INTRODUCTION
In this new age, the market environment is being facilitated by a digital economy, with constant changes in the consumer-business relationship. A vital feature of a digital economy is that, businesses build their entire models based on the exchange of information between consumers and business firms being at the centre. This flow of information primarily consists of the personal data of the consumers.
Businesses can more successfully target goods and services using the analysis generated from the processing of personal data. They are no longer reliant on the organic demand and supply chain; instead, they now generate demand by observing customer behaviour and their purchasing habits.
This process creates two challenges in the market predominantly: firstly, the privacy rights of a consumer are under threat, secondly, a vast gap is created between the businesses that can conduct this process and those that cannot.
Because the fundamental purposes of antitrust law are freedom of competition, economic efficiency, and consumer and competitor protection, consumer data regulation in the digital economy becomes an issue that falls under antitrust legislation.
REGULATING PERSONAL INFORMATION
At the present, India has no specific codified legislation to regulate the personal data of the citizens. However, in the recent past, the Judiciary and the Government have been making constant efforts to safeguard the Right to Privacy of individuals.
In July 2020, the Ministry of Electronics and Information Technology(hereinafter referred to as “MEITY”), published a study on the governance framework for Non-Personal Data (hereinafter referred to as the “NPD Report”). The NPD Report stipulated the regulations pertaining to the processing of NPD and the risks associated with the same. Counter to the Competition Act, 2002 (hereinafter referred to as the “Competition Act”).
The NPD Report appears to per se characterise a dominant position as a breach of competition law and argues that the Competition Act could be used to safeguard competitors. It claims that “businesses with the greatest data pools have outsized, unassailable techno-economic advantages” and that “many new entrants and start-ups have been crushed,” implying that this advantage is problematic.
To formulate the Personal Data Protection Bill, 2019 (hereinafter referred to as the “PDP Bill”), an expert committee led by Justice B.N Srikrishna was established. The PDP Bill governs the collection, disclosure, sharing, and other processing of personal data in India and the processing of personal data by the Government and the corporate entities.
The PDP Bill also applies to the processing of personal data by companies headquartered outside India if the personal data is handled in connection with any business or activity that involves supplying goods or services to individuals in India or data profiling within India.
CONSUMER AND PRIVACY DATA AS AN ENTRY BARRIER: BIG-DATA ADVANTAGE
The theory of collecting user data in exchange for goods and services is not uncommon. The practice of Internet forums gathering personal data is not inherently unethical and it does not jeopardise consumer welfare.
Furthermore, when businesses use the data to design business strategies and foster healthy and active public relations, it is not considered as an anti-competitive activity. However, when these businesses rely on collecting a generous quantity of unstructured data to use data mining and big-data analytics to recognise consumer behaviour and preferences with the sole objective of customising their products and services to the consumer’s needs, it becomes anti-competitive.
The primary reason for classifying this behaviour as anti-competitive is that firms with access to such technologies shall be efficient in shifting towards a more conducive consumer environment. In comparison, a firm with lesser accessibility to technology shall fall short of consumer requirements, pushing those consumers to more prominent, tech-friendly firms.
In Federation of Hotel & Restaurant Associations of India (FHRAI) & Anr. v. MakeMyTrip India Pvt. Ltd. (MMT) & Anr., [2021 SCC OnLine CCI 12], the Competition Commission of India (hereinafter referred to as the “CCI”) issued an interim order under Section 33 of the Competition Act, noting that “If the alleged conduct is not based on the merits, eliminating such anti-competitive behaviour as soon as possible becomes critical in winner-take-all platform markets. Network impacts, combined with even minor platform activities, may exclude and marginalise competitors, which shall multiply the effects that may be difficult to address later.”
Thus, new technologies have welcomed brighter and more efficient market dynamics for large, data-rich businesses.
NON-PRICE CHARACTERISTICS OF PRIVACY CONCERNING ANTITRUST
The premise that several platforms provided “free” services could not hurt consumers complicated antitrust litigation was argued in the case of United States v. Microsoft Corporation, 253 F.3d 34 (D.C. Cir. 2001), In the said case it was observed that consumers could not face damages because they were receiving “free” services and goods in the form of Microsoft’s Internet Explorer web browser.
The CCI reinforces this theory of harm in the WhatsApp Suo Moto Order, stating that “WhatsApp’s data-sharing with Facebook degrades non-price competition parameters. This conduct prima facie equates to the implication of unfair terms and conditions for WhatsApp users.” Facebook was also considered a party in the investigation as a direct beneficiary of this privacy policy.
The veracity of the claim that “free” ensures no consumer harm is disputed when the integrity of this claim was checked in relation to FAANG (Facebook, Amazon, Apple, Netflix, Google); the service or good may be prima-facie “free”, however, the exchange of personal data ensures that not only that the cost incurred to provide a “free” product is covered in its entirety, but it offers a long-term benefit for the firm.
Overall, regulators and scholars agree that privacy could be susceptible to competition due to quality, choice, or innovation and a merger could lower the incentives to compete based on these factors.
PRIVACY BREACH AS AN ENABLING FACTOR PRICE DISCRIMINATION
The ability to engage in consumer price discrimination relies heavily on the data available concerning consumers to determine where the consumer falls on the demand curve. Price discrimination is widespread, even though present antitrust enforcement does not focus on it.
When merchants do not charge multiple prices for virtually the same commodity or service like airline tickets, university tuition, and new cars, to name a few., they employ other tactics to effectively charge different prices to customers with varied willingness to pay.
The prevalence of price discrimination shows that it benefits sellers privately at the very least. Price discrimination has uncertain welfare implications. Because of the prospect of competitive retaliation, a seller’s capacity to price discriminate sustainably usually indicates that the firm already has market power; price discrimination enables it to profit more from that power than it already has.
The CCI, in the Telecom Report, 2021 provides the following examples of abusive behaviour: (a) a low privacy standard reflecting a lack of consumer welfare; (b) lesser data protection, which might imply exclusionary behaviour; and (c) exploiting a data advantage across many services.
SUGGESTIONS AND WAY FORWARD
Whilst, CCI Telecom Report, 2021 recognises data as a metric for non-price competition, privacy may be primarily a consumer protection issue compared to competition law, which is intended to develop and sustain competition rather than safeguard market players.
The CCI’s assessment of these problems may be early, considering that the required boundaries or standards for data protection and utilisation have yet to be established and are currently under appeal before higher courts. The CCI could be more permissive with preliminary hearings; this would help the CCI understand the underlying technology and business models while also maximising the use of the CCI’s investigative capabilities.
There is an urgent need for clear and comprehensive data protection laws to be implemented at the earliest. If such a law establishes a data gathering threshold, the CCI could analyse market power in digital markets in accordance.
AMLEGALS REMARKS
Privacy and markets share a cause-and-effect relationship. The trends in the market, competition between entities, and their practices directly or indirectly thrive on collecting large quantities of data from casual customers. Certain corporations and big-tech firms have an advantage over smaller players. Thus, they can exploit their system to use the mass data privacy breaches for their profits and elimination of market competition.
This erasure of competition can only occur when data is collected and used to unfairly eject smaller companies from the market. This is done by analysing trends faster and better than other smaller and underfunded corporations, affecting prices based on excess information. This is also true for both price-based and non-price-based privacy concerns.
It is thus a well-established fact that big data and its monopolisation leads to anti-competitive practices. In their various observations, the Courts have opined that these practices are used to marginalise smaller companies. Therefore, the constantly inflating behemoth of data pool amongst the most influential companies requires immediate and stricter regulation. A direct consequence of the same would be a more accessible, fairer, more conducive and nourishing market for diverse players.
-Team AMLEGALS, assisted by Ms. Priyanshi Jain (Intern)
For any queries or feedback, please feel free to connect with aditi.tiwari@amlegals.com or mridusha.guha@amlegals.com
Leave a Reply