Startups-IAMAI row: Regulations necessary to promote competition and give consumers choice

Many Indian startups are up in arms against IAMAI’s stand on the proposal of a competition law for digital markets and are voicing their angst against the alleged stranglehold of Big Tech firms on the industry body.

Nothing signifies the need for a robust regulatory framework for curbing anti-competition and monopolistic practices and their potential in the digital market than the showdown between the Internet and Mobile Association of India (IAMAI) and a section of Indian startups. That many Indian startups are up in arms against IAMAI’s stand on the proposal of a competition law for digital markets and are having to take to public platforms to voice their angst against the alleged stranglehold of Big Tech firms on the industry body, is a compelling instance of abuse of size and clout, and the need to address it.

IAMAI has more than 550 members, a majority of which are Indian digital startups. Big Tech firms such as Google, Meta, Twitter and Microsoft, among others, are also its members. A section of these startups has alleged that the industry body is opposing the government’s move to institute a separate and ex-ante competition framework at the behest of these firms.

In December last year, a Parliamentary committee had recommended that a separate competition law be introduced to address the unique challenges of the emerging digital economy in the country. The committee presented a detailed view on how the Big Tech firms had an unfair advantage in the market that they could abuse to curb competition, and it suggested that practices such as anti-steering, self-preferencing, deep discounting, bundling, exclusivity needed to be regulated to ensure a level-playing field for smaller companies.

IAMAI has criticised these recommendations saying that “preemptive standards coupled with rigid and size-based designation mechanisms risk having an adverse impact on investments, innovation, consumer choice and welfare.”

Unfounded Fears

Big Tech firms’ fears as expressed by IAMAI are tenuous. Though television broadcasting is a different business, there are examples from the industry that can be used to illustrate this. TV broadcasters, for instance, are subjected to restrictions on vertical ownership in the distribution business. Likewise, distributors are not allowed to give preferential treatment to the channels of the broadcaster they are allied with. Both distributors and broadcasters are bound by “must carry”, “must provide”, “no exclusivity” and “no bundling” provisions.

Like Big Tech companies of today, the broadcasters, too, had argued that these restrictions will limit their own, and consequently, the industry’s growth, and hurt investments. The experience, however, shows that both broadcasters and the industry only flourished over the years till digital innovations disrupted the industry.

IAMAI’s argument that restriction on aforementioned practices will disincentivise innovation and hurt consumers, too, is dubious and in bad spirit. Again, experience shows that self-preferencing combined with deep discounting is usually meant to raise the entry barrier through unfair means and kill competition. Such practices hurt smaller companies the most as they can’t incur losses for too long by selling their products or services way below their cost of production while large corporations can afford to do so. On the face of it, discounted pricing benefits consumers but in the long term, as the competition dies and choices shrink, consumers are left at the mercy of large operators who, then, are free to manipulate the market, and exploit them.

The real service to consumers is to give them choice and allow pricing to be determined by the dynamics that emerges through healthy competition in a diverse market.

Looking Ahead

IAMAI’s other reservation with regard to ex-ante regulations is also steeped in self-interest. Big Tech companies are global giants with massively deep pockets. Their consumer set and financial prowess is so huge that they have the potential and propensity to resort to unfair business practices in any allied business segment they enter to corner market share. There are several instances of allegations of market manipulation, malpractice and heavy penalties imposed by the European Union and the United States on Google and Meta. Even in India, the Competition Commission of India (CCI) slapped a penalty of Rs 1,337.76 crore on Google for the abuse of its size and clout in the Android ecosystem. The penalty was upheld by the National Company Law Tribunal after Google challenged it.

Again, to check the abuse of dominance and cornering of smaller players, it is important that such probabilities are weighed upon. It is not for no reason that many countries across the world have heralded ex-ante regulations. The EU, in fact, has been leading the way through regulations such as General Data Protection Regulation, Digital Markets Act and Digital Services Act.

Instead of pushing their resources into finding ways to milk the market through nefarious means, Big Tech firms need to focus on innovation and finding newer and better means to grow and serve the consumer.

At the same time, the government needs to ensure that in a bid to create a fair environment for smaller tech companies and safeguard consumer interests, it doesn’t end up over-regulating the market. As Digital Personal Data Protection Bill and Digital India Act are already being worked upon, it should be ensured that these complement each other and not impede the growth of the industry.

Archna Shukla is a senior journalist based in Delhi. Views are personal, and do not represent the stand of this publication.