Barriers to entry, platform neutrality, and algorithmic collusion among key concerns in digital markets, says CCI chairperson

At the 15th annual day celebrations of CCI, Kaur stressed upon the tendency of digital markets towards market concentration as “many digital platforms benefit from network effects where the value of the service increases as more users join”. “This can quickly lead to a winner-takes-all scenario where one or two companies may dominate the market in the digital economy,” Kaur said.

Kaur identified three key problems that could arise with control over large datasets by digital platforms – barriers to entry, issues with platform neutrality, and algorithmic collusion. “Data is a very important resource. Companies that can collect, analyse, and leverage vast amounts of data can gain significant competitive advantages. This raises concern about data dominance where control over large datasets can create insurmountable barriers to entry,” she said.

“Many digital markets are characterised by… data-based business models where a single entity controls access to a wide range of services. This raises issues of platform neutrality, especially when the platforms also compete with the businesses that rely on their infrastructure. There’s a growing concern that platforms potentially favour their own services or products,” Kaur said.

“Algorithms play an important role in digital markets from shaping user experiences to making pricing and product placement decisions. However, the opacity of algorithms can make it challenging to assess their impact on competition issues. [For example] algorithmic collusion, where algorithms might implicitly coordinate prices or market strategies without explicit human direction pose novel challenges for us,” she added.

During his special address as chief guest, Venkataramani cited consumer electronics and jewellery retailers, agriculture equipment distributors, and the packaging industry as “examples of distribution channels that exert a strong influence on end customers”. “The e-commerce platform and its monopoly is another example. [An e-commerce platform] that controls and uses user-inclination generated by them, zealously created by these giants, can be an area for scrutiny and, fittingly, the e-commerce policy as one among the 100-day agenda of the government to come in,” Venkataramani said.

India’s draft National E-Commerce Policy was shared for public consultation in 2019 by the Department for Promotion of Industry and Internal Trade (DPIIT) and the final policy is yet to be released. In its initial iteration, the draft policy sought to bring in stricter consumer protections against unsolicited phone calls and emails. It also sought to enforce data localisation rules that place restrictions on cross-border data flow and to give the government authority to demand disclosure of a company’s source code and algorithms.

Since the release of the first draft, DPIIT has held numerous stakeholder meetings to discuss suggestions and clarify queries on the policy. However, it has not yet released any updated drafts. “While the policy has been long awaited by industry, consumers and other stakeholders, it is notable that the last draft of the e-commerce policy was made public four years ago, prior to the pandemic. However, no draft has been shared with the public, including industry, of the current version of the policy,” Lalit Bhasin, National President of the Indo-American Chamber of Commerce (IACC), said in September last year.

“To be sure, it was also noted in reports that a final consultation was held on the e-commerce policy between government officials and industry players as well as industry bodies. According to reports, the government has also mentioned that a broad level of consensus had emerged among concerned stakeholders on the policy. However, without a draft, it may be difficult for industry and stakeholders alike to comment on the provisions the proposed policy aims to put in place to unlock growth in this key sunrise sector,” Bhasin said in a press release.

During the event, Kaur also said that CCI is working on a market study on artificial intelligence (AI). “The transformative capabilities of AI have significant pro-competitive potential, but at the same time, there will be competition concerns emanating from the use of AI. The study will be a knowledge-building exercise to develop an in-depth understanding of the emerging competitive landscape, the development of ecosystems, and implications of AI applications for competition, efficiency, and innovation in key user industries,” she said.