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What are the major issues being discussed at a series of meetings because we are hearing in some part about complaints that some companies have against Indian aggregator companies and then the complaints that Indian tech companies have against the global tech giants. What are the primary issues your committee is looking at?
Jayant Sinha: Competitive behaviour in digital markets around the world demonstrates four or five issues that need to be addressed in the Competition Law. These issues include number one; winners take all markets where you end up with monopolistic outcomes where there are one or may be two players that become pre-eminent. So how do you deal with these winners? Take all effects. Do you have ex ante regulation to prevent these kinds of monopolistic outcomes? This is one issue that has become very important around the world.
Number two, the issues associated with complementary products. If you end up becoming a very key player and a pre-eminent player in one market, how do you then compete in other markets through bundling and tying? Does that give you an unfair competitive advantage that also has to be examined and understood as to how bundling and tying works?
The third issue is of course the use of data. If you have very privileged data from one market, do you use that in another market and therefore again gain a competitive advantage and end up with a non-level playing field in these adjacent markets? Everybody is considering the use of data, what data can be used, not be used etc. And then finally pricing, which is if you have significant market power, are you forcing pricing, discounts, fees, commissions on to people that are part of your platforms and that would be considered non-competitive or anti-competitive behaviour?
These are four prominent issues that have come up in Competition Law related to digital markets largely because digital markets are fundamentally different from traditional markets and the underlying economics of digital markets which are driven by increasing returns to size as opposed to diminishing returns to size.
Of course the role of network effects is quite different from those of traditional markets like cement or fertiliser or financial services where we do not have these fast reducing marginal costs and therefore increasing returns to size.
Coming specifically to the first round of meetings on July 22, where you had Makemytrip, , Swiggy, Oyo etc. What we have read in reports was that their vendors were upset with some of their monopolistic practices. Could you give us some insights on what was discussed in that meeting?
Jayant Sinha: There are many meetings that we have already had and we are extensively consulting with all stakeholders and so stakeholders associated with digital markets, digital platforms include consumers, they include partners and vendors that are associated with digital platforms so restaurants, hotels, travel agents, news publishers, consumers, consumer associations are all people that are part of the ecosystem of digital markets.
Then of course in digital markets, we have Indian as well as global players and then there is the Ministry of Corporate Affairs as well as the Competition Commission of India. These are all members, stakeholders associated with digital market ecosystems and we are in consultations with all of them. We are hearing everyone’s perspective to understand what the issues are with digital markets and to understand how competition law should evolve to address some of these competitive practices.
Can you give us details of the kinds of complaints coming in because this is kind of a longstanding issue which has been there in the public domain where companies talk about restaurants? If I take that one particular area where restaurants say the same aggregators are squeezing their margins, is this the kind of complaints that you have been looking into?
Jayant Sinha: A range of issues need to be investigated. These issues start with the nature of digital markets themselves and I will just take a step back and explain to you why competition law for digital markets has to be fundamentally different from competition law for traditional markets. Digital markets have three very important characteristics that lead to a very new approach to them.
Number one, digital markets result very often in winner-take-all types of outcomes. You will have one major player that completely dominates a particular digital market. Whether it is a surge, whether it is ride-hailing, whether it is food delivery, one or two players end up becoming the most prominent players in those markets with winner-take-all effects.
Number two, in competition law, there is very significant bundling and tying associated with one digital platform. Then bundling some additional products with that digital platform and so get into other markets as well with a very big advantage. So, contestability of markets becomes a big issue.
Then there is a third set of issues associated with digital markets which is the accumulation of data which can also result in a situation where there is no level playing field in that particular market as well. These are three or four issues that are very common and once one accumulates this kind of pre-eminence in the market, one ends up in a situation where there will be all kinds of disputes and conflicts associated with pricing around the use of data, around the use of complementary products etc. these are the kinds of things that we are hearing as far as India is concerned.
This is exactly what is being seen and observed around the world also. So if you were to study what is happening in terms of the EU and their thinking on digital markets, if you were to look at the US and see how the US is considering the competitive behaviour and conduct of digital platforms or Australia for that matter, everywhere we will see similar issues which is that digital markets are very different from traditional markets. They require a variety of new approaches ex-ante implementations. They require us to look at bundling and tying, at winner-take-all effects and require us to look at platform neutrality. All these are consistent themes that are happening around the world and therefore countries and jurisdictions around the world are modifying and extending their competition law to deal with this.
We think that the situation is similar in India and which is why we are holding the stakeholder consultations.
The fear is that we are going to have policy meddling in a space which is growing very rapidly and is very dynamic. You also spoke about international precedents. Is there any model that you see globally which you find ideal?
India is a very unique market. We are one of the most important digital ecosystems in the world with 600 million internet users. We have a very fast growing market, a very vibrant start-up ecosystem with very successful domestic players. We also have a set of digital public infrastructure like the India stack and at the same time, we have the global players. We have a digital ecosystem in India that is thoroughly unique and one cannot compare it with any other country in the world.
That is why we have to come up with our own unique solutions. Of course, we can learn from others and that is what we are trying to do but we have to develop our own unique way of looking at all of this. Now with respect to your question of how do we balance innovation as well as fairness and contestability, it is the art of policy making and that is why it is so important to be able to speak to all stakeholders so that we understand how balance can be struck.
But let us be very clear: markets flourish and consumers do well when we have contestable competitive markets that offer a level playing field to all players. Those are attributes and objectives that I think we can all agree on and then the question becomes how do we ensure that we have competition law that results in contestability fairness and a level playing field.
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