The rise of the digital sector has posed unique challenges for regulatory authorities of India, including the Competition Commission of India (CCI), due to the significant differences in the way such markets operate as compared to traditional markets. In addition, many issues emerging from the development of digital markets are being analyzed simultaneously by regulators in other countries, resulting in a lack of guidance from other jurisdictions.
Across the world and in India, there is a growing demand to make digital platforms accountable and accountable for the adverse effects they cause. This is evidenced by the recent investigations initiated by CCI into the operation of digital platforms like Google, WhatsApp, Apple, Zomato, Swiggy, etc.
An initial step involved in such investigation is to define a ‘relevant market’ within which such digital platforms operate. The Competition Act of 2002 requires the CCI to define a ‘relevant market’ that is considered to be interchangeable or substitutable by the consumer (“relevant market test”). Factors required to be considered by the CCI when defining a ‘relevant market’ include physical characteristics or end use of goods, prices of goods or services, consumer preferences, regulatory trade barriers and local specification requirements, among others.
CCI’s Vision so far: As of 2016, CCI has defined a ‘relevant market’ for e-commerce companies and marketplaces (such as Snapdeal, Ebay, Yepme, Cloudtail, etc.), CCI has defined the online and offline segments as different forms of distribution. Viewed as channels and not separate relevant markets. This was based on the CCI’s view that the two segments differ in terms of discounts and shopping experience, and buyers will typically weigh both online and offline options before making a purchase decision. Furthermore, if there is a significant increase in the prices of the same product or service available online, the consumer is likely to purchase the product or service from an offline channel, and vice versa.
In 2018, when examining a complaint filed against e-commerce companies alleging ‘abuse of dominance’ through predatory pricing and preferential treatment to certain sellers, the CCI from its initial view Diverged and recognized the potential to differentiate between online and offline. section. In October 2019, it obtained a defining distinction in its prima facie order initiating an investigation against MakeMyTrip by defining the ‘relevant market’ as “the market for online intermediation services for booking hotels in India” in its case. Did. This matter is still going on. think thought.
Following the MakeMyTrip case, the CCI has considered ‘relevant markets’ for certain online-only players in a number of matters relating to digital markets. For example, it has defined the relevant market for (a) Google as “the market for online general web search services in India and the market for online search advertising services in India”, (b) for WhatsApp”. Market for Over-the-Top (OTT) Messaging App via Smartphone in India” and (c) for Apple as “Market for App Store for iOS in India”.
Subsequent orders of the CCI in cases where it was argued that offline products or services could be replaced with online products or services did not explicitly apply the relevant market test, and did not make it clear that Whether all products and services that could be considered interchangeable by consumers are considered when arriving at the definition of ‘relevant market’.
The need of the hour: Given the pace at which the digital sector is expanding in India, and the emergence of several issues driven by this growth, it is essential that the CCI considers the question of ‘relevant markets’, and in particular From now on, the question is whether the online and offline distribution segments of such a market are substitutable in each case and industry. A prima facie analysis of the ‘relevant market’ would result in a more efficient and streamlined process of investigation.
A ‘one-size-fits-all’ approach to this question would prove unsatisfactory, given the large variation in business models today and the significant number of businesses that have ‘online’ distribution channels. Accordingly, the CCI should define a ‘relevant market’ in the digital sector taking into account all replaceable and interchangeable products or services for each industry, including those available offline.
One way to address concerns across quarters would be to conduct market surveys to ascertain consumer preferences, habits and dependence on digital platforms on a case-by-case basis. While CCI has conducted some market studies, it needs to reach out to consumers at a wider scale and should not limit its analysis to secondary studies or surveys. Such an approach can seem quite expensive and time consuming. However, given the magnitude of the consequences arising from the question of ‘relevant markets’, due attention should be given to each industry and sector.
India’s digital sector needs proper market valuation and in some cases reforms. For this, a coherent approach that includes all stakeholders, including the consumer, will ensure that the country’s digital story does not face redundancies or other undue constraints.
In short, it is imperative that CCI’s approach to digital markets is well-thought-out, consistent and proportionate, so that the digital sector has room for growth while protecting the interests of consumers and competition.
Simran Dhir, Akshat Kulshrestha and Anuja Agarwal are respectively the Head of Competition Law Practice and Associate at S&R