Daybreak - Red tape and lawsuits: Big tech has a big problem

Episode Date: September 6, 2024

"Google is a monopolist and it has acted as one to maintain its monopoly."Last month, Judge Amit P Mehta of of US District Court for the District of Columbia delivered a historic ruling against one of the biggest technology companies in the world. Google was accused of abusing its dominance by paying the likes of Apple and Samsung billions of dollars to make its search engine the default option on their smartphones and browsers. It is being called the biggest antitrust case of the century. And this is only the beginning. The Google ruling comes amid a growing anti-big tech sentiment. The general consensus is that this tiny group of companies — Google, Amazon, Apple, Meta and Microsoft — have grown too big and too powerful. These companies are deciding what we see on the internet — the news we consume, the information we have access to, what we buy and who we buy from. At some point, everyone got a little wary of these companies. They started seeing some real threats to their power in the form of antitrust lawsuits and regulations. Suddenly, their every move was being scrutinised. Have we gone too far? Manjushree RM, Senior Resident Fellow at Vidhi Centre for Legal Policy, weighs in on the pushback against big tech, and how India is keeping up with it all. P.S The Ken's podcast team is hiring! Here's what we're looking for.Daybreak is now on WhatsApp at [phone]. Send us a hello with your name and since when you've been listening to us and be a part our community. Also, if you have any recommendations for this Thursday's Unwind segment, send them to us as texts or voice notes.Want to be part of the Daybreak community? Introduce yourself here.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the Sita Ramancahans, my colleague. secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they managed to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into.

to the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert, as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcast. or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode.

In our world, technology is hope and the internet has a solution for almost every problem. And it shapes everything around us. So, for the longest time, big tech companies have been the perfect blue-eyed boys. They've been shaping economies, helping governments evolve, doing relief work in disaster-struck countries. Let's just take a moment to remember how important they were to us during the COVID-19 pandemic. These companies have given us access to things, to ideas that would have otherwise been out of reach for most of us.

Five companies. That is how small this group is. But together, they are connected to half of the world's population. We are talking about Apple, Google, Amazon, Meta and Microsoft. These are the companies that hold the very foundation on which so much of tech innovation is built, and is being built around the world. And the more we relied on them, the more control we gave them. And now, we have reached a point

where these big tech companies are often more powerful than many national governments. They have become the giant in our garden. Only this time, instead of keeping the children out by building a high wall, the giant is saying, come play in my lovely garden. But I'll also build a wall to make sure you never get out. And I also get to be a wall.

to decide exactly the kind of information that will come to you from the other side of the wall. But here's the thing, as the giant grew bigger and more powerful, all of us became a little very. We became concerned about things like privacy, security, misinformation. And at the same time, the small fish in the tech pond wanted more space to breathe. We all started thinking, has big tech just become a little too big? And you know what that means? It means that the giant's wall, has finally cracked. These five companies have been facing an onslaught of antitrust lawsuits all over. And in all of them, they are being accused of abusing their dominance in some way or the other,

of basically being monopolistic. This anti-Big Tech sentiment that started in the West has spread everywhere. And the more we probe into these allegations, the uglier the picture that emerges. This morning, we're taking a look at a landmark court ruling that could change the way that You use the internet. We begin today's show with what's being described as the biggest anti-trust case of the 21st century. On Monday, a federal judge ruled Google has illegally maintained a monopoly over the internet search market. Google controls more than 90% of the online search market.

The U.S. Justice Department says the company maintains a monopoly by paying billions of dollars to device makers and telecommunications companies. Judge Amit Mehta of the US District Court of Columbia delivered a landmark verdict last month. Finally, the Google monopoly had been challenged. But what does that mean for the rest of the world? What does that mean for us? In this episode, we were joined by Manjushri RM, a resident fellow at Widi Center for Legal Policy

to understand this pushback against big tech, whether it's gone too far and how India is keeping up with it on. Hello and welcome to another special episode of Daybreak. I'm Snigda and I'm Rahil and every week we come together to talk about something in business and tech that interests the both of us. And it won't just be us. Depending on what we're talking about, we will bring a bunch of really interesting people onto the podcast. Hi Manju, welcome to Daybreak.

Thank you, Rahil, thank you. That's great to be speaking with you guys. Thank you so much for joining us. We're really excited to have this conversation with you because there are very few people who, who are as well-placed as you are, you know, to talk about the world's biggest technology companies, Google, meta, Apple, Amazon, and the kind of pushback that they're facing right now, right? And what that means for all of us, as people who engage with these companies in some way or the other, very often in ways that we don't even know about on a day-to-day basis.

Right. Right. And I say that because Manju has worked very closely with the committee that worked on the draft digital competition bill in India. Right. And, of course, we're going to get into her work there in a little bit. We're going to talk about, you know, how India plans to regulate, how India plans to look at antitrust regulations, you know, when it comes to big tech very soon. But before we get to that, we have a slightly more fundamental question.

Right. Right. We want to know why everyone is talking about antitrust and big tech right now. And where antitrust actually fits in when it comes to regulating big tech. Right. So, you know, that's a great question to start with because the way we've looked at. that competition or antitrust in India is just limited to the Competition Act 2002. So which, you know, for a lot of us, just looks like any other legislation, right?

So what does it really mean when we're talking about competition versus when we're talking about regulation at large? So let's really try and draw this out as a spectrum, right? Like, on the one hand, you have lazy spray where you look at a situation where the government absolutely does not intervene in the way markets work. And on the other end of the spectrum is something similar to a license Raj where before every step you need to take the government's permission right?

Competition fits somewhere in between where we're saying that let's have a slightly more balanced approach to regulation because there are benefits to both the government being slightly involved and letting markets work the way they naturally do so it's a little like let's take a playground

example right so Lazy's fray would be a situation where you let a bunch of kids come into the playground and, you know, allow them to play without there being any rules about who gets how much time on the swing or on the slide, you will naturally see that the big bully kids will start bullying everybody else out, you know, the smaller kids out. Yeah, yeah, it is pretty much that, right? Like, in that you, and they will get all the swing time, they will play on the best, you know, things on the playground. And the smaller kids will just be waiting, you know, in the background. On the other hand, if you have complete regulation

and that if you say that you have to fill in such a large form before you enter the playground every time. Turn by turn, five minutes or whatever. Yeah, or just say that, you know, even before you enter into the playground, you have to tell me who you are, deciding, who your mom is, who your dad is. All of this, this essentially means that the number of kids

that will voluntarily want to play will automatically go down. So now, what is the solution, right? To something like this. So the idea then would be to have a... game where there are some rules, but we don't take the enjoyment out of the game, but we just tell kids how to play this game, right? And then we have umpires, which are largely like the antitrust regulators. That's what they're supposed to do in that. They're just supposed to observe

that the rules of the game are being followed fairly, but you let kids decide how to creatively meander around those rules and play the game really, because that's when the best of both worlds come out. So antitrust is a little like that. You set the rules of the game to ensure that it's fair, it's competitive and everybody gets a fair chance to do it. But this comes again with a huge presumption when we're talking about, you know, situating competition at the center of Lazy's Frey and a complete regulation, that some amount of competition is always good in a market. Now, but that's an assumption, right?

We might want to get to that later because there are some markets that behave like natural monopolies. I mean, natural monopolies are basically markets where there is a single entrant where the entry barrier to set up a business is so high that it actually doesn't make. sense for a second competitor to imitate exactly what one person is doing. So you know, in a natural monopoly, you have a situation where the way we would understand competition differ

slightly in that it's not competition for the sake of competition. So we'll park that for the moment and, you know, move later. But largely if I have to situate competition in the larger, you know, broad theory of regulation, it's somewhere between, you know, lazy free and complete regulation.

Right. But Manju, you know, whenever we speak of antitrust, you know, there's this very important reason that comes up, right, which is innovation. Like in an ideal market with the right kind of antitrust regulations in place, innovation will take place and that is the sign of a healthy market. How true is this with respect to big tech? So, for a long time, you know, whenever we have intervened in cases where there has been, you know, some amount of monopoly or some amount of market power

that's concentrated with one single entity. The theory around this is that, you know, I grow as a company. I get enough of a market share in that I'm able to, I'm making great profits, etc., etc. Then my incentive to innovate really falls. Right? So then you need to have someone else in the market that keeps you on your toes so that you innovate better. And you're able to, you know, then offer better prices to consumer, more choice to consumer. And all of these are part of what we understand to be healthy competition number.

market, right? But there is also a situation where this competition can become a little bit of an overdose. I mean, there is a brilliant book called competition overdose that I would, you know, absolutely recommend the readers also to look at where sometimes when the level of competition is so high that, you know, it becomes very hard for competitors to keep up with the pressure of that competition that standards often fall, right? So there is this famous case in the US that happened with the quality of meat, you know, the quality, the kind of market competition, from meat producers was so high that the quality of meat dropped so significantly because there was no way for them to compete on prices that the other person was offering without really dropping

the quality of meat to the extent that they did. So this is where I think we'll have to first fundamentally ask the question, what is the goal of antitrust really? And I don't think we understand that fully well. We are in the midst of articulating what the goals of antitrust for India means, hopefully, you know, with more conversation on the draft digital competition will, but it's not a straightforward answer really. You know, that playground analogy that you just used was really interesting. And I want to understand where, you know, the Google verdict in US kind of, in the US recently kind of figures in that analogy, right? Just for context, for our listeners, we know that there was this really landmark kind of Google verdict that

happened just recently. We saw Justice Samit Mehta's. say that Google's been acting illegally to maintain its monopoly. It's been playing, paying the likes of Apple and Samsung, billions of dollars to have Google automatically handle all of its search queries on their smartphones and their web browsers. And of course, this is the first significant antitrust ruling against big tech, you know, in the recent wave of lawsuits that we've seen the world over, which is why it's been talked about considerably.

All of this is great in theory, right? all of us are kind of in agreement that monopolies exist. Yes, to some degree, they have to be kept in check. Competition is a good thing to a certain extent. All that is great. But I want to understand what the end game is, you know, when it comes to antitrust lawsuits, especially like this one, right? Is the end game breaking the monopoly, which I think we've established by now,

isn't likely because of regulation, because of lawsuits? Is it giving people more choice? because in my opinion, if we're talking about Google in particular, people are still going to be using Google search. Absolutely. It's not like people are magically after the verdict going to start using Bing more or using Duck, Duck Go more. Right?

And that's kind of along the lines of Google's defense in this whole thing as well, where they just said, you know what, we do search better and that's why people use us. So what really changes? So that's a lot of questions rolled into one. And let's take them one at a time. So just, you know, contextualizing the U.S. ruling recently. A couple of things. One, the remedy's hearing is yet to happen in that this was.

So usually this is a federal court sort of a judgment. And there is what the remedy for Google's conduct is going to be is not out yet. So it's supposed to start on the sixth. That's tomorrow. Yeah. So when the episode drops, I think the readers will have a little more of context to understand why the remedies went a certain way. But I think, at least from what I've been reading around in newspapers, there are many, many ways to look at remedies.

I don't think breaking up Google is completely off the table yet, but we don't know what's going to, what the final agreement that the DOJ and the courts, you know, here earlier, arrive at. And second, most importantly, this is still a federal court judgment. And Google has very much, you know, publicly stated that it will appeal this order. So we are yet to see how this will, like, you know, play out in the future. So I think let's take the Google, judgment with a degree of a little less, I mean, it's a little more uncertain and not as final

as we'd like it to be at this point in time. And let's sort of like, you know, keep that at the back of our minds when we're talking about the Google judgment because I have a feeling that there is a lot that's going to generally change around this because there is, again, when we look at Google's defense in this case, right, the thing that Google said about, here, you know, I am dominant because I am just doing this better than. everyone else. And to prove the counterfactual in this case has been very difficult. Right? Like, if you look at the kinds of people that, you know, the kinds of entities that Google entered into these agreements are other arguably big tech companies like Samsung and Apple,

who, if they thought was a good business opportunity to have another search engine, they would have by now, right? This somewhere brings me to the heart of the question that you try to tie this with the playground example, right? Like, that the playground example, is great when we have, you know, we understand somewhere competition as something that relates to the overall health of the market and not really competition for the sake of competition. In that, in this whole Google thing, I am not really certain that if there is going to be an as efficient competitor that we're trying to protect, you know, that I don't see a single situation of, hey, there would be someone else that would have made it as big as Google did if not

for these agreements. I don't think I'm seeing that very clearly because if you think of Apple, right? Apple is so hell-bent on giving the best to its consumers that for Apple it makes complete sense to push Google as a default search engine on its consumers as opposed to anybody else because Apple has internally vetted and verified

that Google is what is best on the market. So who are we really trying to protect? Yeah, exactly. Even from the consumer's perspective, right? like we use an Apple phone and we have Google as the default search engine. I know it's the best. You know, my phone is the best, my search engine is the best. Why do I even want a choice?

So who does it serve really? Yeah. Right. And I think that's a broader debate that we have to answer here, Rahil, in that I don't think we have. So earlier, right, like let's go back a little bit to the theory of like, you know, how antitrust avoid. So earlier we started with this whole idea that big is bad in that, you know,

anyone that accumulates power, hey, we have to be very, very, look, they are so powerful. they might do something tomorrow to abuse it. And then we realize that if we start with this whole idea of big is bad, then in some ways you are preventing or disincentivizing companies from getting big in the first place. Because the moment you hit that threshold, I'm saying that you invest all of that money and become a great search engine, hey, now that you're big, I'm really going to come clamping down on you. And that's not the precedent that we want to send me. But that's, again, you know, in some ways that is the sort of antitrust.

That was the flavor of the season when we were looking at. antitrust a little earlier back, which is the Harvard School of Thought generally. And from there, we've moved on to what is perhaps the Chicago School of Thought, where we're sort of trying to understand, you know, big is not bad, but abuse of big power is bad, right? So what is problematic is that if there is abuse. And traditionally, what is abuse has always been looked at vis-a-vis the consumer, but to make a case of abuse in competition terms when we look at digital markets is a very

tricky, you know, problem. And we've just about been able to articulate why, you know, digital markets are an antitrust concern separately from there being, you know, privacy concerns. Because when a consumer is getting products or services free of cost, right? And all of your antitrust is centered on price theory in that it has to mean lower prices for customers. It has to mean more choice for customers. And so much of it is centered around price as a fundamental theory that that when you're getting services for free of cost, you automatically want to ask yourself, can it get any better?

Not really should we do something to regulate it or should we do something to break up the monopoly that Google has? Okay, so then what are the sort of implications of the search engine case for general users like us and also for Google? So let's look a little bit at Google's business model as a whole. How does Google really make money? lot of its revenue comes from advertisements. And that's because for it to maintain a powerful search engine as the one that we all,

Google has become the default word for search. It's like Xerox and photocopy. I don't think people say photocopying as much as they say Xerox. And we immediately say, if you want to search for something, you say Google it, not search it, right? So the way Google has established that one may be trust, maybe that presents in the market. And the fact that it takes tons of money and maintenance and resources to run something as powerful as a search engine that Google does means that it has to be monetized in some fashion or the other. So if you're hitting on the heart of advertisement, then is the implication that tomorrow, if Google's search and advertisements are completely split up as services, would consumers tomorrow be happy with paying some money for Google search?

I'm not sure, you know, that's the sort of outcome that we're looking at, right? So then what is the remedy that's going to come out? I mean, even I'm waiting to see what the remedy phase of this case is going to look like. But the implications of this on consumer especially, for me at least, is unclear. And this also ties in with a little bit about what sort of a test, you know, the US, the court relied on in this case. It's this brown shoe sort of a test that was, you know, earlier used in one historical merger that was very, very criticized for, you know, know, because the merger, because the criticism there was even though the merger would mean more, less prices for consumers, they said that this is anti-competitive because, right?

It was a because. It stopped there. And we've relied on this exact precedent to hold Google as a monopolist and the fact that it was abusing its monopoly in one market to enter advertising and, you know, do the kind of exclusive agreements it had. But the fundamental point that I'm trying to make here is that all of these new waves of trying to regulate antitrust may take away significantly from the benefits that it has to consumers. And that's something that we ought to be quite cautious about. Okay. You know, again, in an ideal world, if big tech is kept in check and, you know, smaller companies are allowed to flourish, what does that mean for users like us? Like, you know, going back to what we were speaking about earlier, you know, like Google and Apple together, a great user experience, right? So,

what happens when smaller players come into the picture? So, you know, that's, that again, Snigda hits at a very fundamental question in that, if not Google, what else would the market look like? And I don't think we have an answer. It sounds very familiar to Indians, no? If not X, Y, Z, then who? Yeah, but, you know, if, because today it's very difficult to imagine Google as a service alone. and I think it's perhaps best characterizes as an infrastructure

where a lot of other small companies are building things on top of Google. So it's giving us, it's giving a lot if, so let's take Amazon for example, right? Like I do agree that there may be things that are anti-competitive that we have to look at with Amazon like such as self-preferencing, what it does with Suleimo, etc., etc. But the fact that, you know, it has established access for e-commerce to some of the remotest parts of the country is not something that we want to ignore. Even Google, for that matter, at the end of the day, if search and YouTube and communication is available to villages in India and if Google is doing that for free, you know, it might be somewhere problematic to say that my vision of consumer welfare does not account for those that are reliant on Google in a way where, you know, choice is not their primary concern but accesses. So I don't think that that's a narrative that we have completely articulated as a country yet.

in that I think our flavour for really what should we do with big tech companies has largely been inspired from what's happening in the EU, but EU and India are very, very different. Actually, this is a good time, right, Manjou, to look at how the Indian legal system deals, has been dealing with monopolies and the latest anti-trust draft bill that you worked on. Right. And, you know, it is, we all know that it is inspired by the EU antitrust law, the EU Digital Markets Act. Can you tell us a little bit about why was it a good framework to follow the EU law? Right. So there are a couple of reasons for this, right? So one, when we generally talk about tech regulation, there is something called the Brussels effect

where EU generally sets the standards for what tech regulation, you know, it has the first beginners move advantage in, you know, coming out with a sort of law that needs to be followed. And because a lot of companies end up complying with those laws. to make it suitable for EU. It's easier for other countries to also put similar compliance mechanisms in place so that it gets easier for companies to not have to think about many different regulations.

That's one side of it. The second part of it is that there are two technical perhaps phrases that I will throw around a little bit and I'm happy to break them down further. So there is one called India again, let's be very wary of the fact that our regulatory capacity is very, very different

from how it is in the EU, right? So the way the CCI works is very, very different from how the EC works or how the DOJ, FTC and the court systems work in the US. And our legal systems are the kind of appeals that we have pending at the Enclat, the kind of appeals we have pending at the Supreme Court, etc., is clearly, it's clear that there is a logjam and a clogging problem in our judiciary that's very different from the way it is in the EU and US. So let's just keep that in mind, you know, for a little while.

And third, so ultimately when we're talking about big tech regulation, it's been fairly clear that the kind of anti-competitive practices that we're seeing across the world are somehow similar, right? Like the kind of cases that we're seeing in the EU, the kind of cases we're seeing in the US, the kind of problems that we're seeing in India are somewhere similar. So if there is someone in the ecosystem and as a regulator that's got in A law right, perhaps, then there is no shame in getting inspired from that. But at the same time, this inspiration should be very attuned to Indian political realities, right?

So one of the reasons why we've always tried to be inspired by EU laws, it also comes from the fact that our Competition Act 2002 was largely inspired from the European, the TFEU, which is the European Union's competition law and the UK competition law. So, and because we're a common law country in some ways, we've also found it easier to rely on you know, EU and UK precedents as opposed to the US largely. So that's one of the reasons as to why, you know, we've looked at EU generally. Second, the EU's DMA generally. Another reason perhaps that I could think of why, you know, we've looked at the EU more

specifically than in any other country that has tried to do something around antitrust is the fact that, you know, when the committee sat down for his deliberations, which was last year, February, the only law that was completely in shape, ready to be enforced was the DMA. So a lot of this was also the timing at which India decided to take cognizance of whatever is happening in Indian digital ecosystem and to see if competition could be a, you know, a tool to sort of like, you know, try and tinker around that to establish a more fairer competitive, you know, digital ecosystem.

So these are largely the reasons why we, you know, decided to take inspiration. But why not strengthen the existing competition law? Why introduce a whole new law to cater specifically to digital markets? Yeah. So this comes down to. something called, you know, ex ante versus exposed regulation, right? So, and again, the line between ex ante and exposed isn't really clear.

So generally, when we've looked at, you know, the larger theory of competition where we situated competition in between Lazy's Free and pure regulation, is that we want competition to be as light touch as possible. In that, I will only intervene when something goes wrong. So general competition theory has said that if you have to make a trade-off between slightly

being slightly over-regulatory versus slightly under-regulatory. Let's try and be, let's try and veer towards under-regulation because the cost of over-regulation on markets is very, very harsh. Now, in digital markets, however, there is ongoing debate that this error cost may not work in the same way as it does with traditional markets. Because by the time you take a, you know, sort of when you take a case of a Google or an Amazon, By the time you sort of get them to the CCI, establish that they have dominance, go ahead and check their abuse and come out with a ruling. You're talking about a good three year, four year, perhaps a seven year window.

The Google shopping case in EU went on for seven years. So by the time the decision is out, the markets would have moved so swiftly that the competitors that were trying to compete would have naturally been pushed out of the market. So there we're trying to do something called ex ante regulation, which is trying to regulate, you know, preemptively as opposed to. to in a post-factor fashion. So to try and, you know, draw the playground analogy, ex-ante regulation would be trying to set the rules of the game, but exposed regulation would be to be an umpire of the set game. So an umpire checks in on you,

or the empire will have to only decide on a case-to-case basis if there's been a violation or there's a problem if someone's done some foul and call foul at that point in time. And India so far has been the empire. But how would it work? Like, are you literally talking about big tech companies? like a lot more paperwork for them where you have to apply for absolutely everything. How does that actually work in practice?

So, you know, that's a great question, Rahil, because we've won, DMAS is the only act that's been in force that is purely an ex-antee competition law till now. And it has had its own teething problems. I mean, we've been reading up about how the compliance costs for companies have generally shot up, and especially compliance costs is far more heavier on the smaller ones than the bigger ones if the thresholds for who should notify

aren't perfectly calibrated right? Because your ex ante might be what prevents someone that is about to compete with the big guy that gets clamped down upon because there is a huge amount

of regulatory cost that this company has to like, you know, now bear with. So, yes, unfortunately the way we have that the way we have sort of looked at ex ante regulation

under the DME involves a fair bit of paper work and I imagine it to be somewhere similar even if the draft DCB, the way it is currently in shape comes to see the light of the day. But I do think there is a lot more scope for, you know, to shape the public narrative around what this digital competition bill should look like. Because I think at the end of the day, it starts a very important conversation. Hey, something is wrong here. You know, I see smoke and that smoke may not be without fire. So it's worthwhile to look into where that fire is coming from.

But whether we want to, you know, if it's a small fire, whether it really makes sense for us to go just maybe with a tiny extinguisher or do we want to take, you know, like call the fire brigade is a question on the degree of regulation that we want to, you know, subject these entities to. So, Manchu, tell us about this draft bill. Right. Yeah. Like what are the major fundamental changes?

Because now it's come in almost 30 years after the 2002 law, right? Right. Why did it take so long? and what were the important parts that were missing in that that you're trying to make up for it in this bill? Couple of things. So, again, like, you know, let's sort of roll back a little bit and think about lawmaking in general, right?

So lawmaking and enforcement, if I were to compare that to how businesses are run, lawmaking is usually the idea stage of a business and the enforcement is running the business. So in my limited knowledge in terms of how lawmaking and enforcement happens, I think lawmaking is perhaps the easier part. Getting the idea for a business is perhaps the easier part. The enforcement is what's really tricky. Keeping your business running is also what's going to take, you know,

is going to sweat out the entrepreneurs more than the idea itself, right? So one thing about let's sort of keep that in mind here because when we're talking about why we are coming to an ex ante regulation, perhaps 30 years after the Competition Act, you know, was that came into picture in 2022, although it was only enforced much later. I think it began enforcement only in 2012 because there was a bunch of litigation that stopped the CCI. 10 years after? Yeah, 10 years after. So there was this Brahmadat case and a bunch of other cases that challenged the CCI's powers itself because the CCI was doing the fact-finding was also the, you know, has quasi-judicial powers, was also, you know.

Judge Jury execution. Exactly. Exactly. So at the end of the day, there was a little bit, it is an expert body, so it has all of these, you know, functions rolled up into one. So there was a lot of litigation around whether that's fair, whether there violates principles of natural justice, etc, etc. And the CCI only started functioning, you know, much later. Now, so we moved not from the, so let's talk about this a little more historically, because before the Competition Act, we had the MRTP Act, right? So the MRTP Act was a pre-liberalization Act. We realized that what we wanted to only clamp down was on, was, on things that were monopolies and not essentially other anti-competitive practices such as like, you know, whether vertical agreements or, you know, abuse of dominance or cartels, which are largely in the New Competition Act 2002. Now, it took us a while to get from, you know, MRP to Competition Act. And all this while, we were largely dealing with traditional markets.

So if you see CCI's decisions under the Competition Act 2002, some of the most important decisions that it's had has been in things like cement factory. or like, you know, automotive industry, etc., etc. And the principles, the first principles around the Competition Act 2002 were also keeping, was also drawn up keeping those markets in mind. It's not really, you know, a legislation that had the foresight to think about, like, you know, digital competition, digital market as it existed. But that's true of any regulator that you look at, which is why, you know, although there is a TFEU,

EU came out with the Digital Markets Act, right? Like the US has also been talking about coming up with a host of new bills, everything from the Chipsack to Ioka to everything that talks about that specifically aims at establishing a fair competitive field different from the fact that there exists a Sherman and a Clayton Act separately. So the fundamental point of this is that our old competition regimes didn't really account for the way digital markets would evolve and the way they stand today. So there is some sort of a consensus that is emerging that we may have to look at this. you know, with a fresh paraphrase. So, which is why there is a fresh bill, the digital competition bill, that tries to look at this. Now, this establishes the fact here that there is perhaps a need to look at

digital markets differently. There is perhaps a merit in entertaining how ex ante regulation could be helpful in establishing a competitive digital ecosystem. But whether we want to completely go by the DMA model or not is a completely different question from, you know, whether we want ex ante regulation or not. Because let's sort of like look at how India's ecosystem is sort of like, you know, poised. For every Amazon, you have a flip card that's competing. You have our own homegrown tech giants such as Swiggy, Zomato, an Ola competes head to head with a, like an Uber.

There is now rapido, there is namayatari. So clearly in some pockets of our economy, it is not as concentrated as we'd like to believe. or it is not definitely as concentrated as it is in the EU or the US. There are definitely some parts of Indian economy that I do believe that there is some, you know, there is some dominance. A couple of Google cases that have come up before the CCI has looked at in the context of App Store, has looked at in the context of Android. So some places there is clear monopoly. It's clear, like, you know, I think somewhere in the 94 or 97% of Google's, I mean,

the search market is dominated by Google. So that's a huge number, right? So, but this may not be the problem when you look at, say, a Swiggy or a, sorry, Amazon versus a flip card. And more importantly, you know, newer innovation such as Blinket or like, you know, these quick commerce delivery services are taking on these Amazon and e-commerce giants very, very strongly. So there is clearly evidence that the market still allows for competitors to come up at least in certain pockets. of the economy. So a fundamental question that we have to ask here is

one, do we need ex ante regulation? And if the answer to that is yes, the second question that we ought to ask is in what limited spheres of the digital market is ex ante regulation advisable? Because it could end up being

counterproductive in that sense, right? Because then everyone's the big guy. Exactly. And then the same rules that apply to a Google or an Amazon or someone else will also apply to a flip cut and people who are actually emerging as challengers to these massive

companies in India. Absolutely. And in fact, it has the opposite effective, like, you know, if you want competition to emerge from the market, regulation might be what is stifling that competition from emerging as opposed to opening up doors for new competition. So I think we'll have to be careful about the heavy-handedness that regulation generally comes with. And I think there is this wonderful paper that, you know, Shruti Raj Kopal and like Alex Tabrock

have sort of talked about, which is premature imitation in India when we talk about, you know, regulation making in that we tend to imitate what the West does but somewhere that imitation in the process might lose you know relevance in reality because our

situations might in fact be very very different. Exactly what you just said the digital market in India is very different from the ones in the West yeah that makes it. Okay so coming back to the bill Manju how do you identify the big guy? Like who is the big guy? Okay so

So that's an interesting question again. So let's look at how we did it under the Competition Act, right? So we have something called dominance, which is also something that the EU uses as a standard. The US calls it like a monopoly power, but they all roughly mean the same thing, right? So dominance is basically the ability for you to single-handedly, like, you know, sway the market in a way that it would make sense to you, simply because you have the power to do that. It basically measures the degree of influence that you have on the market, right? Now, earlier the way we did it is that we identified a relevant market and then we asked the question as to, you know, in this relevant market, who is the competitor for this entity? If there weren't many competitors, then we understood that entity to be dominant in that market.

So this relevant market is a very important sort of a definition in that, sorry, a very important sort of an exercise because, you know, let's take the example of the Ken itself, right? So in some ways, Ken could be competing with Spotify. really depends on whether you classify Spotify as a music streaming service or a podcast streaming service or whether you classify Ken as a newspaper and like your news media company or whether you classify it as a podcast streamer. So, you know, identifying in which market are you looking at the relative strength of that enterprise becomes very, very important, right? Now, to do this in digital markets has, however, become very difficult because all of

these companies, right, like leverage the way their business models are, organized is that they don't, it is almost impractical as a business decision to only exist in one market and not another. So by virtue of how business models are organized, someone in search is going to invariably be there in advertisement, someone that's going to be there in, like, you know, shopping is invariably going to also be a competitor on the same platform. So that's the only way where this model makes sense for businesses, otherwise you're essentially asking them to run certain infrastructural services free of cost. That's, that's, I don't think we, think that's a fair outcome, right?

So to do that under the digital, so therefore to delineate exactly, you know, the sphere of operation of these big tech companies is very, very difficult, right? So which is why in the draft digital competition bill, you have a list of core digital services at the schedule at the end of it, where we have everything from cloud services

to online, like, you know, to app stores, to search engines, etc., etc. So these are supposed to service proxies for your relevant market. Now, once you've identified the relevant market and you are someone that provides that particular core digital service, there are some financial thresholds and there are some user thresholds when look together should be able to tell you whether you are an entity that satisfies those thresholds. And if you satisfy those thresholds, you can become designated as an SSD, a systemically

significant digital enterprise, which is the rough equivalent of dominance that we looked at under the old digital competition act. So under the new digital competition bill, sorry, under the old Competition Act. So under the new digital competition bill, we are calling that standard as an SSD standard. So you have, you know, it's based on how much turnover you have, how much gross merchandise value you bring to the table, what your global market capitalization is, and also the number of users you have, how many business users you have and how many end users you have. Now, one thing again to keep your in mind is, again, these thresholds are also largely borrowed from what is happening in the EU.

Now, that's where I think the reluctance for a lot of industries and a lot of, you know, stakeholders have arisen. Because these thresholds, yes, may catch the big fish in the pond. But the question that we ought to be asking is not that who it catches, but who else does it catch? Because that has far-reaching implications on the kind of innovation that we want to spur in our digital ecosystem. So we may very ostensibly be looking at.

at a situation where, you know, DMA has only designated six entities, if I'm not wrong, as gatekeepers. And these are all your big entities. You have your Google, you have your meta, you have bite dance, you have booking.com. These are the large entities that have gotten caught under the net. But that net might be a little too, you know, sparsely spread for the Indian context. And that may have implications for how our digital economy works. Also, Manju, you know, the ex-ante-part, right, there's been a lot of resistance from tech

companies in India. Can you tell us why? Okay, so, I mean, if I were putting myself in their shoes, right? Of course, any regulation is going to cost me a lot in terms of the way I organize my effect. So I think some amount of resistance is expected whenever you're trying to roll out a new law and the subjects of... At the same time, sorry, to interrupt, but we saw like 40 startups, Indian startups

that came out and they were like fully supporting the draft bill, right? But then you also had other companies who are, you know, opposing, especially the ex-ante. But, yeah. Yeah, yeah. So, yes. So there is currently like a little bit of a flux that the bill, you know, is in also because it's not a bill that's been put up as the ministry's bill, but it's largely in a recommendation stage, it's, like a mandatory stage and that the committee deliberated

on it and has proposed a version that the MCA may or may not take up, right? So at least under the thresholds that, so I think principally, you know, when you look at ex-ante, I think a lot of smaller startups and a lot of, you know, other innovators in the ecosystem think that this is something that's beneficial for them because it's somehow going to help them, somehow going to help the CCI reign in the really, really big guys. But that calibration, you know, like who are we really targeting becomes very, very important. Because in an ideal world, we would be catching maybe three or four big tech guys.

But in a not-so-ideal world, we may be catching somewhere around like 40 or 40 or 40. 50 of them, or at least asking them to come and notify, you know, that I fulfill these criteria to the CCI, which may simply add, you know, compliance burden. And I think generally when we look at the history of regulation in India, I think the 1991 reforms have just been fairly clear in terms of what deregulation can simply do for us as an economy. So given that, you know, IT and digital services is one bright spot in the Indian economy, what opportunity cost are we willing to bear to catch the really big ones is a question that

is unique to India and one that we should think on first principles from. And perhaps there is no merit in borrowing that thinking from what EU is doing or UK is doing or, you know, US is doing. Got it. And the other kind of side of this is the harder that we make it for companies to set up shop here, the less likely they are to come, right? Like there's a very real possibility that the Googles and Amazon's of the world are like, hey, you know what?

I'm better off elsewhere. Yeah? Right? So that's a very interesting question because, one of the critical sort of things that, you know, that determines success of these companies is also the amount of data that they sort of like, you know, collect and like, you know, have.

So, you know, one of the very interesting debates currently in antitrust also is that, you know, sure, consumers are not paying like a monetary price to access to Google, but we're surely paying through our data, right? So how do we really account for that as, you know, a price? Now, what's great for India is that we are so many people that, like, you know, if I were trying to, like, you know, collect and store data.

I would do it in India, right? This is a place to be. Yeah, this is a place to be. So, India definitely has a population advantage going for it. But we've also historically, you know, not been very good enforcers of the laws that we sort of put out, that we sort of put out. And that's, that's, and again, another problem

because of the state capacity think we talked about in the beginning, right? So, Land Prichet very famously describes India as a flailing state in that, you know, we are simultaneously too big and too large a visit, too big and too small at the same time, and that we want to regulate everything, we want to govern everything, but our capacity is tiny, so tiny that we have to prioritize, right? So my worry is that while this may be paved with great intentions, the enforcement of it is what's going to really decide whether it's going to add the sort of compliance burdens that people's care of some, you know, people that are investing in the bright spots of our economy.

And only time can tell that. And, and, but yes, I just generally hope that the draft digital competition bill goes through many, many more rounds of like, you know, public discourse and public debates so that we're all, we're sharpening it to be very, very specifically targeted at the ones that we want to target. the flip side of overregulation here might be a little too costly for the way Indian digital economy is positioned at the moment. Okay, Manju, last question.

You know, talking about public discourse right now, I mean, this is why we have this episode right now, is because the public sentiment is very anti-Big Tech right now, right? Are we, do you think we're being fair and balanced when we're thinking of like these big tech companies as like the Big Bad Wolf? That's a very interesting question, you know, again, because there is no one answer to something like this.

And whenever we look at Big Tech, I think it's important to look at the kind of power that big tech as a whole, you know, has had on the way our, the way it has changed from everything, from what we eat to what we wear, to how we commute, to even how we vote, right? Like Cambridge Analytica was a huge example of how, you know, big tech power can easily be misused. So there are, yes, I'm not saying that there are no instances of misuse, but I think it's important that we weigh these instances of misuse against, what really big tech brings in terms of advantages to the Indian economy. So let's take COVID, for example, right?

Like the kind of delivery support system that some of these commerce companies were able to establish was phenomenal. And the fact that, you know, someone like an Amazon today gives a rural entrepreneur access to India as a whole as a market as opposed to just maybe they're limited local Monday. It's insane. It's insane. And the kind of connectivity that, you know, a YouTube or like even Google has established in rural places is all. also absolutely insane. And these are some essential functions that I don't think we can put a price on. These really mean a lot to the Indian economy. So I think when we're talking about big tech, yes, am I saying that there are no problems with it at all? Not at all. Everything comes with its own set of problems. But I think it's really important that we ask ourselves at this

point in time, what is the opportunity cost of going down really heavy on these big tech companies? do we stand more to lose or more to gain? And that should perhaps that is a goal that we have to define for ourselves as India and then figure out how do we target our regulation or even antitrust laws to meet exactly those specified goals. So it should be a systems thinking approach and not really looking at antitrust and big tech in isolation. We need to look at the larger bigger picture, zoom out and see what we can do with antitrust. It's just simply one other tool in the larger regulation, you know, the larger regulations. regulation kitty that we have when we look at big tech.

Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the Ken website. Today's episode was hosted and produced by Rahal Philippos and I, Sinkda Sharma, and it was edited by Rajiv Sien. Also a huge shout out to Aditi and Kavipriya and the rest of our fantastic design team here at the Ken

for the amazing artwork that they make for every Friday special episode of Daybreak.