Antitrust hearing against the Big-Tech in USA: Opportunity for India?
[The said contribution is part of the series on “US Congressional Antitrust Hearing” run by the Centre for Competition Law and Economics]
The great French author of the Renaissance-era Francois-Marie Arouet’s (popularly known as Voltaire) words, “With great power comes great responsibility” could not have been more befitting, more so in the context of the recently concluded Big Tech antitrust hearings. While the Big Tech companies have succeeded well in accumulating (market) power, their ability to share proportionate amount of responsibility remains rather dubious. The companies during the said hearing were accused of distorting fair competition in the market, thereby falling foul of the antitrust laws of the land.
Even though the investigation by the US Congress - the most bi-partisan effort ever - has culminated into an almost six-hour long marathon hearing, where in the CEOs of the four Big Tech giants (Tim Cook of Apple, Sundar Pichai of Google, Facebook’s Mark Zuckerberg and Jeff Bezos of Amazon) have testified under oath in front of the House Committee, the writing has been on the wall for quite some time now. 50 State Attorney Generals in the US recently opened an inquiry against Google, and Department of Justice (DOJ), along with Federal Trade Commission (FTC), is also probing the Big Tech. Senator Elazabeth Warren has already fired an open warning to the Big Tech, proposing to break them up if she is elected to the White House.
The enormous market power of these four Big-tech giants in the US can be easily understood from the fact that Amazon accounts for 70 per cent of all the e-commerce business taking place online. David Cicilline, the Chairman of the Committee, noted that 800,000 out of 2.2 million sellers, i.e. 36 per cent, are solely dependent on Amazon as a sales channel, and the company is seven times bigger than the size of its closest online competitor.
Having said that, a closer look at these companies is of the essence to understand how big these Big Tech companies have become.
The growth of these companies during the pandemic paints an interesting picture. While the global economy is shattered due to the spread of Coronavirus, the Big Tech has only soared new heights during this time of crisis. While the European economy was hitting a nadir, the Big Tech companies reported a combined profit of $28 billion. Amazon reported a quarterly sale of $88.9 billion and managed to double its profit to $5.2 billion. Facebook reported a profit of $5 billion, a 98 per cent year on year increase. While Apple, buoyed by its sales, reported a profit of $11.25 billion, Google’s parent company Alphabet reportedly profited $6.96 billion. Since March this year, stock prices of the Big-Four tech giants have risen by an average of 35 per cent, compared to a 10 per cent rise in the S&P 500. Apple recently became the first US Company, and only the second globally, to achieve the $2 trillion market cap. This is just to say, only the start. Put an Indian perspective to these numbers, the top five most valued Indian companies, i.e, RIL, TCS, HDFC Bank, HUL and Infosys, have a combined valuation of $495.28 billion, which is not even 25 per cent of the valuation of one of the said entities.
The threat against the vastness of Big Tech is now far too real for democracies to realise. The said companies have now access to more than 50 per cent of the world’s population. One common trait which identifies the Big Tech is their access to huge databases, which more often than not, are being used to stifle competition by choking smaller players out of the economy. This solidifies the notion that has been in the offing for quite some time now – Big Tech companies are more of a bane than boon, and that has led to both Democrats and Republicans arriving on the same page.
Now that the hearings have concluded, CEOs been grilled before the House Committee, the final Report is expected to be released in September. While calm prevails as of now, it might not be long before the storm hits these Big Tech behemoths. Broadly speaking, there are three scenarios which may arise come September when the report of the House Committee is released. Firstly, and the worse off, the Committee might maintain the status quo. Secondly, the Big Tech might be broken up. Thirdly, new curbs are imposed on these companies which force them to share their innovations with their rivals.
Whatever may be the decision, the undercurrents of this investigation followed by the hearing are likely to be felt in other jurisdictions as well. If the first scenario comes out to be true, the world of tech would further consolidate, battle-lines would be drawn between two major tech camps, the one having its capital in San Fransisco, and the other being located in the Land of the Dragon (China). All other players are then likely to be drawn towards these poles.
The second scenario, i.e. breaking up the Big Tech, will be the reiteration of the Standard Oil case. If this scenario unfolds, companies from other countries will tend to benefit as they will get more opportunities to penetrate into the upper-rungs of the tech market at a more equal pedestal. It is worth noting that India is already the largest market for Facebook, and it is pegged to form a substantial chunk of Amazon’s business as well in the coming years. Google already has a considerable presence here in the smartphone market, and according to some estimates, it constitutes 68 per cent of the online ad revenue along with Facebook. Apple might be the only exception to this, but thanks to the pandemic, Foxconn and Wistron, both of them major I-phone manufacturers, will be shifting a chunk of their business to India as well.
The third option, i.e. imposing curbs on these tech giants and forcing them to share their innovations with their competitors is also likely to augur well, where they may give rise to newer entrants in the market, thereby promoting competition. The US antitrust history tells us that whenever a Tech giant falls, it gives rise to future behemoth at the same time. When Bell Labs was forced to share its patents, it led to the birth of Intel. When IBM was scrutinized, it gave birth to Microsoft. Now when Microsoft is “tying” with Windows and the Internet Explorer, it has led to rise of the most feared behemoth, i.e, Google.
All said and done, Indian context will present a whole new set of challenges and procedures to reign in the Big Tech. The situation becomes all the more peculiar when it does not have its own data protection laws. Even though the draft Personal Data Protection Bill was submitted by the Justice B.N Srikrishna Committee in 2018, it is still on the anvil after almost two years of deliberation. Without such laws, it would be an uphill task for the regulator to impose sanctions and curbs on the Big Tech. While the Competition Law Review Committee formed by the Government of India to look into the functioning of the Competition Act, has stated that it has deliberated on the interplay of the Competition Act with the digital markets, it felt short of recommending “control over data” or “specialized assets” in amended version of section 19(4) of the Act. This clearly reflects in the text of the Competition (Amendment) Bill, 2020 and is likely to have a direct implication on the Commission’s ability to probe the Big Tech.
It may also be prudent to say that in the backdrop of current events, it would be wise to not let the guard down. The CCI has come a long way in protecting free and fair markets, but a lot remains to be desired. The recent hearings in the US could further help the Indian regulator to discern the nuances of the issue better, and adapt innovative techniques to reign in the Big Tech. This would only lead to more predictable policy goals for the Indian state.
[Mr. Debanis Roy Chowdhury is an Associate at the Competition Advisory Services. The submission has been made in his personal capacity.]