The rise of the digital sector has introduced distinctive challenges for Indian regulatory authorities, together with the Competitors Fee of India (CCI), due to vital variations in the best way such markets function in comparison with conventional markets. Additional, a number of points rising from the expansion of digital markets are being analysed by regulators in different international locations concurrently, leading to a scarcity of steering from different jurisdictions.
There may be rising demand, worldwide and in India, to carry digital platforms accountable and accountable for hostile impacts attributable to them. That is evidenced by current investigations initiated by the CCI into the operations of digital platforms similar to Google, WhatsApp, Apple, Zomato, Swiggy, and so forth.
A preliminary step concerned in such probes is that of defining a ‘related market’ inside which such digital platforms function. The Competitors Act of 2002 requires the CCI to outline a ‘related market’ primarily based on what’s considered interchangeable or substitutable by a shopper (“Related Market Take a look at”). The elements required for consideration by the CCI whereas defining a ‘related market’ embody the bodily traits or finish use of products, costs of products or companies, shopper preferences, regulatory commerce boundaries and native specification necessities, amongst others.
The CCI’s method to date: Till 2016, whereas defining a ‘related market’ for e-commerce firms and marketplaces (similar to Snapdeal, Ebay, Yepme, Cloudtail, and so forth), the CCI considered on-line and offline segments as totally different channels of distribution and never totally different related markets. This was primarily based on the CCI’s view that the 2 segments differ when it comes to reductions and the purchasing expertise, and consumers would sometimes weigh each on-line and offline choices earlier than making buy selections. Additional, if costs of the identical services or products accessible on-line have been to extend considerably, then the patron was possible to purchase the services or products from an offline channel, and vice versa.
In 2018, when inspecting a criticism filed towards e-commerce firms that alleged ‘abuse of dominance’ by means of predatory pricing and preferential remedy to sure sellers, the CCI diverged from its preliminary view and acknowledged the potential for a distinction between on-line and offline segments. In October 2019, it drew an outlined distinction in its prima facie order initiating a probe towards MakeMyTrip by defining the ‘related market’ in its case as “the marketplace for on-line intermediation companies for reserving of lodges in India”. This case remains to be into consideration.
Following the MakeMyTrip case, the CCI has thought of ‘related markets’ for sure online-only gamers in a number of instances associated to digital markets. As an illustration, it has outlined the related marketplace for (a) Google as “the marketplace for On-line Basic Internet Search Companies in India and the marketplace for On-line Search Promoting Companies in India”, for (b) WhatsApp as “the marketplace for Over-The-High (OTT) messaging apps by smartphones in India” and for (c) Apple as “the marketplace for app shops for iOS in India”.
Subsequent orders of the CCI in instances the place arguments have been made that offline services or products may very well be substitutable with on-line services or products didn’t clearly apply the Related Market Take a look at, and didn’t make clear whether or not all services and products that may very well be thought of interchangeable by customers have been thought of whereas arriving at a ‘related market’ definition.
The necessity of the hour: Given the tempo at which the digital sector is increasing in India, and the emergence of a number of points prompted by this progress, it’s important that the CCI rigorously think about the query of ‘related market’, and extra notably, the query of whether or not the web and offline distribution segments of such a market are substitutable in every case and trade. Prima facie evaluation of the ‘related market’ would lead to a extra environment friendly and streamlined means of investigation.
A ‘one-size-fits-all’ method to this query will show unsatisfactory, given the massive variation in enterprise fashions at the moment and the numerous variety of companies which have add-on ‘on-line’ supply channels. Accordingly, the CCI ought to outline a ‘related market’ within the digital sector by taking into account all substitutable and interchangeable services or products for every trade, together with what’s accessible offline.
One strategy to deal with considerations in varied quarters could be to conduct market surveys to discover shopper preferences, habits and dependence on digital platforms, on a case-to-case foundation. Whereas the CCI has undertaken just a few market research, it wants to succeed in out to customers on a wider scale and never restrict its evaluation to secondary research or surveys. Such an method could seem quite expensive and time-consuming. Nonetheless, given the magnitude of penalties that would come up from the query of ‘related market’, every trade and sector should be given due consideration.
India’s digital sector wants correct market evaluation and, in some instances, correction. For this, a constant method that’s inclusive of all stakeholders, together with the patron, would make sure that the nation’s digital story doesn’t face overregulation or different unwarranted hindrances.
In abstract, it’s crucial that the CCI’s method in digital markets is nicely thought of, constant and proportionate, in order that the digital sector will get house for progress whereas safeguarding the pursuits of competitors and customers.
Simran Dhir, Akshat Kulshrestha & Anuja Agrawal are, respectively, head and associates of the competitors regulation observe at S&R
