Combating Companies Acquiring Market Power Through Data

Ashutosh Chandra is a third-year student at Jindal Global Law School.

Introduction

Ever since the advent of the age of data, data has come to be viewed as a focal point in multiple markets, albeit in a non-traditional manner. Big Data, in this regard, is the analysis of large complex sets of data that enable making better and faster decisions. This analysis of data provides information that can be used to figure out the behaviour of the group or wants of an individual. Knowing such behaviour, organisations can cater to the group with regards to what exactly is needed, owing to the changing trends and fashions. Therefore, possessing greater quantities of big data provides an entity with an informational advantage over other organisations.

This article primarily ponders upon the disadvantage faced by corporates not having access to big data possessed by other firms in entering the competitive market. The other questions to be explored are whether it is fair for a firm with this advantage to gain the status of a monopoly in a market and dissuade other existing and potential competitors from entering the market. The article concludes that there is a compelling need for changes in the Indian competition laws owing to the possession of big data by some firms gaining monopolistic advantage over others.

Instances of Intersection of Big Data, Technology and Competition Law

India

In the Indian jurisdiction, the Competition Commission of India (“CCI”) had issued a report in January 2021, where it targeted the telecom sector and acknowledged the intersection of data privacy and competition law. The CCI had identified the use of data as a non-price competition mechanism and the implication that data could be collected from the customers of an enterprise and be used for competitive advantage by an enterprise against others.

In 2020, another report suggested that CCI had noted the implication of use of data by companies to compete on a determinant other than the price of a service or a good and create a system where one company comes across as dominant.

A third instance is the WhatsApp case where the CCI had stated in its Suo Moto Order that competition law would need to examine if excessive data collection could lead to anu-competitive implications.

European Union and the United Kingdom

European Commission had assessed that personal data can be recognized as a non-price competition factor in the merger control assessments in the Microsoft/LinkedIn merger.

Further, in the Apple/Shazam merger, the European Union Commission had stated that the Shazam app was not unique in nature after delving into the concepts of uniqueness of data and its quality for the assessment of anti-competitiveness. The case brought in new factors which could be used for the purpose of competition.

As for the United Kingdom, its anti-trust regulator had stated that data has potential to leverage data control in some markets for procuring enhanced market power in their relevant market through tying in arrangements or bundling. The interpretation of the same could lead to market power circling back to holding of data.

Why is the Intersection relevant?

By referring to the cases above, it can be determined that data has been recognised as a proxy for market power and further highlights that the collected data could have anti-competitive implications.

When the law does not account for technology and changing circumstances, more novel questions and issues pertaining to the intersection arise. If the parameters do stay aloof off the changing market scenario and technological realities we would be ignoring a component that could potentially have great relevance in ensuring a competitive market. Given the same, it would be interesting to analyse if the current law is competent in dealing with the issue of power through the data.

Section 4 of the Indian Competition Act, 2002 and Monopolisation Offence

Circling to the Indian jurisdiction, it is noted that the law today does not have anything akin to a monopolisation effect. What it means is that the law in India does not try to penalise an enterprise if its market power increases to the point that there is no competition left in the market, and this market power is obtained by improper means. Compared with the Sherman Act that, there is a vast difference where the western law does not allow for corporates to attain the position without suspicion and leaves a lot of activities for the consideration of the court. Instead, the Competition Act of 2002 provides for the provision of ‘abuse of dominant position’ in its Section 4.

Section 4(2) lists the specific types of conduct undertaken by an enterprise for it to abuse its dominant position. This position of law would investigate dominant entities in the market and penalise them if the judges deem that their activity falls under any of the mentioned sub-sections. However, this also means that entities that are not dominant but indulge in such behaviour escape the brunt of the Section. Further, the provisions have never been equated with misuse of data, either by legislation or by a judge.

Is there a need for monopolisation offences in India?

Attempting to answer the question at hand, monopolization in the country would leave judges with powers of broader consideration, and not limit them. Taking the current scenario, in case a judge is of the opinion that depriving other entities of data, while attaining the status of a monopoly and not after it falls under the purview of Competition law, the judge would have no legislation to support it. However, from the point of view of monopolisation offence, the judge has the power and leeway to declare the act anti-competitive if they deem so. In a developing field of law and changing times wherein new market factors are founded, the provision of monopolisation offence might help to give a more legally sound judgement.

Analysis of Big Data with respect to Section 4 of the Indian Competition Act

This paper argues that there can be instances where Big Data can be used by enterprises in a manner which may seem legal from the standpoint of a jurisdiction but hampers competition in market through advantage in big data and increases its own profits. An example of this is Asian Paints.

Asian Paints has created a network through 50 years of proprietary data on paint demand for each neighbourhood in India, which has lead it accrue market share of 56.33%. Through this data, they have gained the ability to forecast, and its network of distribution has collectively given Asian Paints a working capital cycle of 8 days with 98% accuracy. This is matched by no other entity in the paint sector.

However, the competitors of the company may not have such data available to them. Even if they do indulge in collection of data, historic data would not still be available to them. Conclusively, the data available to competitors is much less in volume and the disparity in data available to the corporates is not going to decrease as time passes by. Therefore, Asian Paints has created barriers to entry in the relevant market through its model of supply and data collection. And since data has been attributed to market power in the paper earlier, Asian Paints has an advantage in terms of means to obtain market power and this gap between enterprises is not going to bridge.

In its business model, the company is not indulging in acts falling under Section 4 directly. Therefore, the section is not triggered.

However, this is not to state that there are no other factors which provide Asian Paints with a competitive edge, and it is only that data acquired that is the discriminant in the case. Even if there are, big data plays a huge factor in providing points of analysis. And what this eventually results in is concentration of power in the hands of a few players in a market, particularly those who have the means to acquire such data.

In multiple markets, there are other companies which may follow a similar business model or may adopt a model where the presence of data provides them with market power. In such cases, if new entrants attempt to enter a market where a data-driven giant has already taken place, it would never be able to match the individual needs of consumers or the general needs just because it would never possess the data for the same. An established Indian enterprise would not be bound to share any non-sensitive data anyway.

Further, the problem of entities who are in the process of acquiring a dominant position or still have not acquired a dominant position remain. This would mean that another entity might arise in another industry, collect data, and then build a model based on the same. There would be nothing to stop the entity to follow the model and then become dominant based on the market power of data. Unless, of course, other entities in the market have more data. Then, the stated entity would never be able to achieve dominance, and the market power is only shifted in the hands of the few players.

The contemporary Indian law is not combating this to any effect. If there is no dominance, practically the authorities won’t even mind these companies using such a method. Even if there is dominance, there is no structure in place to combat market power reflected in the hands of a select few.

Conclusion

It is high time that Competition law in India evolves to tackle the problem of monopolisation through data collection and step in to prevent the process of monopolisation before the stage of dominance. These instances and developments at their core are inextricably linked to entities in markets and their competitors in the stated relevant markets. The core problem is that this model of domination through data leads to power left to only a few entities in the market, particularly those who have data.

The Competition Act, 2002 was brought in to prevent practices that have adverse effect on the competition among other things. If entities in the market can get away with their possibly problematic conduct, then the purpose of competition law will not be fulfilled. For ensuring the same, Competition law in India must keep up with all developments of data-based market power.