Introduction
In today’s Global World, there is no existence without connecting to data through various modes like, mobiles, e-commerce platforms, and farmer’s apps for agriculture products. From agriculture sector to artificial intelligence the present world is merged with technology-based products and services which have become seemingly fundamental for the survival of mankind and livelihood. It is in this context, time has come to see the development of market structures where no physical borders exist, like how it is in the virtual world. Digital markets and associated products would be a part of the present world economy where India must play vital role in the Global markets. Development of quality, innovation, and use of data are integral dimensions of competition which have far-reaching effects.
Technological evolution made all of us to be part of innovations of entrepreneurship. Today, every person in the Global hamlet would depend on technology, be it a farmer, pauper or a person having position in the highest stage in society and state. Electronic/digital markets have eliminated the physical borders of marketplace where the Global Market is linked to Technology based products for connectivity, and place for marketing.
The development of innovative marketplaces has paved way for creation of new anti-trust legislations around the world, including in India. Technological innovations on marketplaces like, internet, e-commerce, application based business, Algorithm’s market[1] and other types of markets have created an era of virtual antitrust law in Global markets. The progress and development of business strategies, models have lead for enactment of legislations and establishment of regulatory bodies to protect the interest of market participants be it the consumer, producer, buyer, or supplier in vertical and horizontal markets.
Anti-Trust law in India
In India, The Competition Act, 2002 came into existence with the object of economic development, promotion of free trade and protection of consumer interest. The legislation deals with the two types of relevant markets like, relevant product market and geographic market. However, today there is a dire need to discuss and define the limitation and scope of ‘Digital Platform Markets’ in the Indian scenario. It is submitted that the Consumer Protection (E-Commerce) Rules, 2020, Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (Repealed) would be relevant here. Even though the latter legislation was repealed later, it emphasized on providing a facilitative framework on electronic trading and promotion of business in electronic form.[2] Some of the online platform markets are, Amazon, Ola, Uber, Future Retail, Zoom, Cisco Webex, Tele medicines and others etc. To put it succinctly, the sectors from necessary products to luxury products are available in online platform where consumers and suppliers have the choice to trade.
It is the duty of state and regulatory bodies to promote trade for the development of economy. Therefore, it is clear that the development of economy of a country is rooted in the legislative framework of the state and also in policies of the state. The state needs to enact the legislations for promotion and protection of free trade in the light of state policies. Technological infrastructure is of paramount importance for the development of fair trade in Global markets. The role and importance of law making, executing and adjudicatory body’s active participation is necessary to achieve the goals of free market and protection of consumer interest. There is a need for relation of economics of law and policy in the areas which are unaddressed and require the attention of all stakeholders of the state.
UNCTAD on Digital Platform Markets
United National Commission on Trade and Development in its reports of 2019 and 2021 on Digital Economy analysed the study and impact of digital platform markets globally. Digital markets are contributing heavily to the world economy in terms of market share. These platforms are not new as they became a part of the daily lives of people. It is referred to as a business based on enabling value interaction among producers and users. Digital platforms have created digital assets and infrastructures which need to be regulated by the various laws both domestic and international.
According to UNCTAD Report – 2019 digital platforms are digital assets and infrastructures that enable two or more groups to interact. Therefore, they position themselves as intermediaries that bring together different users like customers, service providers, advertisers, suppliers, producers, and even physical objects. ‘The types and products on digital platforms are several, to name few are:
Advertising platforms (Facebook or Google);
Cloud platforms (Amazon Cloud Services, salesforce);
Industrial platforms (Siemens, General Electric;)
Product platforms (Spotify, Rolls Royce);
Lean platforms (Airbnb, Uber, TaskRabbit);
Labor platforms (Uber, TaskRabbit);
Capital platforms (eBay, Airbnb);
Transaction platforms (Netflix, Tencent);
Innovation platforms (Microsoft, Salesforce);
Integrated platforms (Apple, Google, Facebook);
Investment platforms (Naspers, Softbank), and so on.
The Platforms markets have been derived from different perspectives, depending their geographic functionalities, and levels of openness. Transaction platforms are also associated with transformations in the digital economy that have become a core business model for major digital corporations namely, Alibaba, Facebook, Amazon, paytm, etc. Innovation platforms are also sometimes referred to as engineering or technology platforms.
Legal Regulation of Digital Markets/Platforms
Digital Markets are those markets where transactions related to goods and services, like buying or selling of the same happens through online mode, by using internet apps, or through computer applications, mobile and other devices. The goods and services are accessible through a platform other than the traditional physical market. These markets have their presence in domestic as well as international markets. Importance of platforms in digital markets has been well studied in other jurisdictions as compared to India.
Reference can be made from Section 2(1)(w) Information Technology Act 2000 wherein it is included in the definition of Intermediary that it covers telecom providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes. It is very clear from the definition that online marketplaces and auction sites form a part of digital platform and markets. These markets provide access to consumers for their need and play a vital role in the digital Economy of the State.
Besides, Consumer E-Commerce Rules 2020 deals and applies to:
All goods and services bought or sold over digital or electronic network including digital products;
All types of e-commerce;
Retail e-commerce;
To prevent all forms of unfair trade practices across all types of e-commerce.
These regulations prevent, restrict, and regulate the unfair trade practices in digital platform markets. However, the ecosystem to regulate the same has not developed as expected or as to the speed of digital platforms.
Digital revolution has led to a substantial growth in the corporation’s ability to acquire market share, store and analyze data of their customers and competitors to fix price on products and services by considering market factors. With the help of such algorithmic pricing systems, corporations can track online prices and adjust them instantly in order to:
To undercut prices offered by competitors;
Modify products being offered to consumers;
Assist consumers to find the lowest price.
An algorithm enables electronic decision-making through converting digital inputs into digital outputs. Algorithms carry a potential of self-learning, amending rules depending on data gathered from past interactions/experiences.
Section 3 of Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 deals with due diligence of intermediary and their duties. The rules provide the grievance mechanism also. However, the complete ecosystem for the same is yet to be established.
Need for Digital Platform Market Regulation
The swift growing of inter-dependencies and interconnected character of international architecture of internet has given rise to the dependence for development and dependence on internet. Access to technology is of prime concern as there are huge challenges before the state, such as, poverty, health, hunger, global warming. Global connectivity through data is the need of the hour in the light of the 5G implementation and information technology tool. The use and dependence on digital world has given rise to a Digital Economy and Digital Products in the world and more importantly, in sectors like, education, health, banking and consumers in particular.
As we have seen during the COVID-19 pandemic the use and necessity of digital platforms for basic health benefits and raising of digital money, assets through mobile based application was prevalent. Every person uses digital devices for their daily needs including receiving benefits from social welfare schemes from state and for agricultural to health and education for children.
It submitted that there is a need for uniform law instead of piece of rules, regulations in various statues to regulate, prevent and establish an eco-system for Digital platforms and markets for user welfare and benefit of the law.
This was said in a recent address by the Chairman of CCI, “it is said that Competition Commission of India will set up a digital market unit to better understand and assess the conduct of e-commerce platforms and other digital economy firms so that any anti-competitive behaviour of new age businesses do not go undetected by the regulatory framework.” He further emphasised that “In view of the increasing number of cases and complexity in the digital sector and the increasing need for data and technology skills, we are now planning to set up a dedicated digital markets unit within CCI as a centre of expertise for digital markets.”
Concluding Remarks
It is submitted that Online Market Places are considered as an intermediary under IT Act 2000. Therefore, the Contracts, transactions, dealt under the online markets would come under the ambit of markets under the anti-trust regime in India. The problem is detecting the cartels, collection of evidence, creation of awareness and program to detect the online anti-competitive practices including cartels. There is a need to equip the regulatory and adjudicatory body to learn the intricacies of emerging laws in anti-trust regime which effect the economic development and hampers the consumer interest. Application of Per Se Rule or Rule of Reason in the online market cases needs to be rethought in the light of online smart contracts, agreements and arrangements which may be called anti-competitive. Currently, there is a circuit split on how to handle a firm that makes agreements that fix the prices of its suppliers or distributors who compete with each other. If pricing practices are illegal when implemented offline, they are very likely to be illegal when implemented online as well. Companies should be on their toes when using software tools such as pricing or monitoring algorithms that check and adjust prices automatically. It is imperative that the CCI take cautious steps in assessing new market practices and ensuring that the appropriate distinctions are drawn between varying practices. Most commentators argue that the currently available competition law instruments are generally sufficient, but that they could be modernized (instead of being overhauled) and applied more efficiently. Hence, until the CCI runs into “un-addressable” problems that require novel approaches there seems to be no basis for changing competition rules.
Technological infrastructure is of paramount importance for the development of economic law, and role and importance of law making, executive and adjudicatory bodies with their active participation is necessary. There is a need for relation of economics of law and policy in the area of law which has remained unaddressed and requires the attention of all stakeholders of the state. In addition to this, there is also a need to create and develop electronic tools for pre and proactive detection of bid-rigging, or any other anti-competitive agreement which will have appreciable adverse effects on markets including digital markets.
[1] Business based on the algorithms uses the pre-loaded program for prediction of demand, behavioural preferences of clients, price fluctuations, Assessment of Risk, and for setting optimal prices. (Algorithms and Collusion: Competition policy in the Digtial Age, URL: oced.; OECD Roundtable on Algorithms and Collusion, Background note by the Secretariat, June 2017).
[2] Section 2(a) and 5 of Farmers Act 2020, defines the electronic trading and transaction platform, means “a platform set up to facilitate direct and online buying and selling for conduct of trade and commerce of farmers produce through a network of electronic devices and internet applications.”
This article has been authored by Prof. (Dr.) Kondaiah Jonnalagadda, Professor of Law at Maharashtra National Law University, Aurangabad. This blog is a part of RSRR’s Excerpts from Experts Blog Series, initiated to bring forth discussion by experts on contemporary legal issues.