“Big Tech like Google, Meta dominates the market” – parliamentary panel strikes for “Digital Competition Act”

“Big Tech like Google, Meta dominates the market” – parliamentary panel strikes for “Digital Competition Act”

New Delhi: A parliamentary panel in its report tabled on Thursday highlighted “anti-competitive practices by major technology companies” such as Google and Meta, and suggested that the “Digital Competition Act” should be implemented as major players with huge market share have engaged in “anti- competitive’ practices and limited the reach and growth of smaller market players.

The Standing Committee on Finance chaired by Lok Sabha Member of Parliament Jayant Sinha of the Bharatiya Janata Party (BJP) – in its report on “anti-competitive practices by large technology firms” – also pointed out the various ways in which these larger organizations have set their broad footprints, sidelining smaller businesses .

Citing examples of how companies such as Google and Apple have blocked other lesser-known players through their app stores, the parliamentary panel’s report read: “Google’s Play Store and Apple’s App Store are the biggest players in this marketplace, and both have proven to have anti-steering devices on their platforms.”

In addition, the report also explicitly revealed details of specific provisions that harmed competition in the market.

For the report, the panel heard from representatives of hotels, restaurants and travel agencies, along with digital media and newspaper associations via federations and trade bodies, and “took evidence” from officials in the Ministry of Corporate Affairs (MCA), the Ministry of Electronics and Information Technology (MeitY) and Competition Commission of India (CCI).

The report has also highlighted how “monopolistic” firms such as Google, Meta and Apple have been targeted to steer smaller companies out of the market by making it difficult for them to reach their collective target audience. This comes on the back of CCI’s punitive orders against companies like Google, which have already piled up fines for similar reasons in the US and the EU.

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ThePrint reached out to Apple, Google and Meta for comment via email, but did not receive a response by the time of publication. This report will be updated as soon as a response is received.

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The Rise of Big Tech

In an effort to rein in Big Tech companies around the world, countries with strong state antitrust committees have initiated fines worth millions against companies such as Google and Meta.

Among the reasons cited in the parliamentary panel’s report to explain why Big Tech took up so much space in the market was the fundamental discrepancy between how traditional and digital markets work.

“The rise of big tech is due to the fundamental difference in the way digital markets work, compared to traditional markets. Digital markets are driven by a tremendously strong increasing return to economies of scale. These increasing returns are not only due to the traditional scale and scope effects, but also from dramatic powerful learning and network effects Because of these powerful increasing returns to size, digital markets often quickly (within 3-5 years) tip to monopolistic winner-take-all outcomes, the report says.

Traditional markets, on the other hand, tend to lose their competitive streak due to “diminishing returns to size,” the report said, adding that there are other variables at play that may not ensure profits the way a digital ecosystem does.

Diminishing returns to size refer to a situation in the traditional market when profits stagnate even though investment in a particular area increases.

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“In addition, leading players in one digital market can quickly unlock these increasing returns effects in adjacent markets as well. Since digital markets do not have sufficient competition, they are also exposed to significant anti-competitive behavior by leading players,” the report added.

‘Anti-Governance Regulations, Network Effects’

The report also talked about how Big Tech companies have engaged in “anti-governance regulations” to ensure that organizations prominently linked to app stores prevent their business users – such as app publishers – from moving off the platform and using payment alternatives.

“The problem lies in the fact that this does not allow the user any choice of options, which could cost him less and provide a better interface. By imposing the use of their own payment system, App stores eliminate possible competition from other payment applications,” the report said.

The phenomenon of “network effects” was also found to be a catalyst in this problem, where larger firms took advantage of the fact that users were more likely to log on to a platform if it is widely used by a large group of people.

“A ‘seated platform’ continues to grow, also due to network effects. As the number of users on a platform grows, so does the utility for each user of that platform,” the report said. This essentially means that users found a drive to migrate to or be part of a digital community when it accumulates a large number of users, and how this is then used as leverage.

The report also mentions how leading players in the market can systematically and strategically exploit their position to cut off innovative start-ups, thereby eliminating the competition. “This creates entry-level barriers for an emerging firm,” it said.

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CCI has actively monitored Big Tech companies, and it has on several occasions recognized ways in which they may have played unfairly. The report also quoted CCI’s comments where it accused Google for unfair use and exploitation of the payment platform Google Pay.

“Google unfairly privileges “Google Pay” by prominent placement in the play store, android OS and Android-based smartphones distort the search results in the play store in favor of Google Pay; and by pre-installing and prominently placing Google Pay on Android smartphones at the time of initial setup, resulting in a “status quo bias” at the expense of other apps that facilitate payments through UPI as well as other payment methods such as e.g. mobile wallets, online banking, etc.,” the report explained.

“Exclusive Bindings”

The report added that not only major social media intermediaries, but several e-commerce platforms have engaged in “exclusive arrangements” with their peers, reducing the overall market share of others.

It read: “One of the most common anti-competitive practices on some e-commerce platforms is exclusive arrangements. An e-commerce platform may decide to enter into an agreement with a brand, to allow the sale of the brand’s products on its platform, completely exclusively. This not only hampers the business of other e-commerce platforms, but can also lead to losses for brick-and-mortar sellers.”

(Editing by Amrtansh Arora)

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