Global technology companies such as Google, Facebook, Amazon, and Apple have been under the radar of governments in many countries for trying to steamroll competition by either buying their competitors (even if that meant spending mammoth sums) or pushing other vendors to avoid working with them.
In June 2019, the US Congress and an antitrust panel of the House Judiciary Committee began a probe into the nature and working of the aforementioned big 4 who together have market capitalization of US$ 5 trillion. Based on collected documents and testimonies from workers of these firms and from rivals (it collected 1.3 million documents), prima facie the panel inferred that they had tried to push them out of the market using unfair means.
During their testimony before the House antitrust committee on July 29, 2020, CEOs of these giants viz. Alphabet’s (Alphabet is the holding company of Google) Sundar Pichai, Facebook’s Mark Zuckerberg, Apple’s Tim Cook and Amazon’s Jeff Bezos were confronted by the law makers on specific instances intended to show that the companies had indulged in unfair practices and thwarted competition from rivals. The big bosses were unable to put up a convincing defense.
That these companies hold complete sway over the digital market in their respective areas of operation is best captured in an observation by Representative David Cicilline of Rhode Island, who has led the year-long House investigation. He said “these companies as they exist today have monopoly power”. Cicilline went on to add “some need to be broken up, all need to be heavily regulated.” Here is a glimpse of how they misuse use their dominant position.
Google’s search engine is accused of stealing content with the goal of keeping users glued to its site, instead of directing them to other sources on the web. In fact, it used its surveillance over web traffic to identify competitive threats and crush them. It promotes its own products on its platform instead of rivals, even if the latter provides better service. An analysis of 15,000 search results by The Markup has found that 41% of the first page of Google search results is dominated by Google-run products. Apple, in a bid to promote its own app (it allows parents to limit the screen time for kids) had thrown out a rival app on the pretense of the latter not being safe. Both Google and Apple services grow by being default on their operating systems.
Amazon uses the data of the products on its e-commerce platform to decide what to sell under its own brand. In other words, the platform which is otherwise, meant for helping millions of vendors sell their products is utilized by the tech giant for its own benefit.
Facebook which owns and operates the biggest social media platform, is accused of using money power to outright buy competitors (it had bought Instagram and WhatsApp in some of the biggest deals in technology space) and then push them aggressively against other competitors in the market.
All the tech giants have orchestrated strategies to prevent other smaller players to make way into the digital payments space by citing the lack of one security feature or the other.
The house panel has also looked into the use of data by these companies and whether they had followed the sensitive data protection norms set in place by various states across the US.
These startling revelations will form part of the committee’s report expected to be completed by the end of this month. This could be used to inform investigation already underway by the U.S. Federal Trade Commission and the Justice Department (as also probe by states across the country on Facebook and Google). Going by the statement of the Congressman who led the probe “some need to be broken up, all need to be heavily regulated”, one can look forward to some tough action by the regulators in USA.
The digital giants have a huge presence in India too. Indian stakeholders across a wide spectrum of economic activities are suffering due to their anti-competitive and unfair practices.
Almost every second or third Indian has a smart phone and is keen to have prompt access to information and knowledge; a demand which is promptly met by Google search engine – almost everything at one place. He also wants to instantly communicate and interact with friends, relatives etc individually or groups. That need too is met by Facebook.
Both these giants get tens of millions footfalls every day and that is a big attraction for entities keen to advertise their products and services. As a result, many advertisements which were earlier coming to content providers viz. newspaper, magazines, publishing houses (in some cases, even individual website owners etc) are now going to Google and Facebook. The latter have gained at the expense of the former. What an anomaly is this? Those who provide content and for which information and knowledge hungry people do the search, get nothing even as the owner of the platform (read: Google) where they go to conduct the search gets away with most of the ad revenue.
This inequality and absence of a level playing field for the local content providers is a global phenomenon. Already, regulatory authorities in other countries (besides USA) have swung into action and come up with concrete measures to deal with it.
In Australia, following an 18-month inquiry by the Australian Competition and Consumer Commission (ACCC), the government has made it mandatory for Google and Facebook to pay news companies for content even as digital advertising revenues were overwhelmingly captured by the two titans severely impacting Australia’s news industry (since 2014, the number of newspaper and online journalists declined by over 20%). The regulations will also cover data sharing and the ranking and display of news content, to be enforced by binding dispute resolution mechanisms and penalties.
Prior to that, France’s competition authority ordered Google to negotiate with publishers over payments to reuse snippets of content in its news aggregator and Google Search.
In India, these digital biggies have access to voluminous data which can be put to unfair commercial use. To get an idea of what it can do, look at the investment of over Rs 43,000 crore by Facebook in the e-commerce platform (nicknamed JioMart) of Jio Platforms Limited (JPL) – a company of Reliance Industries Limited (RIL). Under JioMart, the duo intend to connect 30 million kirana stores (a street corner shop) to every customer in their neighborhood wherein over 400 million-strong Indian database of WhatsApp – a 100% subsidiary of Facebook – will come in handy.
Then, you have Amazon and Flipkart/Walmart having an overwhelming presence on the Indian online retail space. They took entry as marketplace operators (the ‘market-place’ is a platform where vendors sell their products to consumers even as its owner merely acts as a facilitator) as under the extant policy on foreign direct investment (FDI), the foreign investor is not allowed to sell directly to individual consumers. Yet, they are operating as direct sellers, controlling inventory, giving discounts etc.
The policy guidelines issued in early 2016 (Press Note 3) were meant to get these global giants set up such platforms for the benefit of millions of small vendors but, what is happening on ground zero is just opposite. The former have become dominant sellers themselves easing out the latter from online retail. Even the courts so far have failed to give any relief to small vendors against unfair practices of Amazon et al, thanks to the loopholes in the fine print which they exploit to the hilt.
In the field of apps or digital payments space also, the big players have orchestrated strategies to disable start-ups and small players to gain a foothold. Very often, they play around with ‘safety’ and ‘privacy’ considerations which are pretty much vulnerable zones for small players. Even if, someone does manage to come up, the biggies buy him/her over by offering a price which he/she can’t resist.
With their predominating presence, the tech giants not only generate billions of dollars in revenue from their operations in India but also deny Indian government the tax revenue legitimately due to it. Doing business in digital mode (here, physical boundaries get blurred) helps them in this game plan. They structure their investment arms through a maze of subsidiaries held outside India in low tax jurisdictions such as Singapore, Mauritius, Ireland etc.
They invoice Indian customers via these offshore entities despite having significant revenue, users or paying customers in India even as their Indian entity is crafted more like a service company or commission agent to the parent company located abroad. This helps them in booking an overwhelming share of revenues in the parent company [registered in tax haven] while a very small portion of service/commission revenue and income is reported in the entity registered in India.
To conclude, even as developed countries such as USA, France, Australia etc have the regulatory tools to rein in the anti-competition and unfair practices of digital giants and also acted with alacrity, India does not even have a law in place to deal with them. The Competition Commission of India (CCI), which is the statutory body mandated to regulate anti-competitive activity in the country, has been largely toothless and ineffective. With regard to data protection, a Personal Data Protection Bill [2019] introduced in the last winter session was referred to a joint select committee for examination. There is long road ahead before this gets enacted into law.
By the time, India gets ready with the legal muscle, they would have become so big and deeply entrenched in our socio-economic milieu as to render any legal remedy ineffective.