next to regular horizontal and vertical agreements, implying the PRC’s struggle with these types of concerted monopolistic practices (source).
‘Provisions’ on Abuse of Dominance and on Monopoly Agreements (2023)
In the Provisions on Prohibitions of Abuse of Dominance, network effects are mentioned as important factors to take into account when defining the relevant product market for platforms. For example, markets may be separate for products involved on platforms (source). The Provisions also provide more detailed guidance to identify specific abuse in the digital economy. Examples include calculating costs in cases of multi-sided platforms, or discriminatory treatment through ‘big data’ (i.e. price differentiating for different customers). However, while the draft version of these provisions explicitly named ‘self-preferencing’ as a type of abusive conduct, it is no longer in the final version. Still, it is implied self-preferencing is prohibited through Articles 9 and 22 of the AML. Finally, the Provisions
Classifications Guidelines and Responsibility Guidelines (draft) (2021)
These Draft Guidelines provide a more ex-ante instrument for competition regulation. SAMR applies an asymmetrical regulatory framework to Ultra-Large, Large and Middle/Small Platforms in China. The distinction is mostly made based on a platform’s active yearly users and annual turnover. Unlike the DMA, the amount of business users are not relevant for the classification in China. The Guidelines identify 6 types of platforms:
1. online sales platform (connects people and goods and provides trading services)
2. life service platform (connects people and services)
3. social entertainment platform: connect people to people)
4. information platform (connects people with information)
5. financial service platform (connects people and funds)
6. computing service platform (connects people and computing power)
This mirrors the asymmetrical regulation of the DSA. While interesting, these Classifications Guidelines and Responsiblity Guidelines are more relevant for a comparative discussion in relation to the EU’s DSA than the DMA (source 1 and source 2).
Enforcement
While the SAMR is China’s main competition authority, it has also delegated enforcement to provincial, regional or municipal authorities. Apart from “public” enforcement, the AML also provides for a “private” enforcement regime through civil litigation. This is mostly related to cases related to abuse of power through intellectual property licensing. Furthermore, civil public interest litigation is also possible – this would entail the public prosecutor to bring civil actions (source). The Supreme People’s Court released guidelines for such antitrust civil litigation, which apply from July 1st 2024 (source).
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:
- anti-competitive agreements (section 3);
- abuse of dominance (section 4); and
- 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 |
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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:
- direct any enterprise involved in such agreement to discontinue and not to re-enter such agreement
- direct any enterprise involved in such abuse of dominant position to discontinue such abuse of dominant position
- impose such penalty not more than ten per cent of the average of the turnover or income for the last three preceding financial years
- 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
- direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission;
- 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;
- 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:
- 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
- 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: |
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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.
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.
An even further step in the potentially right direction happened, in January 2023 when the DOJ jointly with eight other US states filed a civil suit against Google alleging that the “industry behemoth […] has corrupted legitimate competition in the ad tech industry”, charging Google with “illegally monopolizing the publisher ad server market, the ad exchange market, and the advertiser ad network market”. Notably, Google/DoubleClick merger of 2008 is mentioned as one of the causes that allowed for these actions, which was both approved by the US authorities and the European Commission. Unlike some other jurisdictions, the US is seemingly able to apply a structural remedy and break up the company which would undo the merger from many years ago. As an ongoing case, the results of the outcome will come in the future, but it is important to note that such a remedy is not ‘light’ and that a firm has not been broken up in such a way since AT&T split in 1982.
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.
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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 for any person, or any individual who acts as an officer, director, partner, or employee of a person who fails to comply with the Bill are present. The civil penalties constitute either up to 15% of the total average daily US revenue of the person for the previous calendar year, or 30% of the total average daily US revenue of the person in any line of business impacted or targeted by the unlawful conduct during the relevant period (Section 3(c)(1) and (2)). Note that this mirrors the penalty amounts also listed for the American Choice and Innovation Online Act. Additionally, the FTC can pursue civil litigation 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)).
Enforcement falls under Section 5 of the FTC Act as any violation of the Bill is treated as an unfair method of competition (Section 5(b)). Civil action against a person may be pursued by the FTC to obtain a civil penalty and relief (Section 5(c)). The persons injured may also pursue suits to recover three times the damages sustained (Section 7).
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.
As the Bill proposes to amend the Sherman Act, enforcement and penalties are pursued under the Sherman Act itself. However, Section 11 of the Bill also proposes amendments to the Sherman Act regarding penalties for violations. It includes the possibility that every person who violates either Section 1 and/or 2 of the Sherman Act will be liable to the US for either a civil or criminal penalty up to either 15% of the total US revenue of the person of the previous calendar year, or 30% of the US revenue of the person in any part of the trade and commerce related to or targeted by the unlawful conduct during the relevant period (Section 11(1) and (2)). This aligns with the penalty amounts seen in the American Choice and Innovation Online Act and the Ending Platform Monopolies Act. This penalty may be recovered through civil or criminal actions initiated by the US.
It additionally proposes to amend the FTC Act to adjust the ability of the FTC to bring civil actions against persons, partnerships, or corporations who violated the law and undertook an unfair method of competition (Section 11(3) and (4)). This aligns the FTC’s enforcement powers with those the DoJ would have under the Sherman Act (as the FTC Act empowers the FTC to enforce Sherman Act violations and requires its own amendment). The Attorney General and and the FTC will thus be further aligned through the obligation to issue joint guidelines on the appropriate amount of a civil penalty to impose (Section 12). Civil penalties henceforth provided by the proposed amendments do not preclude other remedies provided in US law, such as for example the Clayton Act or other sections of the FTC Act (Section 11(4)(b)).
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.