Big data is a concept which comprises large volumes of data with high velocity and it is processed by the computing software in order to produce unique data sets which will have a large commercial value. Pertinently, the data related issues fall under the ambit of data protection laws, but with the rise of technology and digitalization, the issue has been examined by various antitrust regulators across the world to determine whether ‘big data’ can hamper competition in the market.
It is imperative to understand how Big Data can be commercially exploited. A frequently used search engine has algorithms which analyse and record the search terms entered by the user. Then a detailed user’s profile is created which also contains collections of data from applications such as data-processing services and email. These user’s profiles which contain unique and individual information are sold to retailers and online advertisers for target advertising. The e-commerce platforms by using such data are able to get information about the user’s search history and preferences.
In the month of April, social media giant Facebook invested over 40,000 crores, for a 9.9% stake in Jio Platforms, a unit of Reliance Industries. The transaction brewed up the concerns for the possible abuse of data at the hand of these behemoths. The transaction stirred up the debate upon the lack of authority of the Competition Commission of India (“CCI”) in tackling big data-driven mergers. The article aims at addressing the inefficiencies in the current Competition act, by first defining what big data is, and how can big data give a competitive edge, following up with a discussion on the lacunas in the current merger standards. The last part of the article will lay out the different ways in which the current regulatory standards can be improved so as to cover big data-driven mergers.
Big Data And Its Competitive Advantage
Big data is generally defined as ‘high-volume, high-velocity and high-variety information assets that determine cost-effective, innovative forms of information processing for enhanced insight and decision-making
The potential misuse of data arises from such algorithmic use of datasets which the competitors in the market would not be able to duplicate. This leads to exclusivity of data, which is used to specifically target customers, who are more likely to use the company’s product/services. A perfect example of the possible abuse of the data obtained post-merger is the Google-Double Click merger.
Regulatory Gaps Regarding Data-Driven Mergers
Section 5 and 6 of the Competition Act 2002 (“the Act”) read together, are the regulating provisions of combinations in the market. While Section 5 of the Act defines combinations, Section 6 of the Act provides for regulations of such combinations. However, Section 6 is applicable only to combinations in Section 5 of the Act, which means that CCI does not have the regulatory powers to review all kinds of combinations. Section 5 prescribes certain thresholds in terms of assets and turnovers to term certain mergers and acquisitions as combinations.
The primary disability comes to light when data-driven mergers are on the rise in India. This is because big data is not considered as an asset in India, and digital companies tend not to have high turnover due to the provision of free services thus the scrutiny by the regulator is bypassed. The turnover based exemption is also a threat to privacy. The acquisition of WhatsApp by Facebook is a good example wherein despite having a worldwide customer base, the acquisition eluded the CCI, while the acquisition met jurisdictional requirements in other countries and was reviewed The traditional tools of analysis while have worked out so far but the digital economy is dynamic and a company with a huge data backing can effectively prevent the entry of new entrants in the market.
Considering Data As An Asset
Big Data in the present markets is undeniably an asset and one of the main reasons of investments, mergers, and acquisitions. The future lies in data valuation programmes that can be performed which provide the framework for businesses to monetize, measure and manage information as an actual asset or through the application of info omics
Introduction Of Alternate Parameters
The idea of novel parameters such as the value of transaction or deal size, which is also under consideration by CCI the same was a key observation in the report of the Competition Law Review Committee. Additionally, network effects and control over consumers’ data prima facie appear to be sensible parameters the concept of big data also involves deliberations over privacy concerns, and what the authors view as a whole other debate. Competition concerns are related to privacy, but at the same time, the regulation of both cannot be a concern for a single body. Privacy in the competitive assessment muddles the goal of competition enforcement
Adopting Foreign Competition Regulations To Tackle The Big Data-Driven Mergers
The issue of tackling big data-driven mergers has plagued numerous countries and in response, there have been certain regulatory changes made by some countries. This section discusses the new regulatory norms for curbing big data-driven mergers adopted/proposed in different countries, which can be used to change the current regulatory standards in India
Redefining The Relevant Market Or Lowering The Notification Threshold
The German federal cartel office, the national completion regulator of Germany, in taking a step towards combating the data-driven mergers redefined the meaning of relevant market under section 18(2a) of the German Competition Act. The new provision tackles the free services offered by the digital platforms wherein it states that “the assumption of a market shall not be invalidated by the fact that a good or service is provided free of charge The competition regulator also added a new lower threshold for notification of merger under section 35(1)(a) of the Act. This resulted in the competition regulator being notified about the takeover of small companies by large platforms.
Shifting The Burden Of Notifying The Competition Regulator On The Parties
The competition act of Singapore under Section 55A (3), places the burden of notifying the competition regulator of a merger on the parties. The parties are to assess whether their merger has the potential of disrupting the competition in the future, and on the basis of this, they may or may not notify the competition regulator. If the parties do not notify the competition regulator of their merger, and subsequently the merger hampers the competition, then the competition regulator has the authority to take the appropriate action in order to restore market contestability. The provision invalidated the Grab-Uber merger, wherein the merged entity had the potential of controlling 90% app-based taxi market.
Applying The Public Interest Test
A report by the House of Lords communications select committee in 2019, recommended the adoption of a public interest test for determining the validity of the data-driven mergers. The committee suggested that such a test should be included in the current competition regime as it will give the competition regulators a wide range of powers in tackling the data-driven mergers.
Doing Away With The Turnover Based Threshold For Small Firms
The European parliament in 2015 suggested that applying the turnover based threshold on small companies possessing huge datasets would be imprudent. It noted that “Given the importance of scale economies and network effects, a better metric would be the number of users together with an estimation of the size of the network effects
In India, there is development taking place in the technology-driven markets such as e-commerce, cab-aggregators, digital wallets etc. Furthermore, these technology-driven markets are also involved in Merger and Acquisitions activity which can be a competitive concern since there will be sufficient holding of big data. Therefore, it is important for the Competition Commission of India (CCI) to carry out a study or give a decision which can act as the precedent for such technology-driven markets.
With respect to privacy concerns, the European Commission in the catena of cases has considered privacy concerns as a relevant parameter for the competition assessment. However, CCI in the case of Vinod Kumar Gupta v. WhatsApp Inc. stated that any breach pertaining to Information Technology Act, 2000 will not fall under the ambit of Competition law, 2002. Nonetheless, the competition regime is continuously evolving in India and it would be interesting to see the extent of CCI taking clues from European Commission for dealing in matters of Big data.
The Competition Commission of India (CCI) imposed a fine of 258 crores on Jet Airways, Indigo and SpiceJet after they found that they are doing tacit collusion and cartel-like behaviour in overcharging the cargo freight rates in the grab of fuel surcharge. According to the findings of CCI these leading airlines had fixed fuel surcharges at a uniform rate by using algorithms on the very same day and they increased the surcharges at the time without any analogous rise in the fuel prices. Such an act by the airlines was found to be anti-competitive as it resulted in indirectly determining the rates of air cargo transport which is in contravention of Section 3 of the Competition Act, 2002.
Data And Dominant Position
In the case of Ashish Ahuja v. Snapdeal and others (Case No 17 of 2014), the CCI in context of marketplaces and e-commerce businesses stated that the buyer tends to consider the discounts and shopping experience in both the online and offline markets before making the final decision of purchasing the product. An increase in price in one segment can make the buyer shift towards the other segment. Therefore, CCI held that offline and online markets are not two different relevant markets since they are only different in their channels of distribution.
And the same has been stated in the cases such as In Re: Confederation of Real Estates Brokers Association of India (2016); In Re: Jasper Infotech Private limited (Snapdeal case) (2014); and In Re: Deepak Verma (2016) that “e-commerce platforms have an alternate distribution channel and they are not a separate relevant market.” In the light of aforesaid decisions, CCI has held that since these platforms are not in a dominant position in the relevant market, therefore they are not abusing its dominant position which is in contravention to Section 4 of the Competition Act, 2002.
However, in the aforementioned rulings of CCI, it is not considering that the e-commerce platforms have access to “big data” which gives them a competitive edge in the market. Pertinently, the offline platforms can suffer in the given relevant market since they do not have access to such data.
In Re: Samir Agrawal (2018) wherein Uber India was an opposite party, CCI dealt with the circumstances pertaining to the cab aggregators model. The CCI acknowledged the fact that estimation of fare is done by algorithm on the basis of large sets of big data. These sets of big data include the rider’s personal information, traffic situation, demand-supply situation etc. Therefore, algorithmically determined pricing for each rider is different considering these large data sets.
In Re: Matrimony.com Limited (2012) the CCI held that Google LLC is abusing its dominant position in “online general search advertising market in India”. It was stated that Google was in a position wherein it can control the algorithm which was pivotal for generating the search results. Thus, such an algorithm was capable of intervening in the automated process and affecting the ranking and relevance of the results.
This resulted in search bias wherein equally efficient websites search service providers were not able to acquire large amounts of business-like Google, and this eventually led to foreclosure in the market.
Mergers & Acquisitions
As per Section 5 of the Competition Act, 2002 if at all the parties to the combination want to consummate with the transaction for a combination (i.e. merger/acquisition/amalgamation), they need prior approval from the CCI. In order to determine the validity of the combination, CCI takes into consideration the values of assets and turnover. However, per the De Minimis exemption when the assets and turnover of an organization are less than 350 Crores and 1000 crores respectively, then prior approval of CCI is not required.
When an enterprise possesses ‘Big data’ it has a potential to cause adverse effects in the market. Pertinently, when Facebook acquired WhatsApp it affected about 1.7 billion users in the world, however, such a combination did not come under the scrutiny of CCI as the merger control thresholds as per Section 5 of the act was not met. This happened because the exemption only assesses the value pertaining to the value of assets and turnover and not the possession of ‘Big Data’ by the enterprise.
Section 3 of the Competition Act, 2002 prohibits agreements which tend to cause an appreciable adverse effect in the market. The e-commerce (hosts) platforms use algorithms on the basis of big data for promoting the sellers online. Section 3 of the act is premised on the agreement in any form; it can be contractual, non-contractual, oral etc. Generally, the contracts entered between such platforms are confidential and are inaccessible.
The terms of these contracts could be vague as it allows hosts to modify, delete, add any list of sellers or functionalities on the website. Moreover, it is the sole discretion of the sellers to determine the appearance, design, and content of the site. Therefore, it can be stated that such an agreement can be challenged by virtue of Section 3(4)-resale price maintenance or Section 3(1) of the Act independently.
Furthermore, Section 19(3) talks about the factors pertaining to the anti-competitive agreements such as the creation of barriers or foreclosure of the competition by hindering market entry. Evidently, a market can be foreclosed for the competitors if the parties to the agreement hold substantial market power. In the category of decisions by the various antitrust regulators worldwide, it has been stated that market power also contains “big data”. Thus, the assessment of these factors must be in accordance with the facts and circumstances of the case.
Moreover, in order to check the possibility of an appreciable adverse effect on the competition (AAEC), the CCI considers the existence of vertical agreements or horizontal agreements between the enterprises. However, enterprises which are not related horizontally and vertically and are in possession of ‘big data’ can give rise to anti-competitive practices by causing AAEC in the market.
The nexus between the preclusion of Big Data from the scope of ‘asset’ under Section 5, and Section 6 not only provides companies holding Big Data a means to dodge the notification requirement under the Competition Act, but also debilitates the Competition Commission of India from inspecting big data-driven mergers. With big data-driven mergers on a rise, it is high time that the nation’s competition regulations are revisited, and the competition regulator in the country is equipped to tackle big data-driven mergers. Data, consumer interest, and competition regulations form a trilateral which is conjunct and overlapping, and only a panoramic authority, which has the potential of clubbing all three areas can survive in the age of Big data.
What Is Big Data And Why Is It Relevant?
Big Data constitutes a large amount of related or unrelated data produced by multiple sources at high speeds. It requires great processing power and powerful algorithms to handle and analyse.
Who Should File The Notice With CCI?
Ans: In case of acquisitions, the acquirer is required to file the notice. In case of mergers or amalgamations, all the parties to the combination are required to jointly file the notice. (See Regulations 9(1), 9(2) and 9(3) of the Combination Regulations)
Does CCI Grant Confidentiality Over Information That I Have Submitted In A Notice?
Ans: In line with best practices, CCI treats all documents as confidential in terms of and subject to the provisions of Section 57 of the Act. In this regard, the notifying parties are required to submit a request for confidential treatment to the information filed by them. Such request can only be made if making public of such information or parts thereof will result in disclosure of trade secrets or destruction or appreciable diminution of the commercial value of any information or can be reasonably expected to cause serious injury.
Is There Any Fee To Be Paid Along With The Notice?
Ans: At present, the filing fee for notice filed in Form I is Rs 15,00,000 and that for notice filed in Form II is Rs 50,00,000