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Safeguarding Consumer Data: Embracing a Multidimensional Approach to Regulation

Third-year law students at National University of Study and Research in Law (NUSRL), Ranchi

 

I. Introduction


In the era of widespread globalisation, an unparalleled surge in industrialisation is evident, predominantly focusing on technology within the digital sphere. This situation necessitates the State's responsibility to guarantee that this expansion doesn't centralise power within a select few entities, ensuring equal opportunities for every entrepreneurial initiative in the relevant market. It becomes imperative for the State to uphold and oversee fair competition. This is particularly crucial when these entities operate domestically, as their operational strategies may create an unjust disadvantage for local entrepreneurs.


Recently, Google, the US tech giant, faced scrutiny from the Competition Commission of India (CCI) on two occasions. The scrutiny focused on allegations of engaging in anti-competitive practices and exploiting its dominant status in the Android Operating System market. This was observed not only through its Play Store payment policy but also in other aspects. Subsequently, substantial fines of USD 162 million and USD 113 million were imposed.


The CCI's actions highlight the urgent need to discipline entities that misuse their dominance in the digital market. This article addresses concerns about the concentration of power in the digital sphere, exemplified by Google's anti-competitive practices, necessitating a robust regulatory approach. Furthermore, the article aims to advocate for a multidimensional regulatory strategy to protect consumer data in the digital realm, emphasising the global significance of regulatory efforts and the need for new criteria in addressing emerging challenges


II. Regulatory Imperatives for Tech Giants in India


The Play Store payment policy case uncovered that Google's online payments application, 'Google Pay,' stood as the sole payment method on the Google Play Store for all purchases. This effectively restricted the entry of competing apps into the market. Allegations were made that Google compelled Play Store-listed apps to adopt its payment system and Google Play Billing System (GBPS) as a prerequisite for listing. Another concern was Google's influence on original equipment manufacturers (OEMs) to pre-install Google Pay on Android-enabled smartphones, thereby limiting competitors' market access.


The CCI condemned Google's discriminatory practice of exclusively allowing Google Pay to utilise ‘intent flow technology’ on the Google Play Store. This technology automatically launched the Google Pay application when any customer selected the Unified Payments Interface (UPI) as the mode of payment on checkout. This restriction prevented other UPI applications from collecting ‘flow technology’, effectively denying market access to such rival apps. The imposition of a 15 to 30% service fee for app and in-app purchases was deemed unjust and discriminatory. The Commission also deemed the discriminatory pricing aspect, wherein the GBPS did not apply to Google’s self-owned apps (e.g., YouTube), a violation of Section 4(2) of the Competition Act, 2002.


The CCI outlined specific directives for Google to enhance competition in the payment app domain. These include lifting restrictions on app developers regarding the use of alternative billing services and eliminating any anti-competitive conditions hindering consumer access to such apps. Also, Google must now maintain transparent interactions with app developers, clearly define its services and fees in a published payment policy, and establish a transparent data acquisition and retention strategy.


Furthermore, subject to reasonable controls and safeguards, Google is expected to provide app developers with access to data generated by their own apps without discriminating against other UPI apps in India. CCI's directives are pivotal in establishing an equitable environment for app developers. By ensuring that app developers are not dependent on Google for their operations, these directives foster fair competition among payment apps.


Major tech entities like Microsoft, Meta, Apple, and Google hold substantial user bases and a significant presence in the Indian digital market. This underscores the need for regulations to safeguard fair competition, prevent disadvantages to domestic competitors, foster innovation, and preserve consumer choice. Thus, adapting Indian anti-trust laws to global standards is imperative for addressing changes in the global digital economy.


III. Challenges in Upholding Digital Market Competition


While the CCI’s directives align with the overarching goal of promoting competition in the digital market, there are anticipated obstacles to this journey. Certain challenges may include:


a.  Addressing Abuses in Personal and Market Data Control


Considering access to personal data as a parameter for assessing anti-competitiveness is crucial. The CCI, in Matrimony v. Google, acknowledged the potential abuse of dominant position in the digital market through a monopolistic control of consumers' personal data. However, it refrained from investigating such abuses and failed to hold Google accountable. The CCI also failed to decisively recognise the abuse of control over personal data as a significant parameter of ‘abuse’ alongside the price mechanism. In the author’s opinion, to accurately define a multifaceted market, competition authorities must scrutinise not only monetary transactions but also the flow of market data.


In the digital realm, new criteria must be employed to delineate the relevant market. For instance, Germany amended its competition law in 2017 to align its legal framework with the distinctive features of the digital economy. This amendment introduced a provision acknowledging ‘free’ products or services offered by platforms as a distinct relevant market. It's crucial to highlight that service providers often label a service as "free" while obtaining indirect consideration in the form of consumers' personal data, which contributes to their revenue generation and business operations. Thus, competition authorities should also recognise and address the abuse of exclusive control over personal and market data.


b. Vertical Expansion and Dominant Platforms


At times, dominant platforms extend their business vertically, emerging as competitors to app developers and organisations utilising their platforms. This expansion enhances their data-gathering abilities, elevates their competitiveness, and establishes them as gatekeepers in these relevant markets, where they now play the dual role of proprietors and users. This situation may lead to assertive and discriminatory actions, as exemplified by Google's mandated use of Google Pay in Play Store transactions.


Tech giants like Amazon have faced scrutiny from the European Commission and Germany for simultaneously competing with and providing platforms to other online sellers. Similarly, Spotify took action against Apple in the European Commission, alleging a denial of consumer choice and an unfair market disadvantage. The European Commission also imposed substantial fines on Google for exploiting its dominant position by providing preferential treatment to its own shopping service in search results while demoting rival services. Given the multifaceted nature of these markets in the digital economy, crafting an effective legal framework becomes challenging.


c. Security Concerns: Untrusted Applications and UPI Fraud


The CCI has given Google significant leeway to reform its practices, stipulating that it must grant app developers access to app-generated data under suitable safeguards. The question arises regarding the criteria defining these safeguards and the entity responsible for establishing them. The susceptibility of untrusted applications downloaded from the Google Play Store is a cause for concern here, as these apps can extract and access all financial data on the device, potentially leading to UPI fraud. Thus, thoroughly examining how app developers on the Play Store access consumers' personal and financial data is essential.


Disseminating data relevant to competition necessitates obtaining consumers' consent and demanding more transparency regarding how app developers and other UPI service providers, available as alternatives to Google Pay, utilise this data to ensure consumer protection.


d. Challenges Faced by Developing Country Authorities


Many developing nations possess relatively young, modestly sized and resource-constrained competition authorities. As a result, they face challenges in handling competition cases in a globally concentrated economy. Consequently, it becomes imperative to establish e-commerce policies and regulations in these developing countries to ensure that local small and medium-sized enterprises have unbiased and unrestricted access to platforms under equitable terms and conditions.


Fostering the growth of local start-ups and domestic entrepreneurial endeavours can be achieved by regulating digital competition and creating regional trade frameworks and arrangements. These frameworks should safeguard against global tech giants' exploitation across multiple markets.


e.     Global Regulatory Efforts in Digital Competition


Globally, there is a discernible effort to regulate and uphold digital competition. In 2021, South Korea enacted legislation compelling Google and Apple to open their app stores to alternative payment systems. Simultaneously, Germany’s actions against Facebook represent the first instance where a National Competition Authority addressed personal data-related abuse of dominance in the digital economy. The German Federal Supreme Court held Facebook responsible for exploiting its dominant position.


The Australian Competition and Consumer Commission's (ACCC) DPI Report found that Google and Facebook, providers of general search and social media services in Australia, wield significant market power. The ACCC recommended vigilant monitoring of major digital platforms, addressing concerns about privacy and consumer data use.


Both the European Commission and the UK have played crucial roles in regulating digital competition. Consequently, the decisions of the CCI carry paramount importance in shaping competitive policies in India, aligning with the ongoing digital revolution. The CCI must consistently synchronise with the global objective of regulating digital market competition to ensure equitable opportunities for all market participants and safeguard consumers from arbitrary market decisions.


IV. Conclusion


In conventional antitrust scenarios, the emphasis lies on pricing competition and the competition for larger market shares. However, in the digital economy, the sheer volume of ‘data’ confers market power and creates entry barriers for competitors. Prioritising consumer welfare involves focusing on data protection, ensuring unrestricted choice, and preventing data monopolisation to safeguard domestic economies from risks associated with concentrated globalisation.


This calls for countries to reform their antitrust policies by introducing measures to address emerging challenges. Adopting new criteria centred around the regulation of consumer data becomes crucial, and the consideration of multidimensional markets is essential to safeguard both consumers and domestic operators.


 

Note: This article has been reviewed and edited by Steve Levitsky at Stage- II.


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