Reining in Big Tech in India: A delicate balancing act

We saw how the Competition Commission of India (CCI) has of late wrestled with Alphabet Inc-owned Google for allegedly abusing the app market in India. The CCI is accusing Google of exploiting its dominant position in Android. The watchdog has directed the tech giant to do away with restrictions imposed on device makers.

Google is worried for obvious reasons. India is a great market for Google; almost 97% of 600 million smartphones run on Android, as per Counterpoint Research. Apple pales in comparison with just a 3% share.

Google argued before the Supreme Court that CCI decision would forced it to make changes to its arrangements with more than 1,100 device manufacturers and many more app developers. The search giant contended that no other country has ever asked “for such far-reaching changes". Such restrictions would hurt not only its business but consumers also in one of the key markets, it said.

The tech giant has faced similar scrutiny in countries like the US and South Korea. But what worries the tech giant is that the steps taken against it by the watchdog are more restrictive than those imposed in the European Commission's 2018 ruling; the tech giant was fined for “unlawful restrictions on Android mobile device makers.”

Now, India is about to pass three major laws that will impact the tech companies such as Google and Facebook. An Indian parliamentary panel has already recommended that the government should enact a digital competition Act to regulate anti-competitive business practices by Big Tech companies. The government is also proposing other similar legislations to rein in the Big Tech.

The committee has recommended that the government should come up with a Digital Competition Act “to ensure a fair, transparent and contestable digital ecosystem, which will be a boon not only for our country and its nascent start-up economy but also for the entire world”.

Such moves will have implications for big tech companies in the second most populous internet market in the world.

Experts feel that a cautious approach, rather than a confrontational one, should be taken by the authorities given India’s peculiarities.

Given the nascent stage of the digital ecosystem of the country, a nuanced approach should be adopted while regulating the sector, says Lloyd Mathias, Angel Investor and Independent Director. “This seems to be a result of the approach taken by Western more developed markets where the digital ecosystem is at a more mature stage. While it is important to refer to global best practices, however, at the same time, the peculiarities of our own market should also be taken into account,” he says.  

According to Mathias, being the second most populous internet market in the world carries a huge potential for the realization of the PM's $5 trillion dream, and our policies should promote ease of doing business rather than throwing roadblocks.

Trust Research Advisory CEO Chandra Mouli supports impending legislations like the Digital Competition Act.

According to him, Big Tech has had a stranglehold on many important applications for a long time. Such stranglehold, he feels, increases market concentration, and forces the customers to choose without independence. He cites bundled browsers, search, app distribution services, etc., as typical cases.

“Naturally, these regulations will have Big Tech in a fix, as many other alternatives are likely to emerge like micro app distribution networks. However this will work in the benefit of users, as it will give them choice, which they lacked till now. In my opinion, Indian Digital Competition Act is well placed in asking Big Tech as to why they have different rules for India and Europe,” says Chandra Mouli.

Replicating the European model?

The Indian situation is different and it is not prudent to follow the policies adopted by Europe. Ashish Duggal, COO, Chimp&z Inc, feels that emulating European anti-trust laws would be counter-productive in a diverse market like India.

“We are a fast-growing economy. But today, our tech infrastructure isn’t as advanced as those of the European nations that act as torchbearers in this industry. Though following them to gain industry insights is important, trying to replicate their anti-competitive regulations will have downside implications in India. Those countries are at a point where they can afford to keep the tech giants in line without worrying about the investment or strategy change that may follow. As India is still a developing nation with a demography and economy very different from the west, ‘Think global, act local’ fits perfectly in this context. These tech giants today hold a lot of power. Power to implement a vision, experiment, pump in the money, and use their capabilities, network, people, and infrastructure, among other resources. So, for example, when Google provided free internet services at railway stations across India. A tech giant like that had the power to do just that, promoting its services while aiding the country’s development. If they’re doing so, I think they do deserve a head start and to be able to reap the benefits of early entry. Their work will also help set a standard for local players. So, coming up with such harsh and stringent laws at such an early stage will only work to demotivate these companies and their interests in India,” says Ashish Duggal.

Concurring with Duggal on this, Lloyd Mathias points out that a blanket legislation could increase the compliance burden for operating in the country where a number of entities are in the nascent stages of growth and so they would not be able to weather an increased compliance burden.

According to Mathias, even for players who can bear the costs, the burden would percolate down to the end consumer. “This would also disproportionately impact established players since it could hold them back from innovating and reaping its benefits, which would in turn reduce the competition burden on smaller players who would have less of an impetus to innovate. Since industry giants have been the reason behind driving digital adoption by creating the necessary infrastructure, it would also disproportionately impact the smaller players which act as ancillary units to the same,” he says.

Nitin Raj, CEO and Co-Founder, Riverum, feels that the proposed Digital Competition Act in India could have a significant impact on Big Tech companies. He feels that with the world’s second-largest internet market, India’s proposed legislation could be a significant step in curbing the power of Big Tech.

Raj predicts that the Act would aim to address potential anti-competitive practices and could include provisions such as mandating a minimum period of notice before changes to terms of service, preventing companies from engaging in activities that limit consumer choice or prevent competitors from entering the market, or putting limits on the collection and use of consumer data.

“The implications of this Act will vary depending on how it is implemented. In particular, a committee must be set up to ensure that the Act is being followed and that any violations are met with appropriate actions. This will help to ensure that Big Tech companies are held accountable and that their practices are in line with the law,” says Nitin Raj.

The Act, he says, could have a range of implications for Big Tech companies, including:

• Increased regulatory oversight and scrutiny. Big Tech companies could face increased scrutiny from Indian regulators, with the potential for large fines and other penalties for any violations of the Act. This could potentially lead to more stringent consumer protection measures, and the risk of reputational damage for Big Tech companies in India.
• Restrictions on data collection and use. The Act could place restrictions on how Big Tech companies collect and use consumer data, which could impact their ability to monetize their services and generate revenue from the Indian market.
• Limits on market access. The Act could also place limits on market access and prevent Big Tech companies from engaging in activities that could limit consumer choice or prevent competitors from entering the market. This could have serious implications for Big Tech companies’ ability to compete in the Indian market.
• Increased costs and legal bills. The Act could also lead to increased costs for Big Tech companies, in the form of legal bills and other compliance costs associated with the Act.

The best way for India

Elsewhere, especially in Europe, there is an increased governmental scrutiny over the level of data collected by Big Tech companies like Facebook and Google. It is a thin line here as the Indian government has to tread cautiously lest it will be accused of adopting the same policies followed by police states like China. What is the best way forward for India when it comes to pursuing anti-trust laws?

“Long, wordy and convoluted ‘I agree’ buttons make all of us agree to anything that the digital contract says, and we often even agree to give our most private data. The laws are not strict enough to ensure individual privacy and it must be strengthened further,” says Chandra Mouli.

According to him, China’s case is different. China uses data to monitor and control citizens. But elsewhere, he adds, individual privacy is infringed upon by some organisations using this data wrongly, but also because these organisations do not have enough control to prevent people using this data from illegally selling individual data to bad actors. Sensitive data like names, mobile phone numbers, email ids, marital status, etc., are freely available in the market. He stressed that the organisation must also be responsible for misuse of data held by them through such means.

Data is considered as the new oil and in today’s digitally enabled world no one can disagree with its value, says Lloyd Mathias. But, he adds, it is important to understand its use. He feels that there is a fine line between privacy and personalisation which needs to be maintained given the fact that we live in a world of declining attention span.

“This is also critical from the point that the country is growing as an investment hub and policies should aid this, while ensuring that the data of our people are safeguarded. The new digital personal data protection legislation is a novel step by the government in the right direction,” he explains.

Ashish Duggal supports anti-trust regulations as they are important because they help control business practices and promote competition. According to him, monopolies may be inevitable, but these regulations will help avoid unjustified ones.

“Looking at the current regulations, there is scope for a little more policy tightening and improvement that will have to happen over time. India is a highly democratic nation with many upcoming and large corporations growing at a fast pace that may seem to attain a monopoly status. But that’s a far cry. Right now, we must focus on developing a healthy environment for competition and for new entrants to work per the high standards set by the giants,” he says.

When it comes to anti-trust legislations, India faces a delicate balancing act, says Nitin Raj. “On one hand, it wants to protect its growth and economy while keeping Big Tech companies from becoming too dominant. On the other hand, it doesn’t want to be accused of adopting policies followed by the likes of China,” he says.

According to him, one way that India could potentially protect its market share is by implementing data sovereignty laws. “These laws would allow companies to collect and use data within the country, rather than having it transferred to a foreign company. This would allow Indian companies to compete with their rivals on a more level playing field, and would also ensure that data is kept safe and secure,” he adds.

“When it comes to data collection and privacy, India is in a tough spot. On one hand, the Indian government wants to protect its citizens’ data. On the other hand, Facebook, Google, and other tech giants operate in India largely unchecked, collecting vast amounts of data on Indian users. There is a growing concern in India over the level of data collection by Big Tech companies. This is because the Indian government is worried about the way that these companies use this data to engage with their users. This is a difficult line to tread, as the Indian government does not want to appear to be adopting the same policies as adopted by countries like China or Korea,” he says.

According to him, the product manager for Facebook in the US has a lot of power to change the features that are available to millions of Indian users. “This means that their decisions on what data to share with their vendors, partners, and advertisers have a big impact on millions of people in India. There are a number of ways that the Indian government could pursue anti-trust legislations in response to this. One option would be to create new rules that would apply to Facebook and Google specifically. Another option would be to work with these companies to change their policies. Either way, the Indian government will have to tread carefully in order to avoid backlash,” he explains.

Another way, according to Raj, that India could protect its market share is by increasing transparency and accountability.

“For example, Facebook and Google are required to disclose the amount of data they collect, and to provide information about how that data is used. This information is available to the public, and allows consumers to make informed decisions. So what is the best way forward for India when it comes to pursuing anti-trust legislations? There are a number of steps that the Indian government can take. First, it can increase the safeguards for consumer information. For example, it can require companies to get explicit consent from consumers before collecting or using their data. Second, it can open up the digital market to more competitors. This would allow new ideas and services to penetrate the market and challenge the dominance of the Big Tech companies. Third, it can promote online innovation by providing incentives for companies to develop new technologies. Finally, it can make it easier for consumers to file complaints against companies if they believe that they are violating anti-trust laws,” he concludes.