Tech firms facing antitrust issues

ECONOMY

TOPIC: General Studies 3:

• Awareness in the fields of IT
• Challenges to internal security through communication networks, role of media and social networking sites in internal security challenges, basics of cyber security

Tech firms facing antitrust issues

Context:

Google and Amazon are under Scrutiny for their influence on consumer privacy, labor conditions, public discourse and violation of antitrust law

Background

Silicon Valley giants – Facebook, Google, Amazon and Apple – are new age Tech companies which through their data business model have gained tremendous market power and now wield tremendous influence on socio-economic-political aspects of people.

This has led regulators across the world to frame guidelines/policies so as to curb their market monopoly power.

What are the primary sources of tension between these companies and Governments?

There are two sources of tension relating to these four tech firms that have caused alarm across the United States, Europe and elsewhere: 

• First, that they may have engaged in anti-competitive behaviour over many years thus undercutting smaller potential rivals and holding onto an outsized market share; 
• Second, that as a result of this metastatic growth, they now have a vast influence on politics, policy and personal reputations across the spectrum, making cost of data privacy breaches by these firms catastrophic. 

Concerns of each platform

Amazon: It is an online sales platform has disrupted the traditional business of retail sellers and small business. Allegations that Amazon favours its own self-branded products over those of third-party sellers through manipulation of search results.

Apple:  Its App Store policies, specifically regarding how Apple ranks search results on that platform, is questioned as it has lead exclusion of certain competing apps from the Store (Ex. Spotify). Questions have also been raised on how Apple determines the share of revenue it takes from in-app purchases

Facebook: Regulators have focused their attention on Facebook’s acquisitive streak in capital markets, for example, the U.S. Federal Trade Commission (FTC) enquiry into whether Facebook defensively purchased certain companies to maintain its dominant market position in the social networking ecosystem.

Google: This company handles more than 90% of online searches across the world. In recent years concern has grown over the fact that Google has increasingly been sending users to its own sites to answer their queries, including products such as Google Flights and Google Maps. Thus there are allegations of abuse of its dominance in internet search, advertising and its mobile system, to the detriment of rival content producers. The European Union has already fined Google $5.1 billion in 2018.

What steps has US authorities taken against these tech giants?

• The House of Representative’s Antitrust Subcommittee announced a bipartisan investigation into competition and “abusive conduct” in the tech sector.
• It also made an enormous information demand to all four tech giants, requesting 10 years’ worth of detailed records relating to competition, acquisitions, and other matters relevant to the investigation.
• Attorneys-General across 50 U.S. states and territories announced a joint antitrust probe into Google and Facebook

What is the Political Scenario in USA with regard to these investigations?

• U.S. President Donald Trump could hardly be considered a tech ally as he warned in August 2018 that tech companies could be in a “very antitrust situation.”
• In March 2019 U.S. Senator and Democrat Elizabeth Warren announced as part of her 2020 presidential campaign, a plan to break up Amazon, Facebook, and Google.

What are anti-trust laws?

• Antitrust laws also referred to as competition laws developed to protect consumers from predatory business practices. They ensure that fair competition exists in an open-market economy. 
• These laws have evolved along with the market, vigilantly guarding against would-be monopolies and disruptions to the productive ebb and flow of competition.

India’s Anti-Trust Regulation Framework

• The Competition Act, 2002 is India’s antitrust law. It replaced the Monopolistic and Restrictive Trade Practices Act of 1969.
• The Act prohibits: anti-competitive agreements; abuse of dominant position by enterprises; and regulates combinations (Mergers and Acquisition), which causes or likely to cause an appreciable adverse effect on competition within India.
• From the provisions under the Competition Act, 2002, the central government has established Competition Commission of India in 2003 which acts as a watchdog of free market economy.
• In 2018, The Competition Commission of India (CCI) has also imposed Rs.136 crore fine on Google for unfair business practices and for infringing antitrust conduct in India.

Way Forward:

• India should closely follow the proceedings of these cases in USA and learn the necessary jurisprudence and regulatory framework to be imbibed within Indian anti-trust governance structure
• Justice B.N.Srikrishna Committee report on data protection should be implemented in letter and spirit so as to deal effectively with new age data-centred tech giants.
• In the light of Supreme Court’s verdict on privacy in K.Puttaswamy case, India should come out comprehensive guidelines on data usage so as to balance the need of digital innovation and individual’s right to privacy.

Connecting the dots:

• Should India also launch Joint Parliamentary committee to investigate whether these tech giants are indulging in anti-competitive trade practices in India?
• If these tech giants are broken up, would it impact the digital revolution which is witnessed around the globe and also in India?