In Defence Of The Proposed Ex-Ante Competition Law Reforms In India – An Attention Economy Perspective

Introduction

After much anticipation, the draft of India’s ex-ante competition law reforms targeted towards preventing and remedying anti-competitive practices in big tech is finally out. This piece, post an in-depth analysis, offers a defence of the same, from a perspective of attention economy.

Attention Economy

The attention economy refers to the management of human attention as a valuable and limited resource within the digital marketplace, leading to the emergence of a novel business model, i.e., attention brokerage. An attention broker is a business entity that acquires and redistributes attention. This represents a unique variation of a two-sided market intermediary functioning as a platform. Consequently, these platforms are referred to as two or multi-sided platforms, and the markets they establish are termed two or multi-sided markets.

Most big tech companies that we know of today function in this fashion – on one side, users can onboard without any monetary consideration. They do, however, agree to let the platform collect and use their data. This data is then analyzed with sophisticated tools, and ultimately utilized by advertisers on the other side of the platform to display individualized and personalized advertisements to the users. It is noteworthy that the volume of data collected is directly proportional to the time spent by a user on the platform. Accordingly, such platforms have an inherent interest in retaining the user attention on their platforms through various means including but not limited to introduction of features resembling those of the competitors, reducing interoperability, self-preferencing etc. There is also a circular relationship present here – the more data a platform has about how the user behaves and interacts – and therefore, what the user prefers – the easier it is for the platform to introduce newer features to garner more attention.

Current Competition Policy

The Competition Act 2002 (‘Act’) follows the ex-post approach which, as illustrated below, is unable to sufficiently regulate the attention brokers.

Firstly, under Section 4 of the act, prior to determination of abuse of dominance, the Competition Commission of India (‘CCI’) has to establish the ‘relevant market’. To ascertain the relevant market, the SSNIP (Small but Significant and Non-transitory Increase in Price) Test is typically applied. The SSNIP Test is a method used to define the relevant market by analyzing whether a hypothetical monopolist could impose a small but significant and non-transitory price increase—usually around 5-10%—without losing a substantial number of customers to alternative products. If customers are likely to switch to other products in response to this price increase, those alternatives are considered part of the same market. However, the SSNIP Test falls short when applied to digital platforms, particularly those operating in the attention economy. given the fact that on the user side, the consideration is not money. It is noteworthy that in the case of Matrimony.com Ltd. and Consumer Unity and Trust Society vs. Google LLC 2018, CCI denied Google’s argument that since their search engine is available to users free of cost, they are not covered under the relevant law. Twofold reasons were provided by the CCI for the same – firstly, users pay for the ability to use the service with their attention and data. Therefore, the service cannot be called free. Secondly, the entire transaction can be understood as one in which the platform, to be able to gain revenue from the advertisers, subsidies it’s services on the user-side of the platform. However, the application of this understanding in subsequent cases has been insufficient. In future cases involving Google viz. Umar Javeed and others vs. Google LLC and others and XYZ vs. Alphabet Inc. and others, the CCI investigated allegations of Google’s abuse of dominance, such as tying apps to Android devices and favoring Google Pay. However, the CCI’s market definitions primarily focused on the manufacturer’s side, overlooking the two-sided nature of these markets. This approach is quite narrow as it does not consider the broader consumer perspective, which could have recognized potential substitutes like Apple’s iOS. Despite recognizing Android’s network effects, the CCI did not fully explore their impact on market competition.

Further, as per section 19(7) of the Act, other factors that the CCI uses to determine the market are consumer preferences, end use etc. In the case of attention brokers, as mentioned earlier, there is a commercial intent to retain as much attention as possible. This is often done through introduction of as many features as possible. Consider the example of Instagram – even though it was primarily introduced as a photo sharing app, it can currently be used to shop, for one to one communication, for short videos, for long form content, for text based content, for transient sharing in the form of stories. It is therefore difficult to ascertain whether Instagram is in the same market as say, YouTube, TikTok, Amazon, X or in fact all of them.

Insufficiency of the Current Approach in Regulating the Attention Economy

It is important to consider the fact that the reason behind consideration of price as the primary factor to determine the relevant market in competition policy is because of the indisputable evidence pointing to strong price sensitivity of customers and users. To address cases of user behavior being guided by factors other than price, factors such as product features etc. may also be checked.

Examples of such an approach include suggestion by OECD that privacy policies may be taken as a factor to ascertain the relevant market. Through this approach, if a platform changes it’s privacy policies to the detriment of the users, leading to shift of user attention to another platform, the two platforms are to be understood as operating in the same market. This approach however, cannot be applied to a country like India where privacy advocacy remains low, both in the digital world and culturally.

Further, in the case of zero-price digital markets, a user’s choice of a platform may often be guided by multiple factors such as network effects, privacy concerns, user interface, user experience etc. As of now, we lack market studies to come to an all-pervasive factor. Therefore, to determine substitutability in an ex-post approach, the CCI would necessarily have to look at a multiplicity of factors. A pre-requisite of this is that the CCI would require consumer usage data which is specific and individualized. This data may not always be available. Secondly, mandating compulsory collection and storage of such data for the platforms may itself be a major privacy concern from a policy standpoint, in addition to enhanced compliance costs. Thirdly, a qualitative consideration of a multiplicity of factors will inevitably introduce subjectivity in the system, which in far from ideal.

Addressing Concerns with the Ex-Ante Approach

The introduction of ex-ante regulations is not without its challenges. Amazon, for instance, contends that it is already subject to regulation under the Foreign Direct Investment policy, warning against the imposition of ex ante regulations that could potentially lead to excessive regulatory burdens. While this assertion is currently disputed, there is a legitimate concern that these regulations could impose significant compliance burdens on companies, particularly smaller businesses and startups that may lack the resources to navigate complex regulatory requirements. This could inadvertently create barriers to entry, contradicting the regulations’ intended goal of promoting competition.

Similarly, Indian startups such as Swiggy and Zomato have expressed apprehensions regarding the bill’s perceived threat to innovation and entrepreneurial freedom. Critics argue that imposing rigid rules could limit the flexibility needed for businesses to experiment with new business models or technologies, thereby stifling innovation.

However, while these concerns are understandable, it is important to recognize the broader benefits that ex-ante regulations offer, particularly in the context of the digital economy and the attention economy.

Firstly, the ex-ante approach, along with the consumer laws will go a long way in plugging the entry barriers to innovation due to data monopolies, which has been a recurrent concern for Indian startups. In the attention economy, where user data is a critical asset, dominant platforms can use their vast data resources to create insurmountable barriers to entry for new competitors. By setting clear rules on data usage, sharing, and collection, the ex-ante regulations help level the playing field, ensuring that new entrants have a fair opportunity to compete. This, in turn, fosters innovation by preventing established platforms from using their data advantage to unfairly outcompete potential rivals. Thus, rather than stifling innovation, these regulations can promote a more vibrant and competitive marketplace.

Secondly, the bill represents a significant stride towards channeling innovation in a direction conducive to consumer welfare, a paramount objective increasingly central to competition law and policy worldwide. In modern competition law frameworks, ensuring consumer welfare lies at the heart of regulatory efforts. This entails not only safeguarding consumer interests but also fostering conditions that promote vibrant and competitive markets. By prioritizing consumer welfare, regulators aim to enhance consumer choice, encourage innovation, and drive economic efficiency.

In the context of the bill, steering innovation towards enhancing consumer welfare is not merely a rhetorical aspiration but a tangible regulatory objective. By fostering a competitive environment that incentivizes companies to prioritize consumer interests, the bill aims to stimulate innovation that generates tangible benefits for consumers. This includes improvements in product quality, affordability, and accessibility, as well as greater transparency and accountability in business practices. Moreover, by curbing anticompetitive behavior and promoting market dynamism, the bill seeks to prevent monopolistic tendencies that can undermine consumer choice and welfare over the long term.

Conclusion

In essence, the bill represents a proactive approach to competition regulation that acknowledges the evolving dynamics of the digital economy while reaffirming the primacy of consumer welfare. While concerns and debates surrounding its implications are inevitable, it is essential to recognize the overarching objective of fostering a competitive landscape that ultimately serves the best interests of consumers. As regulatory discussions progress, striking a delicate balance between innovation, competition, and consumer welfare will remain paramount in shaping the future trajectory of the digital economy in India.

(This post has been co-authored by Nandini Babbar, a fourth year law student at National Law University, Jodhpur.)

CITE AS: Nandini Babbar, “In Defence Of The Proposed Ex-Ante Competition Law Reforms In India – An Attention Economy Perspective”  (The Contemporary Law Forum, 1 October 2024) <https://tclf.in/2024/10/01/in-defence-of-the-proposed-ex-ante-competition-law-reforms-in-india-an-attention-economy-perspective/>date of access