Most of the competition agencies determine the relevant market as a start point of their inquiries. This inquiry is also based on de minimis thresholds that depend on the assets or turnovers of the companies in India. The traditional methods of applying the tests to get a definitive answer on such a platform’s behaviour is a challenging task. The Competition Commission of India (CCI) has played an active role in this area and gave a favourable analysis in the Facebook-Reliance merger. This was based on synergies that were to be derived due to the merger. The synergies were not only found to be in industrial integration but also net neutrality.
But what happens in cases of what Europeans call the killer acquisitions? These acquisitions occur frequently in digital markets and pharmaceuticals where the start-up or business is not big enough yet in terms of volume of sales but are being eyed for acquisition by the big players. While addressing the laws relating to digital markets, the EU Competition Commissioner has said this while discussing the challenges posed by them: “These include defining markets for multi-sided platforms, in particular where services are supplied at zero monetary price, defining markets for ‘ecosystems’ or for data, and assessing online vs offline competition.” The Digital Markets Act has specifically been agreed upon recently by the EU member states to deal with such issues. It was thought important because the EU considers defining the market as the logical first step in its investigations.
While deciding the Google/FitBit merger case in the EU, the Commission placed excessive reliance on how information sharing between the two companies could have adverse competitive effects as well as compromise the privacy of individuals. The court subsequently held that it is enough if Google holds the data gathered through FitBit in data silos (in isolation) and the privacy issue can be dealt with by the fact that the American tech giant will be governed by the principles of GDPR.
Since there is no enactment in India that exclusively deals with digital markets (only consumer protection rules have been passed for the e-commerce industries) or data protection of individuals (which is still dealt with by a few sections under the Information Technology Act and cannot be held as a comprehensive code for information protection), the situation cannot be addressed in the most direct way.
While much depends on the outlook of the agencies deciding the cases, that is, whether they have an interventionist attitude or not, the CCI has maintained this balance by taking into account the pro-competitive and anti-competitive factors and ultimately their effect on the consumers. This was one of the reasons for the approval of the Facebook-Reliance deal. One thing that the CCI should push for is that the privacy issues should be taken care of by separate legislation or rules. This is all the more important because the parties will keep contending that the CCI cannot traverse its jurisdictional boundaries, i.e., the fact that it should be dealt with by a different regulator will always come as a ready defence from the parties. This can be seen in the Bharti Airtel and Facebook/WhatsApp cases.
One way out of the strict market definition determination practice is to rather apply tools such as upward pricing pressure and group upward price pressure analysis, which will be an economics-based approach. This analysis is followed by the US. Defining the market is not the first step for the Federal Trade Commission or the Department of Justice (the two agencies entrusted with the responsibility for keeping competition in check). Nothing would be more suitable than being able to define the market but it should not be treated as a goal in every case.
Parties can have pre-filing consultations with the CCI, which was introduced in 2020. So it is always beneficial to engage in such consultation, to avoid intervention at a later stage, to save the resources and time.
With the increase in merger activity and boom of start-ups in India and globally, taking timely measures in this regard would be beneficial for our country and also for it to be viewed as a favourable destination for mergers. Striking a balance and not prohibiting those mergers that would have pro-competitive effects on the consumers and the economy goes to the heart of a balanced competition regime.
Kavya Lalchandani
Legal scholar based in the UK
(lalchandani.kavya@gmail.com)