Unchecked dominance in digital markets a concern, says CCI chief

Digital markets are epicentres of technological innovation but lately they have become zones of “entrenched and unchecked dominance”, Competition Commission of India (CCI) Chairman Ashok Kumar Gupta said on Thursday.

He also said application of competition law to such disruptive technologies becomes challenging.

Earlier, it was widely contended that market power in technology markets is rare and fleeting. However, it has now been noted that market dominance in these markets is not fragile but durable, he said.

Gupta was speaking at an event organised by the Centre for the Digital Future.

He highlighted that India has an active startup ecosystem with a large market and that the last quarter saw USD 6.3 billion funding in technology startups.

“While there is no doubt that digital markets are the epicentres of technological progress and innovation, lately, they have become entrenched and unchecked dominance and high concentration is the result of presence of certain characteristics which makes market power in the digital space uniquely durable,” Gupta said.

He said characteristics such as network effect may prevent a newcomer from replacing an established player.

He pointed out that when an online platform acts both as marketplace and competitor, it has an incentive to leverage its control over the platform in favour of preferred vendors to the disadvantage of other sellers.

Besides, sticky consumer behaviour combined with lack of data portability increases switching costs and helps maintain the status quo.

“Initiating anti-trust investigations and invoking anti-competitive remedies as early as possible is crucial to avoid competition harm to the market,” Gupta said.

He also mentioned problems with respect to merger control in digital markets.

He added that interventions in merger reviews in technology markets need to be guided by case specific economic evidence of competition concerns.

Keeping the challenges in mind, CCI has prioritised and stepped up scrutiny against online platforms across verticals.

CCI has looked at several anti-trust cases against e-commerce platforms across sectors such as retail, food delivery, hotel booking and others.

He further said he foresees an important role for the CCI both in enforcement and policy debates in the areas of digital markets, such as understanding the role of data, analysing the dynamics of market power of platforms and supervising the way platforms operate.