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Beyond Traditional Boundaries: A new approach towards defining market

Mayank Kumar and Parth Shahane


Technological evolution has left no sector of the economy being untouched. Having affected the regulators across jurisdictions and practice areas, this pace of change creates a nightmare for the policymakers to draft sound workable solutions for the regulation of these new advanced business models different from the traditional brick and mortar marketplaces.

The starting point for a competition law infringement investigation is to define the ‘relevant market’ which circumscribes the area in which the business operates. Among the many problems faced by the regulator, the first is how to define a market? Is the current method of making a distinction between offline and online sufficient to define a relevant market or do we need an update? The highly dynamic markets having loose boundaries where services are bundled are among other factors which create a doubt about whether the existing approach to define the market is suitable for the ‘new digital business models.’ To simplify these questions, the European Union (‘EU’) came up with the EU Digital Markets Act (‘DMA’). It defines the digital sector as “the sector of products and services provided by means of, or through, information society services.” ‘Information society services’ is defined under Article 1(1)(b) of the Directive(EU) 2015/1535 as services provided by the electronic means by processing, storing, and transmitting the data. Moreover, the discussion around the ‘Digital Competition Act’ floating around in India adds to the ongoing demand for an updated framework of defining the relevant market in the digital sector.

This article will first discuss the current approach of defining the relevant market in India in the context of the digital sector which was also illustrated in the Lifestyle Equities v. Amazon (‘Lifestyle’). It will then move to highlight the gaps in the present definition and that there needs to be an update in the tests for defining the relevant market while focusing on the issue of ‘data monetization.’ Towards the end, the authors will give an indicative list of components which can be incorporated into the existing definition.

Regulatory approach to define market: An Indian dilemma

In Ashish Ahuja v. Snapdeal (‘Snapdeal’) the Competition Commission of India (‘CCI’) has for the first time highlighted the distinction between offline-online markets. However, ruled that both markets distribute the same product and are interchangeable in nature. Showing progression while defining the relevant market, the CCI in Matrimony.com Ltd. and Consumer Unity and Trust Society vs. Google LLC (‘Matrimony.com’) highlighted the existence of a multi-sided nature of Google’s business model of bringing internet users, content providers and advertisers together. However, it separated the online general search market and online general search advertising market on the sole basis of non-substitutability, in the author’s opinion this is unreasonable.

Although the effort of CCI to define a relevant market is commendable, its conception needs modification. Though the CCI in Lifestyle has highlighted the need to “delineate the relevant market based on the current realities,” the approach of the commission in recent cases like FHRAI vs. MMT, 2019 and XYZ (Confidential) Informant vs. Alphabet, 2020 highlights its use of the traditional method of distinguishing between the offline-online market. This traditional way of defining the market in a one-sided way, focusing on supplier and consumer may fail since the firms ‘simultaneously serve different customer groups with interdependent demand from all the groups.’ Today due to the separate usage of ‘data’, it forms a market in itself and has an important role to play while defining the market; non-consideration of its relevance may leave behind an important element of the market.

Furthermore, an important discussion arises as to whether the relationship between the platforms and the different sides of the market should be considered as a separate or a single market. Another issue is how to treat the ‘zero-price’ nature of the platform. Traditionally, the commission has used the SSNIP (“small but significant non-transitory increase in price”) test to define a relevant market. The test identifies the relevant market considering the ‘supply-demand’ substitutability of a focal product based on the change in the price of the product. However, due to the change in nature of the market and introduction of the ‘zero-price’ platforms, this test became redundant and is gradually being substituted with a new SSNDQ (small but significant non-transitory decrease in quality”) test by competition authorities across jurisdictions. This test substitutes price to quality as a factor for assessing the substitutability.

However, various issues have been raised about the insufficiency of the SSNDQ test to define the relevant market. This test, as OECD has iterated, shall be providing more of a conceptual guidance than that of an objective criterion to assess the market. Hence, to supplement the test and highlight the explicit criteria which needs to be included in the test, this article, in the next part, will suggest certain factors needed to be considered by the CCI while assessing the relevant market.

What is lacking? What can be included?

It is commendable that there is an increasing understanding of the multi-sidedness of the market by the authorities across the jurisdictions. However, as highlighted initially, in Matrimony.com, the commission failed to appreciate the interconnectedness of the market. CCI has distinguished between the online search advertising and online search market however it also concluded at the same time that Google is protecting its position in the former by ‘leveraging its position’ in the online search market. CCI needs to appreciate that it is imperative for the functioning of one side of the market to be connected with the other side of the platform. Hence, it is a criterion of ‘indispensability’ and not substitutability which needs to be considered.

Secondly, CCI in the case of Umar Javeed and others vs. Google LLC and others and Alphabet, did not discuss the ‘two-sided’ nature of the market of the licensable operating system but it defined the market only from the phone manufacturer’s perspective. In this case the CCI did not go downstream to consider the consumer's perspective. The reasoning has followed the European Commission’s (‘EC’) decision in the Google Android case (Case AT. 4099). However, the decision of the EC in the Google Android has been criticized both in the legal and academic fraternity for defining the market too narrowly and not considering consumer perspective. The authors of this article argue that the commission should take a step forward and also ‘include preference of the consumers’ while defining the market so as to continue the preamble of the Competition Act.

Thirdly, platforms like Amazon hold massive amounts of data, not only the public data but also non-public data which they derive from the sellers on their platforms. These ‘non-public’ data are used by platforms like Amazon to promote their own products which has been highlighted by the EU Commission in its Press Release (Commission Press Release IP/20/2077, 10 November 2020). The CCI in the Lifestyle has established the non-dominance of Amazon by looking into the availability of other players in the market. However, the commission has failed to look into the argument presented by the informant that Platforms like Amazon gather data on consumer preferences and other related data, provided by the consumer either directly or through the platform, for their own advantage. Hence, affecting the sellers on the marketplace. This usage of data which is not available publicly for the other users, creates circumstances for unlawful ‘self-preferencing’ which needs to be considered while defining the market. The authors argue that the access to ‘data’ creates a market in itself, hence the commission should consider the relevance of data while defining the market.

Additionally, in RKG Hospitalities Pvt. Ltd. v Oravel Stays Pvt. Ltd. commission defined the market for OYO as the “market for franchising services for budget hotels in India.” While the opinion was prima facie, there are aspects which need further analysis in the case. OYO has a ‘unique’ business model, it can be considered as a platform, hotel aggregator and as a service provider. However, most importantly, consideration should also be given to the ‘data aggregation’ which OYO does as a platform provider. The OYO platform asks for personal details of the consumers which it then shares with the hotel operators. Additionally, OYO also has the data of hotels which it can use to create anti-competitive practices promoting its own or allied brand. Furthermore, OYO can sell the data to other players in different markets or it can use it to enter the market of some related sector hence increasing its market power not only in the present market but also leveraging it to others.

Way towards Digital Competition Act

The increasing complexity of the market increases the challenge of the competition regulators to establish the anti-competitive behaviour of the companies. Importantly, India as a growing economic market needs to take prompt actions to protect the emerging businesses from the big businesses while at the same time protecting the competitive structure in the market. An attempt to enact the Digital Competition Act is a right step taken by the Indian legislators at the right time. However, they have to take into account various considerations while framing the Digital Competition Act, some of which have been suggested in this article. They have to focus on various factors, including the importance of data, while defining the relevant market.

Mayank Kumar and Parth Shahane are third year students of NALSAR University of Law, Hyderabad.