Below, we have provided the full transcript of our panel discussion Reforming India’s Competition Act: Considerations & Best Practices. Read below to see the timely discussion where a panel of experts deepened the discussion regarding India’s competition act and the implications such measures could involve.
Good evening, all of you. This is something I’m looking forward to, because it’s back again with all old friends, and a new friend whom I haven’t met, on a subject, we have all been so immersed with.
I’ll just take a few seconds to introduce each one of you, because you’ve all meant something special to me. Dhanendra Kumar and I were in the first commission and he was Chairman of the Competition Commission of India. A man of tremendous patience who put up with all the arguments I made, and I learned a lot.
I would also like to say hello to Pradeep, and in fact, Pradeep’s involvement in competition and market issues predates the Competition Commission and one has always been privy to his thoughts, his books, and his writings.
T.S. of course, is an old friend from NSIU and totally professional and he’s been writing a series of blogs, which are interesting, and I’m not able to get him to write for CPI, in fact, the only one of them who hasn’t.
And then we have Rahul with us, who I think is the devil’s advocate, because he always manages to get a different argument, which makes him someone interesting in a discussion and, Rahul, it is really nice to meet you and I hope we keep in touch further.
Now without much ado, let me just give a little introduction and then start asking general questions. I have sent you all a three pages note only because I’ve put down all my thoughts, and I don’t think each one is going to be covered. Let’s just let a free flow of thoughts take place on something that is important. The topic is Reforming India’s Competition Act and what is considered as best practices?
We have had a Competition Law Review Committee Report, of which Dhanendra Kumar was also a member of it. The report has been well-written and there are lots of areas which haven’t got covered, because suddenly there’s been a lot of activity. I hope that when we get into the question of digital economic networks, or should I say data networks, as compared to the usual network effects, is going to be something very different and the government will have to consider these aspects completely. I deliberately chose the topics privacy and contract, privacy or privacy, whichever way you like to pronounce it, because there are so many implications to it and they’re interrelated. There’s nothing else further to it but that they’re interrelated.
When you just stick up the privacy for one thing we had the first case that was, I think, sometime in the second commission, when it was felt it was not part of competition law. Competition law doesn’t get into privacy. There was the Harshita Chawla v WhatsApp case. And now we have taken up Suo moto case on the aspect of What’s App and privacy. Now having stated this on what’s on a privacy and what has to be done, Dhanendra Kumar, did you really think privacy should come into the competition law or do you think it is an issue that comes up much later? The reason why is my privacy different from your privacy. So how does one get this into competition law and decide?
Thank you for your question.
Geeta, I feel that privacy and a competition law, in several places, they impinge into each other. This matter also came up before the Competition Commission in the case of Facebook, when they also referred to their study report, a competition study report in the case of telecom sector.
The data, volume of data, the big data, it is impacting the behavior of the firms in several ways, so some of the bigger firms who have control over big data, big volumes of data, mountains of data, and they are able to use their data for their advantage in various ways and at times create barriers for the entry of new players by using or abusing or misusing that data in several ways. What happens, coming to your question on privacy, that as an individual actor I have my right for protection of data, and this was in the Indian competition context, as you will recall, this was appealed in the Potosuami case also. The article 21 of the Indian constitution.
Privacy is the right of every citizen and it has been so upheld in several ways in the European context, also the GDPR that celebrated Spanish Law or Spanish judgment also. When we have our right for protection of privacy, then there could also be a situation when the individuals, and this is a matter which is under consideration in the Indian data protection law which is before the parliament. They might take a view that the citizens will have a right to ask for deletion of the personal information or private data, in which case the volumes of data, the big data, would also be impacted and therefore the behavior of the firms also. What I was meaning to say is that at the end of the day, privacy would also be in some manner intertwined with the competition law interplay and to that extent the right of the individual and the right of the firms for using it commercially and at times the right of the society generally to know about the individuals data, they would all be impinging into each other and the data protection law would have to come in to balance the claims of each one on the use of their data.
So I feel that privacy would have an interplay with the competition law, to answer your question briefly.
Well, what you said is very true. But to get to Vivek, the kind of privacy, the right to be forgotten needs to be understood at the way we in India look at privacy, if you’re giving everything up when it has come to your KYC in the bank, and they want to know anything about you, everyone knows everything about you. But why is it that especially in the EU situation, there has been a little bit of a controversy, which is what I’d like to ask you about because the EU commission of course has gone hammer and tongs.
There has been one judgement that favours them and another judgment, I think it’s the Dusseldorf judgment, and maybe the concept of privacy that pervades in the Western countries may not be something that the Indian Competition Act needs to worry so much about.
I agree with you, Geeta. I think privacy is kind of a flavor of what people want to look at, and I think across different cultures, different countries, the value of privacy varies a lot. If you look at privacy, I personally think that it’s more of a regulatory matter. I think it is less at the margin of a competition policy issue, I think it is much more of a regulatory matter because if you look at big data issues, big data has clear competition policy effects.
Data per itself is not a problem, but it’s a question of who has how much data and what is being used with the data- what are the data you use for. I think privacy and data need to be separated somewhat. I think privacy is more a regulatory matter. I think big data issues impinge more on competition law effects.
So, you’re right. If you look at the US, if you look at the EU, for example, or at other countries increasingly as they’re coming to grips with the mountains of data that companies possess, what do you do with them? Also, if you look at privacy, it is true that when you look at surveys of individuals and you ask them, do you care about privacy? They’ll say, “Yes, we do care about privacy,” but then there are studies, for example, by Christopher Yoo at UPenn, that show that when you look at surveys of individuals and you actually see what they do, that is, when you’re trying to do a new app, for example, or you’re trying to sign up to a new database, for example, what do you do to check the privacy items? People just blanket say, “Yes, it’s fine.” So when you look at people’s actions, it is as if they don’t care so much about privacy, but when you ask them, “Do you care about privacy?” they say yes. I think, overall, this is much more of a regulatory matter, but big data has very different competition policy and law affects.
Pradeep, I saved up this question for you. There has been this piece that has been written by Pinar Akman, who says, “When it comes to data and when it comes to privacy, it’s not really such a big issue.” There’s a lot of data, no doubt. We have a lot of big data, but from your own experience, because you have been very involved in doing surveys, and when you are looking at data, and it’s just that now we are talking data, since everything is new and data is very quick and accessible, it really doesn’t matter because data is required for every business and whoever has the data always protects it. All these surveys and trying to look at data, how does one decide whether the data is valuable or not? There’s a lot of white noise.
Three points, Geeta. Number one is that a huge amount of data is collected and if it is anonymized and used for commercial interest it will not breach the privacy law and that’s a very important part. Privacy is a regulatory matter, it is not a competition issue, but, and this is where I would like to add on to what my fellow panelists have spoken about, is that if collected data is used for commercial purposes, it can be a subject matter for competition law enforcement.
For instance, if such data is used to leverage one’s own product it can amount to unfair practice, breach of platform neutrality, and can also amount to abuse of dominance.
However, let me end with a caution that competition jurisprudence over there, you said, cause you will data anywhere is still in an initial stage, and we should be cautious about over-regulating and we need to have more market studies to get more clarity on digital market function and firm behaviors. Thank you, Geeta.
Rahul, the question I can ask you, but let me ask T.S., because he’s having a series which has come out on the blogs, and especially today’s one with Apple and the issues that have come up with Apple and Epic Games, why it is no doubt a public policy issue, and there is the need to anonymize your data, but in terms of commercial objectives, what sort of data would be really looked for? There is this entire hype that has been made about data and it’s also the fact that we try to combine it by looking at it in terms of the fact that the barriers to entry is being created, but let us face it, we are in an oligopoly situation; the big is always there, and we’re talking of competition of small players to come in, and from your paper, which I know I’m mentioning it again and again, I think you had brought up some issues that were extremely witty and you also had your little bit of twists on the Apple group. Would you like to explain further?
Specifically with respect to the Apple case where it basically deals with in-app purchases and the way in which they are essentially getting the app developers to use their own mechanism for in-app purchases and end up paying a hefty fee of 30%, which is what they objected to. The question is why are companies able to do this? Of course, I’m not even coming into whether that in itself is an abuse which needs to be determined and whether data plays an important role is a different issue, but I think when you’re dealing with privacy and when you’re dealing with the commercialization of the data that comes through the exploitation of privacy, these would definitely come into the realm of the competition enforcement agencies. For the simple reason that, let’s say if a firm forces someone to part with their personal data. When I say forces someone, that force essentially comes, let’s say because of the fact that just like, as in the case of Apple, you’re locked in to the Apple garden, let’s say. So if you’re locked in without the ability to so easily switch to another platform, if you’re asked to compromise on certain data aspects, and if you’re willing to compromise in order to stick on to this particular ecosystem, well, it’s a price that you’re paying.
Now, the question is whether it’s a price that you are willing to pay in a counterfactual situation, that is if you had a choice of an alternate platform without being locked in. So nevertheless, if it’s a price that you’re willing to pay, and if it’s a price that you ordinarily wouldn’t have been willing to pay, or which you wouldn’t have necessarily have been coerced to pay, let’s say in the sense of an excessive pricing sort of a situation, well then the competition authority certainly has a look at it, right? Because it is in one sense an abuse of dominance in the sense of an exploitative abuse of dominance.
Let’s view privacy as a non-price factor, which can be utilized by firms. Now, why would firms want private data? Of course, there’s plenty of discussion on why firms would want such kinds of data. Well, let’s view it this way. If the firm wants it, then they wouldn’t want it. If there’s, I mean, the only reason why they would want it in one sense of reasoning, is because there is a commercial aspect to it.
Well, the Facebook / WhatsApp merger, they said, there’s no possibility for us to merge private data across these platforms. It took place. It didn’t take much of an effort for them, technologically, to pretty soon merge this data. How will they use it? It’s not about them using it. As of now, it’s about them being able to use it in the future, because we already know that data has an important role in the ability of firms, not just in the current market, but in the ability of firms to move into diverse markets and that’s the key when it comes to these swaps. It’s not just about current markets, and that’s the concern that’s being expressed.
So now what is discussed in the blog was the new, so-called neo-Brandeisians talking about the inability of the present competition law to tackle such firms and their so-called anti-competitive behavior, simply because of the obsession with consumer welfare, and also the obsession with price as a mechanism for measuring the abusers or measuring abuses by these tech firms. Well, that’s debatable whether that is correct or not, but anyway commercial possibility is there simply because of the different areas in which they can spread into and use it potentially in the future.
No firm, if you look at any of these tech firms, none of them are in any particular market. They’re moving into diverse markets because they understand the threat can come through market integration of different sorts of products and services. What they’re trying to emerge as some kind of an internet wholesale, or internet supermarket for providing various kinds of internet services, for which this kind of data can be applicable at any one point.
It’s not just current use, but future use.
This is what we’ve all been saying about data, and we tend to think of it as huge mass of information that is available and that can be used and I’ll dig it up later because maybe shifting out from what you can do with data and I was trying to understand when does a company know how much data it requires? Because the important point that is there is that even if you have a lot of data, you’ll have a lot of people there and they will try to do because they have the inputs into it and there’ll be going into building up consumer profiles.
The point that has been continuously bothering me is the consumer profile. Is it so different for every country and what is the data that is really required? It is not that I’ve wear a sari and you wear a shirt or something like that, and what is the data that they’re looking at to be able to sell, do they sell?
I’ve been looking at data markets too, and there’s not a single big five in the data markets. I mean, how would you then show your concern on the aspect of, yes, anonymize your data, fine but what is relevant? What is the relevant data that is required, and is this sort of buying on Amazon or getting onto Facebook ever really going to get you good data which is useful?
Right, and that’s a very interesting and at the same time a very intricate question, if I may, and that possibly also leads us to ask two different questions about this data and privacy that you have raised. Those two questions are as follows: first one is there might be a, let’s say assuming there is a need to regulate this data economy, who is best place to regulate this? Because the question that you have posed when companies, let’s say they are mining this data, how do they figure out whether it is useful or not? I am assuming that there is a need for some kind of an expertise over that, just like I suppose within the Competition Commission, presumably there is an expertise that the Competition Commission has on competition law issues, and therefore similarly, I suppose, for data, there has to be an expertise.
I’m not sure at this stage that in an Indian context, one can say that the Commission is the repository of that expertise, and possibly because of that rational, the way India has been thinking is to have a separate data protection authority and because of that data protection authority, which is being envisioned, it looks like the answer to your question is that companies do a very complex set of things to figure out at what stage to stop and when exactly to stop collecting data. Maybe if you permit me, I can amplify it through an example.
All of us, I’m sure, use WhatsApp over here. If you are on WhatsApp, I’m also on WhatsApp, regardless of whether you are texting me, I can see that you are online by the way, right? And that may be seen as in some context that it is invasion of some kind of a privacy but well, there is a superior product in the market. It’s called Signal. If you utilize Signal, this problem goes away. Absolutely, the point is the moment somebody else’s on Signal even if they are chatting with somebody else, you can’t see that the person is online, right?
Now, what is it that Signal does that WhatsApp is not doing? Now is this is not a question which I suppose the Competition Commission is best placed to answer, and it looks like therefore, somebody else who presumably will have an expertise should be looking at questions like what you have raised: how do companies collect data? When do they think they should stop collecting data? And through this WhatsApp and Signal example, I’m only raising a question about expertise, or maybe lack thereof.
Let me take a pause over there and hand it back to you. Thank you.
The analogy I come back to, because this is really the Competition Commission as to whether in the commission, I mean, we didn’t have these cases back then, they came later.
You referred to the research paper that has been done, and even there, no one has been able to say what exactly is stopping competition, because if you have the personal data protection act, which is what the European Commission has brought in the General Protection and Data Act, then in many ways you might be just stopping competition. It’s this data network effects, it’s not the same as normal network effects, which we were very comfortable with.
As a commissioner and someone who has been very familiar with the problems that come up, what sort of obligatory things can we do? How can we tell the commission “This is the time you should interfere”? How to interfere, when to interfere, when to intervene. These are problems that somehow never get resolved.
Geeta, if you look at our competition law, and for that matter, most other competition laws around the world, these laws were designed for traditional markets, traditional economic markets. Now, the shape and structure and the nuances, they’ve changed quite a lot in the digital economy, and as a result, the price factor has also undergone some change. It is not the question of monetary price alone, which is irrelevant to the firms, it is also the value of the data, which they reckon while evaluating the price or the value of the firm.
For example, why should Facebook pay something like $19 billion for buying WhatsApp when its estimated value at that time, as people say, was about $1 billion at the most. They probably assess the value, keeping in mind the data, which they will be able to have access, and then they will be able to use that data for a number of other applications.
The point I’m trying to make that the competition tools, which had been drafted in our competition laws, in our case in 2002, in many other countries in various parts of time, they are probably not adequate to take care of this situation. The Competition Law Review Committee looked at this, and you referred to it, I was also a member, and also in the Competition Law Amendment Bill, which is pending before the parliament, many of these issues have been discussed and there’ve been matters relating to the deal size and so on, not only the value of the assets in monetary terms or turnover in terms of the enterprise, but also the deal size. We are trying to take into account what will be the behavioral propensity of the firms in M&A or in dealing with the markets and how can they distort the market by using their data.
Altogether, the point I am trying to make is that the entry of big data in the new digital economy is influencing the behavior, the propensity of the firms to intervene in the market, and in many ways, distort the market at times. So the Competition Commission, or for that matter, the other jurisdictions also, they would have to evaluate whether the basic tenets remain the same, whether it is distorting the level playing field in the market, whether it is creating the entry barriers or whether it is giving undue advantage, unfair advantage to certain firms and so on.
Those are the kind of basic tenets which have to be seen at the touchstone of the new situation. All together, I feel that this is a situation where we have to evaluate the tools that exist with us and ensure that the principles of the competition law of creating a level playing field equal, or basically it means economic democracy. To give equal opportunity to all the players and protect the interest of consumers those things are taken care of by the existing tools or by modified tools, which are under examination at the moment.
It’s something that is very important and what you have said, you have clarified exactly what is the concern of all of us and I just wanted to know, let me just ask this, because being in the law faculty and an economist there how would you possibly measure the effectiveness or the amount consideration where data is required? What is the value you give to data itself?
Dhanedra Kumar, has given us one answer, but you know this entire thing of coming up with new tools, we again would have to redefine the markets and they’re coming up with what is known as multiple HHI. So what is the additional factor that you put into HHI that would be very useful? Which is the market that we are looking at the data and as I have always been trying to look at it also is, which is something that perhaps, if you just let competition come in, or don’t even worry about competition, like Rahul was saying, there’s always someone in the background who would want to make a quicker buck than someone else and coming with the new innovation, what do you suggest?
You see it because when we look at it and you want to try and see what is to be done with it, you can get a Nash equilibrium which is a non-collusive equilibrium than trying to get into something when you have a cartel otherwise, because that’s the way business is now working. The smaller people and they’re getting into bigger things. Each one finds out what to take up.
It’s not an easy question to answer. I think we are actually still struggling with that and it also relates to the theory of harm when you try to estimate this. But how do we measure the value of data? I think in our earlier discussion, there was a question as to whether data really matters because some type of data is extremely fungible.
Let’s say for instance, we use Google Map to travel from point A to point B and it’s very, and it tries to give us an appropriate route based on the real time scenario as to what exactly is the traffic intensity in different locations. Now the data acquired today may not be relevant for tomorrow because the scenario may be quite different. So that’s probably fungible data, but yet from that same data, it may still have access to other forms of data, which it may use. For instance, the locations traveled to, and the frequency with which one travels to different rotations. So, there is always a fungibility aspect of certain types of data and there’s always a continuity aspect to certain type of data.
Well, the question is, what exactly is the value of data? Well, in one simple sense, we can say, we do know that data can be monetized and there are different ways in which data is monetized through targeting advertisements, through targeting various other types of services.
In one sense, for companies like Google an online search and targeted ads, we know that advertisements are the predominant source of revenue and so we know that predominantly information or data is used in this particular manner. That’s one way of looking at it. But then there is a limitation to that. There’s a limitation because this data is used to expand into different markets and these are markets which they expanding into, at the same time, applying innovative technology, and there’s a benefit to be derived, but at the same time data is being used to move into different markets.
For instance, let’s say if Google were to use data related to all traffic movement from point A to point B or across the city, well, Google might perhaps also use the same tech if it’s developing its concept of self-driven car, right? The range in which it has applications is simply enormous. We cannot quantify all of that and it’s probably not possible to, because you don’t know if they’re going to succeed in that sense. As of now, the only way in which we can probably go about it is to assess what is the correlation between the revenue earned and its reliance on data. How much is the revenue dependent upon this kind of data availability.
That, perhaps, is not too complex, but at the same time having said this, we have to be careful when we talk about privacy. When we talk about data and we talk about commercialization, and when we talk about the competition commission getting into it, we should not read the commission’s requirement or any competition agency’s requirement to get into this particular issue as something which is to the exclusion of an ex ante regulation. We still would need an ex ante regulator with different perspectives. The commission’s role is simply limited to whether that act is related to an abuse of its market power or whether that act is related to reducing the degree of competition to entry in a particular market.
I think Rahul asked a very pertinent question, as to whether commission is the right agency to actually determine this. I don’t think the commission is the right agency, but at the same time, when we deal with competition related issues arising out of privacy, it shouldn’t be a problem having two different agencies tackling this. The commission tackling it from a competition perspective and a regulator tackling it from a more general perspective because privacy and data has a more general issue, including as you raise, you said the issue of small companies wanting to come up, right? So there may be larger issues that come up.
You know, Rahul, it’s here I want to bring you back to your controversial article the one on the MMT and the Google one, which we couldn’t get you to agree to let us publish it in CPI, because that had something very interesting and you had raised an extremely specific issue with regard to an interim order on privacy. Not only was it a question of privacy, it also had the relationship to contracts, and whether, if this is something that you would like to talk a little bit more, and then we can go into contracts, and I want to really find out from Vivek what sort of tools they use elsewhere, because this is something all of us in India want to know.
So let me just ask Rahul and then I come across to you, Vivek.
Thank you very much on this interim injunction issue.
The competition act in India has had the provision, right from the beginning. What has been interesting is the commission’s new found sort of approach towards issuing interim injunctions in certain sectors, and in that context the questions that you are raising in terms of is it a good idea to use vis-a-vis a contract, vis-a-vis data, that leads to a law and economics sort of a problem, I would say, if I may.
What is that law and economics problem? I think you had yourself mentioned in the introductory part of this panel discussion that in many contexts, the digital economy’s interface with data is that a very nascent stage. It’s very early stage. Sometimes it’s unclear as to which exact direction it will take. Like taking another example from Indian context.
I don’t know how many people know this, but India is the world leader in UPI technology. Payments. Online payments. Every Indian is paying through mobile phone. They don’t worry about credit cards and banks and everything else. It’s actually rightfully so the world leader in UPI. Now that has happened because the infrastructure was there, not because Competition Commission of India had this part to issue interim injunctions and therefore injunct somebody either through a contract or otherwise to innovate about UPI technology, and therein lies the answer to the question that you have posed; my answer would be that in certain contexts it might be a good idea when we don’t know what could be the consequences in a particular sector, a sector which is nascent. It might be a good idea to celebrate our reticence towards intervention because, as you know, in law and economics there is something called type two error, right? That’s something which Competition Commission should be aware of and to that extent, I think it may be a good idea to revisit some of these interim injunction orders which has come across, what we have come across in recent times and we look at them whether they relate to a sector which are nascent, and therefore the chances of errors might be higher.
Let me take a pause over there and hand it back to you. Thank you.
Vivek, I’d really like you to respond again. I know it’s about reforming the competition act, but the sort of indices that have been talked about and they’ve been getting some new ones also as to how very useful they will be when it may be just better to let things take over. You see, I have this very, very wrong approach maybe for a commissioner, but when there is a honey bee and there’s a honey spot, there’ll be any number of people who will get attracted to it. I just wanted your responses and I want you to know, my only understanding was that the European Commission was going very soft on the GPDR for other firms, not for their own, while we may go soft, not go soft at all. We were not even bothered about it and let the market work out.
I’m going to come back to a little bit of a general point and then see if we can work this in.
I think one of the biggest challenges that we face in this area of new age, big data, is the players who run these marketplaces, for example, like Amazon, which is an obvious name, what are they doing with the data, and are they creating an unfair playing field as they keep accumulating more and more data? So I don’t know what brand name Amazon sells in other countries, in the US they have Amazon Basics, for example. When you go to them Amazon site, they are putting an array of products under the Amazon Basics.
Now, if you think about this issue a little bit, anybody running a marketplace could potentially do it. So in the US or in Europe, for example, I can do store brands. If I go to a pharmacy in the US, I can see store brands. CVS is a huge pharmacy in the US. I can see name brand products, and I can also see CVS branded products for the same thing. Anybody who’s running any retail operation, any online marketplace, can actually try to do this – that is the copycat the branded products. If there’s no infringement, if there’s no copyright infringement, there is not a patent, then there is no issue. If I’m simply making a new USB stick and selling it under my name, nobody cares really. But the issue here is that when a marketplace like Amazon gets so big, right?
Suppose Rahul were to run his own marketplace, it is going to be a very small market share. He can demonstrate the same type of behavior and have Rahul’s own Basics, right? Nobody would really care because he’s such a small player in the market. But when you look at Amazon with possession of mountains of data and specific details about how the seller, a private seller in the marketplace, is selling, details of the product, who the customers are, you get all this data and then Amazon replicates that in the Basics model.
The question here is to what extent is this a problem. So if you look at some market indices like market share, how high does Amazon’s market share have to climb, or any marketplace market share have to climb, before this becomes a problem? This is something that competition authorities have to deal with. So again, if Rahul has 1% of the market, nobody would care, but if T.S. has 50% of the market and he does the same behaviors as Rahul, people will start being concerned..
I think going forward in online retail marketplaces, this is like a huge issue coming up and it’s going to be a big challenge because we don’t know what the inflection points are as to where the competition policy problems arise.
The second thing that is related is advertising revenues. Of course, the data has not been collected for the sake of it. Data, in part, has been collected to figure out where the demand function is, what kind of goods and services consumers demand, differentiated products, et cetera. It is not demand for today, we can forecast tomorrow’s demand because having this data and the ability to forecast demand, puts them at a greater advantage compared to a smaller player in the market, and of course, advertisers pay for this. Somebody who has more sophisticated data or more data can actually reap much more advertising dollars.
I think from a competition policy standpoint, these inflection points as to how much data you have, what client you has, your market share. I think HHI by itself is fine. It just needs to be redefined for the particular product we’re looking at, which is data in this case. So I think precisely what kind of behavior a marketplace a platform engages in, what kind of inflection points do we have in the market shares I think these are very critical issues for competition law enforcement.
You had come up with a very good suggestion on this, and had suggested that the government should encourage a lot of the younger platform entrees so that, you see it is true, whether we like it or not, the commerce online now has become far more important than commerce offline and a lot of the Kirana stores have also bought into Amazon and then there’s a whole set of arguments that have come about on the question of discounts and predatory pricing, we’ll take that up later when I’m doing contracts.
Pradeep, you had suggested that perhaps in some ways we’re getting protectionist. If you feel that the government should give support, give loans and encourage startups in getting onto the platform or starting their own website, do you feel that will be a good response to the issues that have been raised by Rahul and Vivek and others?
Certainly, certainly. But Geeta, can I go to a very larger point of this whole discussion?
To me it appears like five blind men around trying to identify the elephant. Honestly, if you had to looking at the form of the competition back then, this is not, this doesn’t require such a big discussion at the moment because we still are at a very nascent stage of the digital economy and its aspects that sort of damage to the competition.
Having said that what is also important is that I find the discussion so far have been illuminating in the sense that at least they’ve been able to inform us about a lot of other things but is that the core of this program, Geeta? If you look at the title, it was Reform of the Indian Competition Act; the law doesn’t require any reform. In order to deal with this kind of situation you’re looking at is the enforcement, and then the analytical part of the Competition Authority, which will be required to be booted up or to be, sort of strapped up, and how are you going to do that? That would be a bigger challenge in the sense that the manpower in the kind of–
You’re very right Pradeep. What we have to get back to, and to get back to the competition–
I mean, I said this is a very nascent state, and my worry often is in many, many of these cases, we find that regulators become over-zealous and that kills innovation. One thing we should, I don’t think any of our learned academics have spoken about the innovation dimension of dealing with any kind of regulation.
What we have found through our own experience is that our regulators are not even very good about all this. A, they have a controller’s mindset. They don’t have a regulators mindset. They’re not built up that kind, it will require another generation or two that we need, and therefore, what I’m worried about is that in many of these cases we have to be very clear about our understanding what the situation is and therefore I gave the analogy of the elephant and five blind men. I find you can all talk about various collateral and very sort of flaky issues. They all sound very good. Whether you talk about the Google Map, or you talk about factors that, yes, we would like to promote more competition, by promoting more players in the market so that you don’t have this kind of monopoly control about few.
Pradeep, here I’d like to come in again. I know you do get, you are very right on some things, but both Dhanendra and I have worked together, I think we’ve been open to every issue possible, at least during our time, am I not right, sir? I think we have tried to get to every argument, and the point that I want to ask is and why I brought this privacy up is how do you bring about confidentiality obligation into the competition law?
Really, is it competition issue, Geeta? I think most of us don’t agree that it’s the competition issue.
No, because that’s just what it is.
It is a regulatory issue.
Absolutely, Geeta, but before I comment on this question, may I also make one or two brief remarks on the issues, which you just alluded to?
Basically, I wanted to add that when we talk of the competition and the benefits which would accrue to the economy as a result of the competition, it refers to both static and dynamic efficiencies and the benefits which will flow through the economy as a result of infusion of technology. The job of the competition also is to encourage innovation, to encourage infusion of new technology and bring in new applications. The firms also adapt the market; they train the consumers and they make them used to new applications, new appliances, new technologies, and that’s how the economy progresses. There are new side applications also, and stuff like this.
The job of the competition jurisdiction regulator is not only to promote competition in the market, but also to promote innovation and dynamic efficiencies. It’s a continuous process, and to that extent, the use of data when they accumulate data, big data and so on, and they use big data for bringing up new innovations and new applications cannot be underestimated also. So it is not all that undesirable. It is not all that bad, also.
The point I’m trying to make is we have to keep in mind the benefits of the new innovations and the application of data therein. That is one point I wanted to mention. Now, coming back to the point which you just now were referring to, can you just repeat that? I seem to have lost track of that. What was the point you were asking me just now?
I was asking, or Pradeep was asking? What I was trying to ask is, if there’s a question of just looking at competition law, is it possible to get a confidentiality obligation into the commission?
Yes, that was the confidentiality part. There also, I would come back to your original question and I see that we are now reaching towards the end of our deliberation, then mention about the privacy and the related issues. The confidentiality part also comes into, because at times it has been seen that the firms are very chatty about, and very protective about the confidentiality part for a number of reasons and legitimate reasons. They would not like their competitors and others to know about various parts. To that extent it becomes a competition issue also, more than a regulatory issue because to the extent it impacts the defense of the party concerned wherein you are examining the party about contraventions and so on, and if they, what they said or their arguments and their position is also known to the competitors, it may put them at a disadvantage. To that extent only, to that extent only, I would say that it’s a competition issue.
But Somashekar, and this is what I wanted to bring in. When you had talked about the walled garden, the entry into the walled garden, because the basic thing when you have this data is that what does the competition commission look at? It’s not to the question of the number of players, but just to see if there is a barrier to entry.
I’ve looked across everything and studied all of them, and I find that as long as there’s no barrier to entry, than anyone can come into the walled garden, which is what you were saying, that Apple was not willing to share anything on its iOS within this walled garden, but Android went around and became free, and of course Android has other conditions that Google comes up with.
What is your response on the debate that Pradeep and Dhanendra had on whether privacy is a competition issue or not?
As I pointed out earlier, defining what privacy is not really the role of the Competition Commission. I don’t think that’s within its domain. That’s the role of a regulator. The role of the Competition Commission with respect to privacy is strictly with respect to competition related issues. Is a firm in a position such as to coerce a person to give up private information and does it actually do it? And does it actually lead to people giving up such information? Can be hold up. Can be a competition issue.
Now, the question is whether we need to amend the Competition Act in order to actually take that into factor? I really don’t think so. If you look at section 19.4, there are the others aspect, which is pretty much included there. The commission pretty freely, say privacy is another aspect and we have to recognize the fact that the way in which any competition agency looks at these issues is dynamic. The position that it had as you pointed out, the position that the commission had with respect to privacy, much early on, was quite different.
That should rightly be so. It should be evolve with respect to the economy and the role that it plays, and also importantly, we will be, I think we understand quite clearly and we respect the fact that agencies across the world, the way in which they interpret acts and whether it does an abuse of dominance and whether it causes harm, also flows along with the development of economic theory of harm.
We have seen changes, shifts in both Europe, as well as in the US, with respect to what harm is, what can be defined as harm, as economic theories have developed. So there’s no principle which is struck in stone saying that this is what it is, and this is how it should be as we go on.
So therefore, yes, the commission does have a role to play, and the commission’s position will evolve, and with respect to entry barriers, to the extent that data is fungible, and to the extent that therefore other players can move into this market and capture similar type of data, there really wouldn’t be barriers to entry.
Apple’s garden is a different volume altogether, and Android is a different ecosystem altogether. Android’s, the basis, Android’s revenue is essentially through advertisement sources. Its business model is completely different. Apple’s business model is completely different. It’s driven through devices, sale of devices, and then through the sale of devices, keeping them within the ecosystem to earn service revenue, increasingly large amounts of service revenue.
Now, Apple is also known, just to get into more interesting areas, Apple has started designing its own chips, kicking out Intel. Will, one day, Apple also kick out Google? That is something Google will be looking over its shoulder, because Google derives a lot of ad revenues through Apple, right? So are Apple and Google frenemies is something which they discuss? I know as in one sense, as pointed out earlier, are we blindly groping around to understand what’s happening? Well, when we are blind, I think we need to be even more cautious. Tthe digital economy, the rate at which it expands is fantastically fast. If you look at the earlier technology and the rate at which it expands, at which it expanded, quite slow. If you look at the rate at which smartphones have expanded and the way in which people are using smartphones, incredibly fast. So simply because of the speed, we may be blind, but the blinder we are, the more cautious we need to be, and when we say cautious, going back to Bork, and he said, any competition laws should have an objective. Without an objective, we have no direction. So even though we are dark, even though we are in the dark, we should have, still grope around towards a particular direction, and what is the direction? To ensure that we continue to retain a competitive process. Not protecting competitors, but a competitive process.
In this whole process, which has happening and is one of the most important things is, are we giving it up?
I’m going to ask all my panelists on the aspect of consumer welfare; are we now going to let go of consumer welfare and moving to producer surplus? Because the moment you talk in terms of numbers and competition, then you’re more interested in terms of producer surplus and not what the consumer gains. The counter argument is the consumer is very foolish and doesn’t realize what he’s giving up just to get a little bit of satisfaction. It’s really a very, very tricky situation that prevails at present.
When a contract is drawn up, there is an argument that the contract, traders have come up with a case at the Competition Commission of India, complaining that these are unfair contracts. We are forced to give more discounts, but if you’re interested in the consumer gaining, if you give him more discounts, they’ll only be too happy about it. Does it matter? Should that be a case that should be taken up by the Competition Authority?
I’m now shifting, if you have noticed, from privacy to contracts, and I know Pradeep will say, “Geeta, let’s stay with one subject itself,” but these are sort of interrelated issues that have come up. Rahul, would you like to take it on? Or Vivek? Whoever wants to start because then I can get to Pradeep because I know he’s itching to tell me something.
Maybe Rahul can start and then I can go?
Sure, Vivek, thank you very much, I’ll begin.
All right, so let me actually talk about two things over here because you spoke about the traders’ case at the Competition Commission, right? I think in the earlier part of this discussion, Amazon has already cropped up. Let me speak about a different company called Shopify. Now, Shopify is a competitor to Amazon what it does is it aggregates small traders and sells products. It guarantees, unlike Amazon, it guarantees that it will not compete with them. I wonder, what is the barrier to entry for Shopify to emerge in India? Why is it that all the narrow place traders, we just go across to aims and reach the Competition Commission, but they don’t find time to set up a website like Shopify, and therein lies the conundrum for me when you talk about consumer welfare versus producer surplus.
Now, if we assume that these traders are looking for some kind of a surplus, I would think rationally speaking, they would come together and set up a company like Shopify, and to me it sounds very perplexing that they are not really able to do that considering that India has a very great reputation, in at least the tech segment and setting up websites. I’m not sure what really is the barrier to entry that they face, and therefore putting all of the queries together that you have put to us, I’ll think that the absence of a Shopify like company in India at one level is very perplexing, at another level it’s also very telling because it looks like producer surplus if we are choosing that producers have less in India, it might be a candidate because it looks like people are okay going to the commission, knocking the doors of the commission. They’re not so okay looking within. Maybe they’re looking for some kind of a paternalistic state help with sounds like a very problematic kind of a situation to be in. Let me take a pause over there and hand it to Vivek.
But, Vivek, because Pradeep has talked about how to support these platforms. I presume that was your idea right in the beginning, if I’m not mistaken. What would you say, Vivek?
I think I find myself kind of torn a little bit about the scale and the scope of the issues. If you go back to Amazon, you see they’ve made make huge investments in data storage, automation of equipment centers, spreading this out all over the country, all over the world. I think going back to Rahul’s point – why can’t somebody replicate? If you look at what Amazon has done, they have invested huge amounts in this business, this online business over decades now.
What has happened is, effectively, somebody could start another competitive business, but it’s going to take quite some time to reach the scale that we think is efficient. So on the point of consumer and producer surplus, I’m also torn as a consumer there’s huge benefits to shopping on Amazon, and there’s no question about it. I’ve already shopped before I saw someone else’s site. I think in some sense looking at consumer and producer welfare, of course, Amazon is getting a lot out of it, but I think consumers are also getting a lot out of it and terms of delivery mechanism.
It’s not just what they find on the website, it’s also the issue of delivery on time among other things. It’s not any one attribute, it’s a combination of attributes. It’s not like going to a grocery store and picking out the right tin of mangoes or whatever it is. I can go on Amazon, where there’s this huge array of products and services, and there’s consumer welfare attached to it because you are benefiting from sitting at home and doing all this.
I think it’s a little bit of a more complicated problem as to how to assess the relative elements of consumer and producer surplus. Since my time is going to be up shortly, I wanted to say that in terms of India competition policy, moving ahead, I think personally it is a mistake to bring in privacy issues into competition law enforcement. I think these are very distinct issues and I think privacy should go separately under some consumer protection bureau.
US has, for example, the Federal Trade Commission that has a competition policy dimension, but then it has a consumer protection dimension, which is very different. I think privacy and related issues need to be done by a regulator under consumer protection issues and not competition policy issues. For the benefit of time, I’ll have others talk.
I mean, Vivek has said what I would have said, and that’s the sort of a very sensible part. What I said, and again, I repeat, I think I’m getting lost into the jungle of words and jargon and Apple and so on and so forth, without understanding is to what the issue is.
Now, Geeta, it is not an issue about the producer welfare versus consumer welfare, or producer surplus versus consumer benefit. As Vivek pointed out. Now, scale allows large businesses to offer lower prices. You can’t beat that. Now scale itself then becomes a barrier to entry, but it is not something which is an illegal barrier to entry which, as you see in many sectors, many industries where you require deep pockets, thereby, inheritly it is a barrier to entry because anybody with smaller pocket won’t be able to enter that sector.
What is it that you can do about it? I mean, look at the telecom sector in India. They had very tough price competition and the prices came down to be the lowest in the world. Today, of course, there are only three or four players, and yet now they have realized that this is not a sensible way to go about it and they’re all raising tariffs of 15, 20%, but I don’t think they’re going to lose business, and consumers are not going to be hard in that sense that there is any exploitation going on or abuse going on in that particular sector.
Similarly, if you look at the retail sector, which is what we’ve been talking about quite a lot, which is where data plays a very important role because it offers, as it was pointed it out earlier, that in economic forecasting, for example, data helps. Other than reaching out to a possible consumer, they can find any of us going by a toothpaste certainly will get other ads for some other toothpaste into our inbox, or wherever or WhatsApp or wherever you can think about it.
Now that, of course, is data, and I feel a conscientious consumer, you’re not going to fall prey to that advertising, let’s not forget that. If you’re not, then you will fall straight to the advertising, and somebody said earlier look at KYC, for example. KYC is totally opening up your privacy. Then every time we will keep on revising KYC all the time with the new debit payment system. Geeta, what idea is brought near to renew your KYC every year? Where is the privacy? Maybe it could be no, privacy is not a competition issue at all, and we should be very careful there could be impact to privacy, as I pointed out.
But you know the reason why, and since I have the advantage of having the last word, let me use it. Well, the simple thing is that this discussion, I’m deliberately taking up privacy and the question of contracts which we could not deal with, because these are two cases that are before the Competition Commission of India. That is the specific reason why it’s being taken up.
I think we should have started off the contract issue. That would have been closer to this. Yeah.
Yes, that’s fair enough. That’s perfectly fair enough.
Maybe we should ask CPI to have another discussion for us on the contracts itself, because there’s a lot to be said about contracts that are taking place, but having stated these, the discussion that we’ve had so far now I think it is very, very important to understand, not only that the culture and country specific issues that are going to come up and whether we talk about consumer surplus or producer surplus what is important is we’re in a global economy, and therefore if you adopt a very nationalist attitude between buying from Reliance and buying from Amazon, it makes no difference.
It is on this note I think what happens, and this is where the contracts also become very important, the boundaries which we take in the political sense, for e-commerce, there are no boundaries. There’s absolutely a wider perspective taking place and as Vivek we have said, yes, we have to look at it in terms of the mergers that takes place and in India in mergers that are taking places, more or less are clear. This is a routine thing that is occurring but at the same time, sometimes there could be a merger of a small bright spark startup with another large company but–
Which has been happening all over the world.
Absolutely. You’re right and that’s why I want your in for money. You are for globalization and you are there to get the benefit as a consumer.
We need another panel one day.
Yes, thank you all so much.