Nidhi Singh & Anku Sharma. The authors are lawyers working with the Competition Commission of India, Government of India, New Delhi. Views are personal to the authors.
Even at the dawn of the 21st century, nobody could have imagined the way digital entities like Google would be impacting our lives today. For the most basic of our needs, like directions for travel, news updates, food recipes, ticket bookings, exam studying, etc, the Internet works like sophisticated eyes, ears, and voice, coupled with an unimaginable memory, to produce the desired results. For most of its inhabitants, Google home page is unarguably the door to the digital world.
Google’s subtle presence in our lives, and its rapidly growing market power, have been met with regulators’ concerns around the world. The Competition Commission of India (the Commission) recently imposed a penalty of approximately $21.13 million to the web giant for abusing its dominant position in the markets related to online general search services and online advertising services in India.
The order by the Commission impeaches Google’s activities while acting as a “platform” for connecting internet users with content providers/advertisers and thereby engaging in search bias. Different from the “one-sided” markets, which involve direct communication between buyers and sellers, “two-sided “platforms” bring together multiple user-communities that want to interact with each other”, notes Jean Tirole, the Nobel Laureate. Examining Google as a “platform”, the Commission was able to dispel the contention that Google’s services are provided to internet users for “free”. It held that “Internet users form consideration by providing their attention or “eyeballs” to the search result pages”. Interestingly, this is the first time the Commission has so elaborately taken into account the two-sided nature of a digital platform, unlike earlier cases involving entities like Amazon, Uber, etc, where this analysis was missing. The only time the Commission acknowledged the peculiarities of a platform in its analysis was in the case against Ola Cabs in 2017, where it again fell short of a detailed discussion. This shift in the Commission’s approach is going to have far reaching consequences for regulating entities operating in the cyberspace, as it has opened the debate of algorithmic pricing and virtual competition in India.
Search Bias & Special Responsibility
The Commission found Google to be engaging in “search bias” due to the specialised results designs, i.e. by Google’s preferential treatment of its own sites over its competitors. As Google search results run on algorithms designed by the technology company itself, this process is most likely to be biased favouring its own websites. Indeed, Google has the flexibility to intervene with self-learning algorithms and distort the ranking displayed on the SERP (Search Engine Results Page) to its advantage.
This raises two possible antitrust violations. Firstly, Google favours its own products and services when displaying results on SERP. Being a dominant entity, Google’s SERP ranking may be justified. However, this should not lead to discrimination against its competitors. Online platforms should promote greater transparency and solve the problem of asymmetric information, where both buyers and sellers are equally informed. As also suggested by the Commission, the solution to this issue is that Google could, at regular intervals, disseminate information about the algorithmic changes in such a manner that it does not compromise its competitiveness, yet still maintain transparency. Secondly, based on the user’s search history, Google has access to a huge amount of personal data (“Big Data”), which it can use for targeted advertising and behavioural discrimination amongst its consumers and competitors. This further exacerbates the situation where Google leverages its Big Data power to harvest profits in its vertical market (Youtube, Google News, Google Maps, etc) to the disadvantage of other competitors. Basically, through its free online search service it has access to a huge amount of consumers’ information that can be used for marketing purposes.
For these reasons, and following the analogous European Commission’s stand on the issue, the Indian regulator has declared expressly Google’s “special responsibility” towards both the market and its competitors. This means that, by virtue of being in a dominant position, Google has the duty to ensure that a system of undistorted competition is guaranteed through equality of opportunity, not just in online web search and advertising markets, but in all online markets, as they are all being accessed through search engines.
Smart Regulation: Way Forward
Digital interfaces/platforms on which buyers and sellers interact promise increased transparency, wider range of choices, swift delivery, and reductions in unwanted transaction costs for consumers, making the online mode of doing business appear more attractive for competition. Powered by technological innovation and efficiency, these platforms have the potential to weed out inefficient market players. Should Governments thus adopt a non-interventionist approach for allowing increased competition on such platform markets?
This does not seem to be possible. The Google case has brought into light the limits of the potential competitiveness of online platforms/markets. This is due to the presence of complex algorithms used by firms with the objective to maximize their profits. Analogously, and contrastingly, to the “invisible hand”, which for Adam Smith should have governed economic markets, the “digitised hand” requires some regulatory intervention. However, with the evolution of domains like Big Data and analytics, self-learning algorithms, and artificial intelligence, regulatory enforcement has become a complex issue. Consumers get high-quality, customised products at low prices but at the cost of compromising their personal data. In this scenario, there is the need to shift towards “smart regulation” in a data-driven market, which understands the dynamics of “digitised hands”.
Smart regulation focuses on closing the policy gap by investing more in policy simplification and evaluation, thereby focusing on delivering good-quality proposals. For example, in 2011, to solve the problem of parking in San Francisco, the government intervened by installing smart parking meters that continually adjust pricing according to peak demand. As illustrated by Ariel Ezrachi in his book on Virtual Competition, the city installed wireless parking sensors on 8,200 on-street meter spaces which detected parking availability slots in real time. Similarly, the Indian government could intervene by determining a competitive price, through collecting and analysing related Big Data. It could then apply similar smart regulation techniques in various sectors of the economy.
Another example is that of the Uber cab pricing which is usually determined by the surge and base price in each market. If Uber can collect data, using the same to determine prices, governments should be able to do the same, and use pricing algorithms to set a competitive price wherein the consumers will have more trust in the fairness of the price they are paying for services consumed. This will help competition agencies develop a “theory of harm” in order to find possible violations, while prosecuting individuals/firms engaging in advanced and complex collusive behaviour, involving the difficult issue of human accountability of a computer’s behaviour.
Overall, the take-home lesson from the Google case seems to be that the digital market regulators should aim at building a holistic framework (including competition law, or sui generis regulation for digital markets, or both) that prevents enterprises like Google from attaining a “God’s-view” of the market, promotes healthy virtual competition, advances consumer welfare, safeguards privacy, well-being and, ultimately, democracy.
Jean-Charles Rochet and Jean Tirole, ‘Platform Competition in Two-sided Markets’, (2003) European Economic Association, <http://www.rchss.sinica.edu.tw/cibs/pdf/RochetTirole3.pdf>, accessed on 20 April 2018
In Re: Matrimony.com Limited v Google LLC, Google India Private Limited, Google Ireland Limited, Case No.s 07 and 30 of 2012, Competition Commission of India, passed on 08.02.2018, <http://www.cci.gov.in/sites/default/files/07%20%26%20%2030%20of%202012.pdf>, accessed on 20 April 2018
In Re: Mohit Manglani v M/S Flipkart India Private Limited, Amazon Seller Services Private Limited, Case No. 80 of 2014, passed on 23 April 2015, <http://www.cci.gov.in/sites/default/files/802014.pdf>, accessed on 22 April 2018
In Re: Fast Track Call Cab Pvt Ltd, Meru Travel Solution v ANI Technologies Pvt Ltd, Case No.s 6 and 74 of 2015, passed on 19 July 2017, Competition Commission of India, <http://www.cci.gov.in/sites/default/files/6%20%26%2074%20of%202015.pdf>, accessed on 21 April 2018
Vilakshan Kumar Yadav & Ors v M/S ANI Technologies Private Limited, Case No. 21 of 2016, passed on 31 August 2018, <http://www.cci.gov.in/sites/default/files/212016.pdf>, accessed on 25 April 2018
The European Commission has expressly stated that dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets. See: European Commission, Press Release, ‘Antitrust: Commission fines Google €2.42 billion for abusing dominance as search engine by giving illegal advantage to own comparison shopping service’, 27 June 2017 <http://europa.eu/rapid/press-release_IP-17-1784_en.htm>, accessed on 23 April 2018.
Ariel Ezrachi and Maurice E Stucke, Virtual Competition: The Promise and Perils of the Algorithm Driven Economy, Harvard University Press, 2016