While there is a basic
distinction in enforcement approach in the EU and US, i.e., there is criminal
enforcement of antitrust laws in the US, it is administrative in the EU. India
has followed the administrative model in the EU.
Several scholars have
lately raised concerns about expanding monopolistic power in the global
economy. Concerns have been expressed from across the political spectrum, but
the most persistent warnings have come from the self-proclaimed "New
Brandeisians," a group of scholars for whom the title of Louis Brandeis's
famous essay, "A Curse of Bigness" (Brandeis 1914, chap. 8), has
become a mighty rallying cry. Members of this group contend that Google,
Amazon, and other large tech companies are engaging in plainly anticompetitive
actions to stymie future competitors and get away with it by influencing the
political system. They are especially concerned that the existing antitrust
doctrine focused on consumer damages has rendered the countries defenseless
against bigness' other problems
Big Tech, sometimes known
as the Tech Giants. It refers to the largest, most dominating, and prominent
firms in the global information technology sector. As the term 'Big' suggests,
each significant technology business is the undisputed leader in its relevant
field. Microsoft dominates the Operating Systems industry, Facebook dominates
the social media area, Google dominates the search engine business, and Apple
dominates communication hardware. These IT companies' notion of dominance has
become a significant headache from a competition perspective. Big Tech has a
significant influence on the economy and broader society, which raises worries
on various fronts, from data privacy to the democratic will forming process.
However, the competition problems are exclusively connected to digital markets'
proclivity to produce monopolies. Monopolies have negative consequences such as
lower output, higher prices, and large expenditures by corporations to
establish a monopoly. This also explains the multiple antitrust lawsuits filed
against Microsoft, Google, and Facebook.
In this article, I will be
analyzing a) A comparative analysis of the US, EU, and India's perspective
towards abuse of dominant position. b) Some case studies on the abuse of
dominance by Big Techs.
Abuse of Dominance – The Concept
Monopolistic behavior is extensively
prohibited by current competition law. The Sherman Act of 1890, which is
credited with establishing competition law, has a particular restriction
against monopolization. Abuse of dominance (AoD) is prohibited under Article 82
of the EU Treaty. Similarly, section 4 of the Indian Competition Act, 2002
forbids and punishes misuse of a dominant position. It does not frown on
domination in general. A company is allowed to expand as much as it wants or
gain as large a market share as possible.
The issue only emerges when
there is AoD. AoD is one of the most challenging areas of competition law
because firms can legitimately achieve dominant positions through innovation,
superior production, or more significant entrepreneurial effort. Many practices
that appear anti-competitive on the surface can serve legitimate
pro-competitive purposes. As a result, in a certain case, various competition
authorities may reach different judgments, as seen by the diverse decisions in
the Microsoft cases. Experts correctly warn of the "chilling effect"
on competition and innovation that might emerge from the incorrect use of AoD
laws.
In most AoD instances,
three questions arise a) What is the relevant market in which the claimed
dominance/abuse occurs? b) Is the company the dominant player in the relevant
market? c) What are the particular implicated practices, and are they abusive?
The relevant market
comprises two parts: the 'relevant product market' and the 'relevant geographic
market .'The 'relevant product market' includes products/services that the
customer considers interchangeable or substitutable. Should the product market
for soft drinks comprise any or all aerated drinks, fruit drinks, cold coffee,
and milk? Is Coca-Cola or Pepsi interchangeable with apple juice?
The 'relevant geographic
market' is defined as where competitive conditions are homogenous. For example,
in the case of cement, is the regional market to be the entire country or just
a small region, such as the Northeast? The Competition Act specifies several variables
that the commission must consider when assessing the relevant product and
geographic markets.
The second consideration is
whether the company is dominant in that relevant market. Again, the act
provides a comprehensive list of considerations that the commission should
consider for finding dominance, many of which are identical to those evaluated
in other countries such as the EU and the UK. The MRTP Act defined dominance
only in market share (25 percent or more).
Market share remains an
essential consideration under the Competition Act, but other criteria such as
entry obstacles, size, resources, economic power and commercial advantages of
the company, size, significance of rivals, and so on must also be evaluated.
Thus, if one business has a
45 percent market share while the second firm has a 40 percent market share,
the first firm may not be called dominant. However, if the business's stake
over other firms is 15% or less, the firm may be considered dominant. However,
dominance may be challenging if there are no entry barriers and the business
confronts possible competition from new entrants. Entry hurdles might include
legislative impediments, significant capital expenditures, a lack of
technology, etc.
The final consideration is
whether the corporation, assuming genuinely dominant in the relevant market,
has exploited its position. The following practices are defined as abuse under
the Competition Act, 2002: “unfair or discriminatory prices or conditions,
limiting or restricting production or technical or scientific development,
denying market access, imposing supplementary contractual obligations unrelated
to the subject of the contract, and using dominance in one market to
enter/protect another market.”
Abuse of Dominant Position in EU
Article 102 (previously
Article 82 EC and prior to that Article 86 EC) of the Treaty on the Functioning
of the European Union (TFEU) deals with the provision of abuse of dominant
position. Specifically, it lists the types of abuses, in contrast to the US, which
relies on judicial interpretation of the concept as noted above. Article 102 of
TFEU runs as follows:
"Any abuse by one or
more undertakings of a dominant position within the internal market or in a
substantial part of it shall be prohibited as incompatible with the internal
market in so far as it may affect trade between the Member States. Such abuse
may, in particular, consist in:
(a) directly or indirectly
imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production,
markets, or technical development to the prejudice of consumers;
(c) applying dissimilar
conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
(d) concluding contracts
subject to acceptance by the other parties of supplementary obligations which,
by their nature or according to commercial usage, have no connection with the
subject of such contracts."
It is essential to
highlight that the current Competition Act of India closely matches EU
regulations, as evidenced by the provisions themselves as well as the
interpretations provided to the legislation by CCI and COMPAT/Supreme
Court/High Courts in the previous five years of enforcement. An examination of
Article 102 reveals five critical components for proving abuse of dominant
position in the EU: “(i) a 'undertaking' – single or collective (ii) a
dominating position (iii) held in an internal or common market (iv) abuse and
(v) influence on inter-state trade.” Furthermore, in the EU, there are detailed
instructions for implementing AOD regulations and determining Relevant Market.
A Dominant Position
The norms of abuse of power
apply to 'undertakings.' According to EU rules, this is generally construed and
applies to all entities engaged in economic activity, regardless of their legal
status or means of financing. As a result, public bodies participating in
commercial activity are subject to the abuse of dominance regulations.
According to the EU
Guidelines, determining whether an undertaking is in a dominant position and
the degree of market power it possesses is the first stage in applying Article
102. While the dominating position is not specified in EU law, it arises from
the United Brands Case and is later confirmed in the Hoffman La Roche Case
“The dominant position
referred to in this Article relates to a position of economic strength enjoyed
by undertaking which enables it to prevent effective competition being
maintained on the relevant market by giving it the power to behave to and
appreciable extent independently of its competitors, customers and ultimately
of its consumers.”
Another significant
difference in the EU approach to dealing with AOD cases is that in the EU,
maintaining a dominating position places a special obligation on the
undertaking in inquiry, the scope of which must be determined in light of the
individual circumstances of each instance. This is not the situation in the
United States, where the undertaking bears no unique duty as a result of its
dominance.
Types of abuse
Exclusionary abuse
Exclusionary abuse is
defined as behavior by a dominating business that can prohibit competitors, in
whole or in part, from profitably entering or remaining active in a particular
market (and which, as an indirect result, will ultimately have a detrimental
impact on consumers).
Exclusionary behaviors are
often regarded as the most dangerous sort of abuse. This is because they have
the potential to weaken the competitive process in the long run by preventing
small or new rivals from becoming viable challenges to a dominant business,
depriving customers of the opportunity to benefit from more choice and
competition. Exclusionary abuse includes (but is not limited to):
• Predatory pricing:
actions used expressly to eliminate or undermine a competitor's position as a
viable competitor (either by forcing it out of the market or by deterring
market entry). This is accomplished by a dominating corporation preceding
short-term earnings to drive out or dissuade competitors. Once the dominant
corporation has effectively rejected current competitors/potential entrants, it
has reinforced its position and is allowed to charge supra-competitive rates
and/or degrade its services without repercussions.
• Refusal to deal: a
dominant undertaking's freedom to choose with whom it does business may be
limited whereas, as a vertically-integrated undertaking (dominant in an
upstream market for the supply/ownership of an important or 'essential'
input/facility), it can use its position in the supply of the important or
'essential' input/facility to deny rivals access (thus harming their ability to
compete with the dominant undertaking in the downstream market).
• Loyalty rebates: a
return granted to a client when a certain amount of merchandise is purchased
over a specific period—can encourage customers to place all of their purchases
with one company rather than splitting their orders among rival companies
(effectively amounting to an exclusivity obligation in its effect).
• Tying and Bundling:
techniques employed by corporations to combine the selling of two unique items
together may make competing with the stand-alone products more challenging.
• Enforcing patent
rights—enforcing one's patent rights by an injunction may constitute an
abuse in certain instances.
Exploitative abuses
Unlike exclusionary abuses,
which target competitors and so indirectly hurt customers (owing to the
exclusion of competitors and a resulting decline in competitive alternatives),
'exploitative abuses' have no negative impact on rivals. Instead, they involve
the dominating corporation actively harming consumers (which uses its market
power to extract rents from its customers beyond what would typically be
achievable).
Reprisal abuses
A 'reprisal' abuse occurs
when a dominating firm 'overreacts' to perceived threats to its commercial
interests. The dominating corporation seeks to warn, reprimand, or penalize the
trade partner/competitor by increasing prices charged, canceling supply or
purchase contracts, or initiating legal procedures, among other things. These
abuses are frequently exclusionary in their goal and effect, yet the action
taken is excessive and unjust (especially regarding trading partners that are
not rivals) (constituting an abuse in its own right independent of its
exclusionary potential).
The Notion of Abuse of Dominance in the
USA
Sherman Act, 1890
The Sherman Act has
declared illegal all contracts, combinations or conspiracies prohibiting trade
or commerce between states or territories or with foreign countries. The
essential requirement is that there must be mutual agreement or commitment to
engage in a common course of anticompetitive conduct.
Monopolize and Conspiracy
to monopolize
Section 2 of the Sherman
Act outlawed (a) Monopolization, (b) attempt to monopolize (c) conspiracies to
monopolize.
This section has two basic
elements
1) Possession of monopoly
power in the relevant market
2) The wilful maintenance
of the power.
A person is not guilty
until he or she possesses monopolistic power, which is the ability to set
pricing and eliminate competitors. As a result, the crime of monopolization
necessitates monopolistic power and intent to monopolize; nevertheless, there
is no monopoly if the defendant's monopoly power arises as a result of a better
product, implying a commercial or historical accident.
Monopolization is covered
under the competition act but not a conspiracy to monopolize. The Sherman Act
forbids any attempt to monopolize. The distinction between real monopolization
and attempted monopolization is that in the former, the general purpose of
acting is necessary, but in the latter, the intent, which may be proven by
proof of unfair methods on the side of the competitor, is required. To establish a conspiracy
to monopolize, three basic things are to be proved:
a. proof of conspiracy
b. specific intention to
monopolize
c. An overt act in
furtherance of the conspiracy, and there is no need to establish the market
power.
Price Fixing
The Competition Act
includes the word price association, i.e., price-fixing; however, it does not
elaborate on vertical and horizontal price-fixing. Vertical price-fixing occurs
when a manufacturer uses its dominating position to fix the price with a
retailer; horizontal price-fixing occurs when a manufacturer sets the price
with another manufacturer. Vertical pricing is also known as price maintenance,
and an agreement between a film distributor and an operator, for example, is
prohibited. Price maintenance agreements do not allow a patentee to regulate
its resale price. Prices are generally established when they are agreed upon.
Section 132 of the Sherman
Act additionally indicates that while the broadcast or exchange of price
information does not in and of itself constitute a violation of Section 1,
pricing information and the criminal intent to fix prices do. However, a
combination or conspiracy under section 1 where rivals agree to share
information on the pricing of the application.
Tying Agreement
Binding agreements are
defined by the Sherman Act as an agreement entered into by a party to sell a
product, but only if the customer either buys another product or agrees not to
buy that product from another supplier. Tying arrangements are not unlawful in
and of themselves. An unlawful tying arrangement occurs when a vendor demands a
consumer to purchase another, less desirable, or cheaper product in addition to
the desired one to reduce competition in the linked product. The Sherman Act
further underlined the need to separate related items since there is no
unlawful tying agreement if the products are comparable and the market is
identical.
Amalgamation
According to the Sherman
Act, an amalgamation is illegal in two ways: first, it removes considerable
competition, and second, it creates a monopoly. There are two kinds of
amalgamation: horizontal and vertical. For example, if two businesses are
significant competitive players in a relevant market, a merger or consolidation
between them violates the Sherman Act if it eliminates competition. If a
corporation loses money and wishes to dissolve, the horizontal merger is not
prohibited. Vertical amalgamation is only unlawful if the illegality is
activated:
a) The purpose or intent
with which it was conceived
b) The power it creates in
the relevant market.
Clayton Act
After the Sherman Act supplementing
the Sherman Act, another law was proclaimed in 1914 named Federal Antitrust
Laws: Clayton Act.
Mergers
Vertical and horizontal
fusions were specified under this statute. A vertical merger occurs when a
buyer and seller unite, whereas a horizontal merger occurs when direct
competitors merge. A conglomerate merger is neither vertical nor horizontal.
The 33rd Competition Act makes no mention of conglomerate mergers. As defined
under the Clayton Act, a pure conglomerate merger is an unconnected combination
between the buyer and the acquired firm.
Indian Competition Law Perspective on
Abuse of Dominance
“Section 4(2) of the
(Indian) Competition Act 2002 (the Act) provides that there shall be an abuse
of a dominant position if an enterprise or a group: directly or indirectly
imposes unfair or discriminatory conditions or prices in the purchase or sale
of goods or services; restricts or limits production of goods or services in
the market; restricts or limits technical or scientific development relating to
goods or services to the prejudice of consumers; indulges in practices
resulting in a denial of market access; makes the conclusion of contracts
subject to acceptance by other parties of supplementary obligations, which, by
their nature or according to commercial usage, have no connection with the
subject of such contracts; or uses its dominance in one market to enter into or
protect its position in other relevant markets (i.e., leveraging).”
There can be no abuse in
the absence of dominance, so, as a first step, the dominance of an organization
in a relevant market must be created. In Uber India Systems Private Limited v
CCI (2019), the Supreme Court held that the losses made by Uber per trip were
prima facie indicative of abuse (through predatory pricing) as well as of
dominance itself.
Exploitative and Exclusionary
Practices
Section 4 is written
broadly enough to include exploitative and discriminatory acts, but this is not
explicitly stated. The CCI remarked in HT Media Ltd v Super Cassettes Ltd
(2014) (HT Media case) that pricing abuses might be 'exclusionary' (i.e., pricing
techniques employed by dominant corporations to exclude competitors) or
'exploitative' (i.e., which cover instances where a dominant firm is accused of
exploiting its customers by setting excessive prices). In this instance, the
CCI found Super Cassettes Industries Limited's minimum commitment charges (MCC)
to be both exploitative and discriminatory.
The CCI has considered
exploitative practices such as exorbitant pricing and unjust contract
conditions in a number of cases. The CCI reviewed the passenger car market and
the aftermarkets, including spare parts, diagnostic tools, and the supply of
after-sales repair and maintenance services, in Shri Shamsher Kataria v Honda
Siel Cars India Ltd & Ors (2014) (Auto Parts case). It discovered that 14
automobile manufacturers misused their dominating positions in their respective
aftermarkets by requiring customers to buy replacement parts and diagnostic
kits only from the carmaker or its authorized dealers. Using the necessary
facilities concept, the CCI determined that this amounted to a limitation of
market access to rivals. The CCI also found that the car manufacturers had
engaged in excessive pricing of their spare parts
The link between dominance
and abuse
The CCI is not necessary to
show a nexus between abusive behavior and a dominating position. Any given
behavior looks to be abusive if undertaken by a powerful organization.
It is also unnecessary for
dominance to exist in the same market where anticompetitive behavior is felt.
According to Section 4(2)(e) of the Act, abuse of a dominant position occurs
when a dominant organization utilizes its dominating position in one relevant
market to enter or defend a dominant position in another relevant market.
Specific Forms of Abuse
Types of Conduct
Rebate Schemes
The Indian Competition Act
2002 makes no mention of discounts or rebate programs. However, rebate schemes
may be considered unfair or discriminatory prices and conditions, or other
exclusionary practices (e.g., practices that limit or control the production of
goods and the supply of services, or practices that result in the denial of
market access), and thus may be covered by the Act
The Competition Commission
of India determined in the Intel case (2014) that Intel's incentive and target
schemes did not preclude rivals and that this was reflected in the distribution
of competing microprocessors by Intel's distributors and OEMs. The
complainant's claim that distributors were barred from dealing in competitive
items was judged to be unfounded. Furthermore, the CCI determined Intel's
incentive programs to be legitimate business practices because they aimed to
promote sales of low-demand items and gave non-predatory discounts to compete
Tying and Bundling
Unilateral tying and
leveraging are considered abusive under section 4(2)(d) and section 4(2)(e) of
the act.
The CCI set out the
conditions for prohibited tie-in arrangements under section 3(4) of the act
(which deals with anti-competitive vertical agreements but has some bearing on
tying under section 4) in Sonam Sharma v Apple (2013): the presence of two
separate products or services capable of being tied. The purchase of one
commodity must be contingent on the purchase of another; the seller must have
sufficient economic power over the tying product to appreciably restrain free
competition in the market for the tied product; and the tying arrangement must
affect a 'not insignificant amount of commerce: a tie-in arrangement is only
considered abusive if it affects a 'substantial' portion of the market
Exclusive Dealing
Exclusive dealing,
non-compete agreements, and single branding limitations might all be
characterized as practices that result in the denial of market access, as
covered by section 4(2)(c), or limiting production or technological
advancement, as covered by section 4(2). (b). As a requirement under Section 4
of the Act, the CCI is progressively analyzing the foreclosure effect of such
activity
Predatory pricing
Explanation (b) to Section
4 of the Act establishes a two-step process for determining whether the
behavior of a dominating organization is predatory. First, the price must be
below cost (as measured by CCI standards), and second, the dominant firm must want
to decrease or eliminate competitors.
The CCI has released
standards for establishing production costs, which say that the average
variable cost is the default cost benchmark (as a proxy for marginal cost).
However, depending on the nature of the industry, market, and technology
utilized, the CCI and the Director General (DG) may consider alternative cost
criteria such as avoidable cost, long-run average incremental cost, and market
value, with written justification
Price or Margin Squeezes
Price squeezes, although
not explicitly referred to in the act, would be covered where they amount to
unfair or discriminatory pricing terms under section 4(2)(a)(ii) of the act and
denial of market access under section 4(2)(c) of the act.
In the case of In Re: XYZ v
Association of Man-Made Fibre Industry of India (2020) (GIL case), the CCI
issued its single infringement order of the year, finding Grasim Industries
(GIL) to have abused its dominant position in the market for the supply of
viscose staple fiber (VSF) to spinners in India. While not a margin squeeze
assessment, the CCI found that GIL had misused its dominant position by
employing a discriminatory pricing strategy in which it charged more excellent
rates to its downstream and domestic customers than to its international
clients. Refusals to deal and denied access to essential facilities
Access to essential
facilities would be covered under practices resulting in a denial of market
access under section 4(2)(c) and possibly section 4(2)(b), which prohibits
limitations or restrictions on the production of goods or provision of services
or technical or scientific development relating to goods or services to the
prejudice of consumers.
Predatory Product Design or
A Failure to Disclose New Technology
Although the act does not
limit reasonable requirements for the protection of intellectual property
rights (IPRs) in anticompetitive agreements, there is no specific reference to
IPRs in the act's abuse of dominant position provisions. An unreasonable
unilateral refusal to license an IPR or a discriminatory price between two
enterprises can be considered an abuse of dominant position if these actions
result in the imposition of an unfair condition or price, denial of market
access, limiting production, technical or scientific development, or price
discrimination, or any combination of these
In the Auto Parts case
(2014), the CCI held that an unreasonable denial of market access by a dominant
company could not be defended based on holding IP rights and would be
considered abusive under section 4
Price Discrimination
Section 4(2)(a)(i) of the
act prohibits non-price discrimination, and section 4(2)(a)(ii) prohibits price
discrimination.
In the Schott Glass appeal
(2014), the COMPAT determined that price discrimination abuse required the
fulfillment of two ingredients: (1) unequal treatment of analogous
transactions; and (2) injury/likely harm to competition by which purchasers
were disadvantaged against each other. The COMPAT offered more advice on
discriminatory behavior by stating that "the price and conditions could be
said to be discriminatory if, and only if, they were different for the same
quantities of the same product.
Exploitative Prices or
Terms of Supply
The CCI has considered
exploitative practices such as exorbitant pricing and unjust contract
conditions in a number of cases. The CCI determined that 14 automobile firms
exploited their dominating positions in the Auto Parts case (2014) by forcing
customers to acquire replacement parts and diagnostic instruments only from the
relevant car maker or their authorized dealers. While deciding the appeal, the
COMPAT agreed with the CCI's conclusion that the margins from the spare
business significantly outweighed the margins from the vehicle-selling business
and ruled that the automobile firms were charging an unfair price in the
spare-parts market. The Supreme Court has suspended the COMPAT's verdict on
appeal
On the contrary, the
COMPAT's ruling in the Orissa Steel Federation case (2016) follows the approach
of EU courts regarding excessive pricing: the CCI must establish unfairness in
addition to arguing that a price is excessive. Aside from expenses, the CCI
should take into account the gap between what the dominant business and other
firms may charge, what various consumers pay, if customers can still be
profitable, and whether there is a supply shortage (in which case high prices
may be an efficient method of allocating the product)
In the HT Media case, which
is now under appeal before the NCLAT, the CCI considered the minimum commitment
charges imposed by SCIL as exploitative
Abuse of Administrative or
Government Process
Section 4 of the Act may cover abuses in the nature of sham litigation that result in denial of market access and limiting production, technical or scientific development.
Bulls Machines filed a
complaint with the CCI in the matter of Bulls Machines v JCB India Ltd (JCB)
(2014), alleging that JCB abused the legal process to remove rivals. The
complaint was filed as a result of JCB's proceedings before the High Court of
Delhi alleging infringement of JCB's design registrations and copyright by
Bulls Machines in developing the backhoe loader 'Bull Smart'; JCB obtained an
ex-parte injunction against Bulls Machines on the basis of alleged design
infringements. The Delhi High Court eventually suspended the interim ruling. The
CCI found there was a prima facie case that JCB had abused its dominant
position in the manufacture and sale of backhoe loaders in India by initiating
these proceedings and directed the DG to proceed with the investigation
Mergers and Acquisitions as
Exclusionary Practices
Although structural abuses
are not directly addressed in the act's abuse of dominance provisions, the
act's merger control requirements necessitate obligatory pre-notification of
combinations that exceed specified financial criteria set out in section 5 of
the act. Combinations that have or are expected to have a significant negative
impact on competition in India are invalid
Mergers and acquisitions
that do not satisfy these financial requirements may be evaluated under Section
3 of the Act for engaging in anticompetitive agreements or Section 4 of the Act
for abuse of dominance; however, no transaction has been reviewed under these
provisions to date. Section 4(2)(c) of the act may be wide enough to capture
any form of denial of market access, including through mergers and acquisitions
if they are exclusionary
The Microsoft Case
Microsoft, the world's largest software company,
has been the subject of multiple antitrust proceedings in both the United
States and the European Union. Microsoft has been accused of squeezing vendors
and customers. Microsoft's strategies included aggressive pricing, bundling,
and discriminatory deals. The diverse nature of the Microsoft abuse of
dominance case exposes features of antitrust trust regulations on dominant
businesses as well as the disparities in methods taken by US and EU antitrust
regulators.
The United States versus Microsoft
In 1993, the US Department of Justice investigated
Microsoft for exploiting its monopoly in operating systems. Microsoft used
exclusive licensing strategies. It offered significant price cuts to personal
computer makers in exchange for agreeing to pay for the installation of the
Windows operating system on all PCs they sold. Manufacturers were thus
penalized if they did not install Windows. Microsoft was also accused of
tightly coupling its apps with its operating system
The inquiry ended in an antitrust settlement
between Microsoft and the Department of Justice that was accepted by an appeal
court in 1995, in which Microsoft agreed not to enter into similar violating
rebates and tying arrangements in the future (Sherman, 2008, 327). However,
Microsoft was later accused by Netscape of tying its browser to its operating
system, therefore breaking the 1995 agreement. Microsoft contended that the
internet search engine Explorer, which debuted in 1995, was not a product but rather
a function and so did not breach the settlement. This term was not accepted by
the Department of Justice (DoJ). However, an appeals court ruled against the
tying injunction in 1998. The bundling was deemed legal by the Court since it
was convenient for customers and reduced expenses. Microsoft was again indicted
under the US antitrust laws for infringing section 2 of the Sherman Act by the
US Department of Justice and nineteen US states in 1998. Microsoft was accused
of being engaged in a pattern or practice of illegal behavior. Under such a
charge, the defendant can be declared guilty whether or not every one of its
challenged acts was a violation (Sherman, 2008, 328)
The Court also declared Microsoft's Java tactics to
be in breach of Section 2 of the Sherman Act. As a structural remedy, the US
Court judgment in the Microsoft case in 2000 entailed the division of Microsoft
into an operating system unit and a unit that developed other software
components. As a remedy, the suing states also requested that Microsoft release
the source code for its Internet Explorer web browser. As a behavior remedy,
the judge ruled that Microsoft should provide rival software developers with
the same application program interface information as Microsoft software
developers and charge uniform license prices to all OEMs. Microsoft had to
provide unbundled copies of new product features as well. Microsoft contested
the ruling, and the appeals court ruled that Microsoft did not need to be split
into two companies. The behavior remedies, however, were upheld (Sherman,
2008). The Appeals Court upheld the original case's factual findings. Before going
to the Supreme Court, Microsoft reached a consent agreement with the DOJ in
2001. The agreement forbade Microsoft from using agreements or threats to
restrict computer makers or software developers from doing business with
Microsoft's competitors. They were also forbidden from customizing their
operating systems in such a way that they interfered with other applications,
such as Java. Microsoft was also compelled to reveal the interface codes or
server protocols required to create competing software that would operate on
its operating system. In 2002, the judge issued a Final Judgment. Microsoft was
required to provide its application programming interfaces with third-party
organizations and to create a three-person panel to oversee compliance with the
settlement. The settlement, however, did not address the critical issue of
tying/bundling Explorer into Windows
The EU Microsoft Case
Following suit, the European Commission initiated
its own action against Microsoft. The commission looked examined the inclusion
of Windows Media Player in Windows. After a five-year inquiry, the commission
concluded in 2004 that Microsoft had exploited its dominant position by
improperly attaching its Media Player to the Windows operating system. It had
also exploited its supremacy by refusing to give Sun Microsystems inside the
structure required by a workgroup server to interface with Windows-powered
personal PCs. By withholding interoperability information from server provider
Sun, Microsoft erected a barrier to entry, resulting in a purposeful
exclusionary refusal to deal that constrained technological advancement to the
cost of the consumer. Microsoft said that their failure to provide
interoperability information was necessary to defend its intellectual property
rights, which had cost the company billions of dollars in R&D spending.
According to the Commission, the primary role of intellectual property rights
is to foster creativity for the broad public welfare. A refusal to award a
license may thus be detrimental to the public welfare. The commission mandated
that Microsoft provide a version of Windows without the Media Player. In
addition, the commission ordered Microsoft to make interoperability information
available at a reasonable fee and without discrimination
Microsoft got a 497-million-euro penalty for
violating EU competition legislation. Microsoft filed an appeal with the EU
Court of First Instance against the 2004 Commission finding and order,
requesting that the execution of the decision be postponed until the appeal
procedure was completed. However, the European Court granted the requested stay
while awaiting an appeal in December 2004. Microsoft paid the punishment and
released versions of Windows that did not include the Media Player. Many of its
protocols were also licensed to developers within the EU and the European
Economic Area. However, Microsoft was fined 280 million euros in 2006 for
failing to comply with EU directives.
Microsoft dropped its legal action in November
2007, when the Court of First Instance in Luxemburg upheld the commission's
judgment. In February 2008, the European Commission penalized Microsoft an
extra 899 million euros for failing to comply with the 2004 verdict. The
European Commission predicated its penalty for noncompliance on Microsoft's
allegedly excessive royalties and fees imposed to license purchasers. The
commission judged Microsoft's royalty charges to be exorbitant. Microsoft
software was deemed an important service that should be offered at no cost.
Royalties on Microsoft global licenses were decreased from 5.95 percent to 0.4%
of the licensee's earnings. The cost of interoperability information has been
decreased to a one-time fixed price of 10000 euros. This, however, did not
satisfy the commission. Microsoft argued that it was left in the dark about the
interpretation of the commission's order, making compliance difficult. Until
that point, the Microsoft fines were the biggest ever imposed on a firm by EU
competition authorities.
In contrast to regulation, competition policy does
not determine pricing. When it comes to acceptable conditions of access, the
necessary facilities theory blurs this difference. This might prompt an
antitrust regulator to issue a ruling on which pricing is acceptable and which
is not. As a result, the European Commission gave an opinion on the fees
Microsoft might charge for access to its source code
The Google Search Case
EU Case
The commission has also
investigated and sanctioned Google's abuses of dominant position with fines
amounting to €1.49 billion in another case concerning Google search
advertisements that appear on other websites. Google exploited its market
dominance by enforcing various restrictive conditions in contracts with
third-party websites, preventing Google's competitors from putting search
advertisements on these websites. The wrongdoing continued for ten years,
denying other firms the opportunity to compete on merit and innovate, as well
as customers the advantages of competition. Google's competitors were unable to
compete on merit, either because there was an express restriction for them to
appear on publisher websites or because Google reserved by far the most
valuable commercial space on those websites while limiting how rival search
advertisements may show
India Case
The informants, namely
Matrimony.com Limited and Consumer Unity and Trust Society, raised many
allegations vis-Ã -vis abuse of dominance (AoD) by Google. However, this post
shall focus on the three main allegations where Google was held liable for AoD,
namely:
· Display of ‘universal
results’[2] in fixed positions in the search engine results page (SERP), in
deviation from the order of relevance;
· Manipulation of the search
algorithm to favor its own search vertical services like Google flight, Google
maps, etc., which are prominently displayed in the SERP; and
· Imposing of unfair
conditions in the syndication/intermediation agreements with website
publishers.
The Competition Commission
of India (CCI) fined Google INR 135.86 crores (approximately $1.36 billion) in
its decision issued on February 8, 2018, for abusing its dominant position by
engaging in search bias vis-Ã -vis Google flights service and imposing unfair
terms in intermediation agreements with website owners incorporating Google's
search bar and/or ad. The current ruling establishes the tone for CCI's
engagement in India's digital economy, which would need a delicate balance of
antitrust action and market innovation
Rationale of the European Commission
The EU Commission held
Google dominant on the basis of the following grounds. (i) Market Share, (ii)
existing barriers to entry and expansion7, (iii) the infrequency of user
multi-homing and the existence of brand effects, and (iv) the lack of
countervailing buyer power
In prior dominant
judgments, the European Commission distinguished between the market for general
internet search and vertical internet search, which is a specialized online
search on certain categories such as travel, legal, and medical. According to
the fact sheet, the European Commission concluded that Google is a dominant
player in all EEA countries' national markets, with market shares of more than
90% for general internet search since 2008, with the exception of the Czech
Republic, where the commission found Google to be dominant since 2011
Rationale of the Competition Commission
of India
As far as the dominance of
Google in India is concerned, the investigation of the DG showcases that for a
period of 6 (2009 to 2014) and 5 (2009 to 2013) years, Google was a dominant
player in the market for general search services and online search advertising
services respectively
While considering Google's
dominant position in India, the CCI reviewed not just its market share but also
other considerations such as Google's size, economic strength, resources, entry
hurdles, and commercial benefits. 87 According to DG, "strong entry obstacles
exist in the form of high cost, technology, network effects, minimum scale
requirements, and contractual constraints, among other things, that confer
tremendous economic power on Google and position it at a significant
advantage." 88 As a result of such substantial entry barriers, it may be
stated that Google is able to play independently of competitive pressures in
the relevant market
In order to maintain the
confidentiality of the data submitted by Google with respect to market share
for a specific period and traffic received by Google in both the markets, CCI
has redacted the statistics and figures from the public version of the
decision.
Conclusion
Competition law is a complicated combination of a
country's legal, economic, and administrative policies aimed to promote
economic competition. Because competition is thought to be necessary for
economic development, competition law tries to safeguard economic
competitiveness. The principle behind competition law is the excellent effect
of competition on an economy's market, functioning as a safeguard against the
abuse of economic power. The relationship between competition law and economic
development has been stressed several times, and the necessity for a
competition law appears to be on the agenda.
Over the last several years, the number of nations
possessing competition legislation has risen, with few being substantially
enforced. As economic activity increasingly crosses national boundaries, it is
critical to ensure at least a fair degree of uniformity and convergence in the
application of competition law to enterprises and behavior outside their
borders.
Abuse of Dominance is subjective in a manner. The
same provisions of the law can be explained differently. Now, most of the
competition laws of abuse of dominance Rely on price or economic factors to
determine competitive competitiveness. However, in the case of regulating big
technology companies, non-price factors
need to be considered. One of the most essential non-price factors emerging
nowadays is data. In addition to that, new provisions should be added to
competition laws worldwide to tackle the issues with big techs. As these big
techs operate worldwide, global harmonization of antitrust provisions would be
necessary for coming years.
Although the fundamental concepts of competition
law remain constant, the aims or outcomes cannot be the same across different
countries. In essence, a progressive achievement of competition policy objectives
would be the solution to an effective competition law regime in emerging
nations. Although the application of competition legislation is not inherently
undesirable, even at the outset of economic growth, its blind execution on the
road traveled by industrialized countries can ruin its own goals. Thus,
competition law is a complicated legislative invention that the Indian
Government and the Competition Commission should take the time to comprehend
and administer in light of the unique demands and requirements of the Indian
economy.
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