comScore

Regulatory force: Tech titans bow to CCI whip

Amazon dissolved Cloudtail, its joint venture with Infosys co-founder Narayana Murthy, after it was accused of getting preference over other vendors on the Amazon site. (Reuters)
Amazon dissolved Cloudtail, its joint venture with Infosys co-founder Narayana Murthy, after it was accused of getting preference over other vendors on the Amazon site. (Reuters)

Summary

Companies are being careful with aspects like self-referencing, search bias

New Delhi: India’s technology majors are rectifying their anti-trust practices following the crackdown by Competition Commission of India (CCI). Market participants said these tech firms are exercising greater caution for arrangements that could be perceived as preferential treatment for specific entities, and addressing concerns related to self-referencing and search biases on their platforms.

Last year, CCI issued directives against half a dozen tech firms, including Google, Amazon and Make My Trip. Besides, it probed smartphone maker Apple and food delivery platforms Zomato and Swiggy, among others. Final verdicts on these matters are still pending.

A few companies were also expecting courts to reverse CCI’s orders, said market participants. However, in most cases, the directives were not interfered with either by the National Company Law Appellate Tribunal (NCLAT) or the Supreme Court.

This prompted companies to rectify the anti-trust issues highlighted by the CCI.

Google recently started taking action to expand billing options for app developers, according to a statement, to address the concern raised by the CCI, to offer users more choices.

Also, online hotel aggregators have started accepting hotel listings from competitors. Likewise, Amazon has dissolved Cloudtail, its controversial joint venture with Infosys co-founder Narayana Murthy, which was accused of getting preferential treatment over other vendors on the Amazon site. Additionally, it modified its systems to ensure no search bias, and preferred vendors no longer receive disproportionate visibility compared with other vendors.

“The CCI orders against tech firms have sent across a clear message that companies cannot create entry barriers or adopt practices that are exploitative," said G.R. Bhatia, head of competition practice at Luthra & Luthra Law Offices. “After the regulatory action taken by CCI against certain technology companies, there is a greater realization among companies to respect anti-trust rules. As a result, their compliance with the competition rules is improving."

This compliance record of technology companies will only improve in due course as the government proposes steeper penalties for any violations, said legal experts.

The Centre has proposed that the fines on competition law violators be computed based on total turnover instead of relevant turnover which used to be the case until now. There are also ongoing discussions on the introduction of special provisions to regulate digital firms.

According to legal experts, CCI’s action has had a deterrent effect among technology companies. “Recent scrutiny by CCI has sent a clear message that it is now in sync with the anti-trust regulators across the globe to investigate practices such as self-referencing, search bias, restricting use of third-party applications on their platforms and anti-steering practices, etc.," said Vaibhav Choukse, head of competition law, JSA Law.

Even globally, there has been a crackdown against tech firms by anti-trust regulators. The EU has fined several companies for violating competition rules. The imposition of a €2.4 billion fine on Google last year for the alleged abuse of market dominance is an example. “Never in the history of competition law have so many competition authorities focused so intently on the big tech sector," Choukse added.

Regulators are also considering introducing ex-ante provisions for digital firms. Usually, regulators react to violations that have been committed, but ex-ante provisions are preventive measures to ensure violation do not take place. A similar proposal is under discussion in India as well.

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