[The said contribution is part of the series on “US Congressional Antitrust Hearing” run by the Centre for Competition Law and Economics]

 

They say when the Capitol calls, you drive. Most recently, the Chief Executive Officer (“CEO”) of the world’s four most valuable tech companies testified to the US Congress. They sought to defend their organization against possible abuse of dominance through stifling innovation and raising prices for consumers. In this article, I discuss the implication of the hearing and the discussion around it across the globe, including India.

Background

Since the dot-com bubble in the United States (“US”), technology companies were seen as propeller of the economic growth, consumer tastes and the financial markets. These companies, i.e. Amazon, Facebook, Apple and Google, have defined and altered the communication in myriad ways between the people across the globe, influenced the consumption of information available in terms of the manner of shopping, exchange of official communication and socializing. Arguably, any research is incomplete if not viable on Google, Facebook and Instagram. Whatsapp determines communication and social interaction to a larger extent, Amazon has and continues to redefine shopping experience for the consumer, Apple products - largely perceived as “statement goods” - have instilled technology and privacy beyond the android devices. Needless to say that while doing so, they amass critical user data which is being commercialized for economic advantage.

Undoubtedly, the Big Tech companies, much like the dot-com bubble, had faced insurmountable losses in the early years only to eventually become the largest valued tech stocks positing their CEOs in the category of world’s richest people. The hybrid model on which they operate ensure flow of cash even during the most unprecedented times. The pace of their growth can be estimated by the fact that while the economies of the world suffer a huge setback during the COVID-19 pandemic, the wealth and the stead of the Big Tech is thriving.

Interestingly, these companies have been probed by various antitrust regulators across the globe. In this background, it was only imperative that the US Congress takes cognizance of these companies, and assess if they are really the “forces of good” as they claim to be. The Congress thus summoned Jeff Bezos, Mark Zuckerberg, Tim Cook and Sundar Pichai to testify before the US House of Representatives’ antitrust subcommittee.The hearing put a lid on the subcommittee’s year-long preparation that involved scanning through millions of public and internal records of the companies to know whether their market conduct was foul of the law. The questions, thoroughly prepared on the antitrust side, covered all major issues involving the Big Tech from preferential treatment to self-referencing to the killer acquisitions they have made.

Anti-competitive conduct of the Big-tech

The CEOs, throughout the hearing, maintained that their market share was insignificant and that they are not in a position to tip the market in their favor. Amazon had four per cent share in the global market, Facebook accounts for only 10 per cent of the advertisement revenue and Google controls 90 per cent of the search market, they suggested. The firms continuously emphasized on the presence of competitors and the lack of entry barriers to counter the allegations made against them. Few of the allegations and rebuttals made against them are summarized below:

Preferential treatment

A common theme against the companies was the self-preferential treatment which often led to the exclusion of competitors thereby harming the consumer.

Google’s conduct to form "walled garden", in order to keep the users on the platform, was questioned. It was suggested that the firm has already been fined by the European Union in relation to self-preferencing, and it is further indulging in striping off content from competing publishers and other websites. The practice of diverting search traffic was also brought up during the hearing.

Apple’s act of levying tax on its competing app developers whilst not taxing Apple’s product was called into question. Interestingly, the Dutch competition authority and the European Union, following a complaint by Spotify, are investigating the firm on similar allegations. The removal of competing apps from the Apple store, following the introduction of its own Screen saver app, was also questioned. Evidence was produced to demonstrate that Apple does not allow a level playing field to all the developers.

Amazon was largely grilled on the usage of the third-party seller data. The CEO of the company accepted the possibility of Amazon using aggregate data belonging to third-party sellers to benefit its own private labels. Further, questions revolved around the fact that Amazon launched a competing private label in a product category with a single seller, following which the sales of the third-party sellers plummeted.

Killer acquisition

The firms were questioned on various acquisitions they have made as part of their regular business. Facebook was questioned on its acquisition of WhatsApp, Amazon on Diapers.com and so on and so forth. The committee brought to the fore evidence in light suggesting ulterior motives behind such acquisitions.

Status in India

The Indian Competition Commission has faced both behavioral and enforcement challenges when it comes to regulating the Big Tech. The said companies have a sizable presence in India, where all - barring Apple - are being investigated by the Commission on similar allegations. Google and Amazon have been scrutinized for self-preferential treatment and Facebook has been brought into question for its acquisition of WhatsApp. As a matter of evolution, the Commission has now called for new thresholds in digital mergers to check the possibilities of killer acquisitions. It has also called for curbs on the digital companies from reporting transactions which breach such thresholds. The CCI had recently published a report on the market study it had conducted which covered various allegations made against the Big Tech in the hearing. The report, without making any sweeping claims, suggested self-regulation by the Big Tech and scrutiny of the anti-competitive conduct on a case by case basis.

Implications and Way forward

American antitrust law is considered to be the patron of all the competition laws enacted across the world. It is no surprise that the laws are in desperate need of an overhaul. The line of questions suggested the US’s preparedness to push for other forms of regulation. The aim here should be to find alternatives that allow restoration of ethics of the traditional antitrust laws along with addressing the new challenges posed by the tech giants. The Congress while formulating the regulation should also consider pertinent questions related to the plausible limits on behavior. Understandably, it will be difficult to address regulatory challenges whose origin lies outside the antitrust.

On the data side, It would be appropriate to govern corporations that build business around personal data. The General Data Protection Regulation might be looked as a model in that aspect. The legislation will also serve as the starting point for other jurisdictions in initiating either the legislative process, or borrow insights from the investigations carried across the world. Closer home, it may lead to the formulation of antitrust guidelines which may help in addressing the challenges related to regulation of the Big Tech.

On the face of it, the Congress has demonstrated that they have enough evidence to justify and initiate formal antitrust cases against the Big Tech. The European Union has already taken a lead when it comes to reigning in the Big Tech and one must not be surprised if the action by the US is a follow up to the same.

It has also been suggested that the Big Tech might be broken up as a measure to address the violations committed by them. The evidence in support of such measure, though is bleak given US’ history of splitting up companies. Moreover, I believe consumer benefit should be at the heart of any antitrust regulation, and any such measure to the break up the said firms may also result in immediate increase of prices for consumer goods and services.

Summing it up, it cannot be denied that the Hearing is a progress in terms of regulating the Big Tech. How far the Congress is successful, whilst protecting the interests of other stakeholders involved, is something which is yet to be seen. Whatever the consequence may be, the ripple effects are sure to be seen in India. One must not be shocked to see the involved stakeholders already getting prepared for the overhaul.

[Ms. Swati Sharma works at P&A Law Offices. The submission has been made in her personal capacity.]