Big Tech: Impact, Dominance and Anti-Competitive Practices

PWOnlyIAS October 30, 2023 04:38 3185 0

Context: Sundar Pichai, CEO of Alphabet and Google, a major figure in big tech, will testify in a landmark antitrust battle over Google's control of search and advertising.

Big Tech: Impact, Dominance and Anti-Competitive Practices

Meta Description: Exploring the impact, concerns, regulatory measures related to Big Tech, including its economic, societal, and political influence globally. This article tried to understand the anti-trust issues, privacy concerns, and job displacement challenges, along with international regulations and the way forward as proposed by the Standing Committee on Finance in India.

What is Big Tech? – The Dominant Players in the Information Technology Industry

Let’s discover the Powerhouses of the Information Technology Industry: Big Tech, the Dominant Players Redefining Technology Landscape.

Big Tech, also known as the Tech Giants, are the most dominant companies in the information technology industry, majority of which are centered in the United States.
They are further classified as Big Four or Big Five presently consisting of Alphabet (Google), Amazon, Apple, Meta (Facebook)—with Microsoft completing the Big Five.

The Global Significance of Big Tech: Shaping Economies, Societies, and Political Landscapes

Understanding the Global Impact of Big Tech: How Tech Giants Shape Economies, Societies, and Political Dynamics Worldwide:

Big Tech

Economy: The impact of Big Tech is felt on a global level. They are continually looking to expand their reach, influencing the domestic economy of almost all countries.
Society: Big Tech influences societal change by being accessible to the masses. The products of these companies are widely used and can impact the consumer choices.
Politics: Big Tech have the reach and capability to create political opinion. These can be in the form of political ads on their platform and also promoting the opinion of certain political leaders on social media.
National Security: Since Big Tech operates across the world, countries claim that these companies support rival economies, which ultimately affects national security. Ex: Huawei was blamed by the US for spying on behalf of China.
Technology: The Big Tech are well known for their innovation and technology development. They are the first to introduce ground-breaking technologies.

Challenges and Controversies Surrounding Big Tech: A Critical Analysis

Looking at the Controversies: Exploring Challenges Surrounding Big Tech in the Global Arena!

Anticompetitive Behavior: They engage in practices that stifle competition, leading to the closure of many smaller businesses unable to compete with them, all in pursuit of higher profits.
- E.g., Google favoring its products in search results over competitors, potentially undermining fair competition.
Privacy Violations: Big Tech firms have faced criticism for infringing on user privacy, leveraging personal data for commercial purposes, and concerns on monitoring of users’ online activities.
- E.g., Facebook’s unauthorized data sharing with Cambridge Analytica, exposing user data to political manipulation.
Tax Avoidance: Allegations of tax evasion have been leveled against Big Tech as they establish their businesses in low-tax jurisdictions to minimize their tax obligations.
- E.g., Apple’s use of the “Double Irish with a Dutch Sandwich” tax avoidance scheme.
Job Displacement: Many technological advancements endorsed by Big Tech, such as automation, have resulted in job losses, particularly in developing and underdeveloped countries.
Disregard for Local Laws: Big Tech companies have been accused of disregarding domestic laws and claiming immunity based on their international origins.
Dissemination of Misinformation: Platforms operated by Big Tech have been accused of amplifying misinformation, with implications for the rule of law and public order.
- E.g., WhatsApp being used to spread false information leading to violence and unrest, as seen in India.
Political Influence: The political biases of Big Tech become evident when they selectively promote specific political ideologies and thoughts.
- E.g., Twitter’s decision to ban former U.S. President Donald Trump from its platform.

An Investigation into the Anti-Competitive Landscape of Big Tech Companies in India

Examining Anti-Competitive Practices: A Deep Dive into Big Tech Companies’ Strategies in India

The Standing Committee on Finance (Chair: Mr. Jayant Sinha) submitted its report on ‘Anti-Competitive Practices by Big Tech Companies’ in December 2022.
The committee has identified 10 types of anti-competitive practices which are practiced by Big Tech companies as:

Anti-Competitive Practice	Description
Anti-Steering Provisions	Prominently associated with ‘App Stores’ (Google and Apple App Stores), the app publishers prevent their business users (app users) from moving out of the platform and use other alternatives for payments.
Platform Neutrality/ Self Preferencing	Commonly associated with ‘marketplaces’, some platforms place their own products prominently. E.g., prominent placement of Google Pay on Play Store by Google.
Adjacency/ Building and Tying	In it, digital firms force people to buy related services. E.g., Food delivery apps making it mandatory for restaurants to use the platform’s delivery services.
Data Usage (use of non-public data)	Monopolistic usage of data by digital firms, especially from leading platforms with vast repositories of data. E.g., Past purchase data is used by Swiggy and Zomato to customize offerings for users, dissuading other players from entering.
Mergers and Acquisitions	‘Killer acquisitions’ is a repeated issue in digital markets where Big Techs buy highly valued start-ups, disallowing the smaller firms to grow beyond a certain limit. E.g., Facebook acquisition of WhatsApp.
Pricing/ Deep Discounting	Prominently associated with e-commerce sales, huge discounts are also used by leading platforms in hotel booking, food delivery etc. It compromises service providers control over the final price and offline player’s ability to compete. E.g., Amazon, Flipkart.
Exclusive Tie-ups	An exclusive arrangement of e-commerce platforms with a brand hampers the business of other platforms as well as of brick-and mortar sellers. Similarly, platforms use price parity clauses to stop businesses from selling at lower rates on other platforms.
Search and Ranking Preferencing	Giving preference to sponsored products in algorithms used to show results for users search rather than showing organic search results. E.g., Preferential listing by Amazon and Flipkart.
Restricting Third-Party Applications	Presence of gatekeepers in digital markets which restrict installation or operation of third-party applications. E.g., for app developers, Apple’s App Store is the only channel to distribute their apps to iOS consumers.
Advertising Policies	Digital advertising market faces issues of conflict of interest and self-preferencing when platforms operate at all levels of the ad-tech supply chain.

India’s Path to Regulating Big Tech and Safeguarding Competition

India’s Approach to Regulating Big Tech: Strengthening Competition Laws and Safe Harbour Provisions for the Digital Era

Safe Harbour Clause: Currently, big tech companies in India are protected by the safe harbour of the Communications Decency Act (CDA) of the USA along with its Indian counterpart Section 79 of India’s Information Technology Act, 2000 (IT Act).
- Safe harbour – as prescribed under Section 79 of the IT Act, 2000 – is legal immunity that online intermediaries enjoy against content posted by users on their platforms.
  - However, now India is working on its own Digital India Act—a replacement of IT Act 2000 along with many others like Telecom bill, data localisation and others.
Competition Act: In India, antitrust issues are governed by the Competition Act, 2002, and the Competition Commission of India checks upon monopolistic practices.
Competition (Amendment) Bill, 2022:
- Regulation of mergers and acquisitions: Mergers and acquisitions with transaction value of more than Rs 2,000 crore will require CCI’s approval.
- Prohibition of anti-competitive practices: The Bill expands the definition of anti-competitive practices to include self-preferencing and other practices that can harm consumers and businesses.
- New powers for the CCI: The Bill gives the CCI new powers to investigate and prosecute anti-competitive practices.
- Increased transparency: The Bill requires Big Tech companies to provide more information to the CCI about their business practices.

Global Perspectives: A Comprehensive Analysis of Big Tech Regulations Worldwide

Exploring Global Big Tech Regulations: A Comprehensive Overview of Key Legislative Measures Across Continents

Europe	Digital Markets Act (DMA): The DMA will directly ban harmful business practices by very large digital players, create a fairer and more competitive economic space for new players and European businesses. Digital Services Act (DSA): This act targets categories of online services, from simple websites to internet infrastructure services and online platforms.
USA	The USA (Anti-trust legislation): The US adopted Anti-trust legislation targeting the dominance of Big Tech companies by giving states greater power in competition cases and increasing money for federal regulators.
Australia	Competition watchdog in Australia recommended tighter regulation of Facebook and Google, and moves to improve media competition. The Online Safety Act will have the power to force social media companies to delete posts that amount to online bullying, and to find the companies and those who hosted the alleged abuse.

Way Forward: Proposals for a Balanced Digital Competition Framework in India by The Standing Committee on Finance

To ensure a fair, transparent, and contestable digital ecosystem, India needs a Digital Competition Act based on the unique needs of digital markets. On lines of global ex-ante approaches, this Digital Competition Act should:

Identify Digital Gatekeepers: Define a limited number of Systemically Important Digital Intermediaries (SIDIs) that have significant influence on competition.
Ex-Ante Regulations: Impose proactive competitive restraints on SIDIs to ensure fair competition in India’s digital markets.
Global Harmonization: Align digital regulations with international standards to reduce the regulatory burden on companies and enhance the competitiveness of Indian firms globally.
Harmonize with Consumer Protection: Integrate competition law with the Consumer Protection Act of 2020, particularly its e-commerce rules.
Consumer Compensation Mechanism: Establish a mechanism to guarantee fair compensation to consumers in case of digital market abuses.
Strengthen CCI: Enhance the Competition Commission of India (CCI) by creating specialized digital market units staffed with experts, academics, and legal professionals.
Code of Conduct: Implement a code of conduct with specific measures to prevent SIDIs from using their market dominance to stifle competition.

Conclusion:

The global impact of Big Tech has prompted nations to scrutinize their practices, leading to the formulation of robust regulatory frameworks. India, in particular, is focusing on comprehensive measures, including the Digital India Act and the Competition (Amendment) Bill, 2022, while aligning with international standards. The critical challenges posed by Big Tech’s dominance continue to fuel discussions around the world, emphasizing the need for balanced digital competition and consumer protection measures.

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Big Tech FAQs

Big Tech refers to the most dominant information technology companies, such as Google, Amazon, Apple, Meta (Facebook), and Microsoft, which hold significant influence globally in various aspects like the economy, society, politics, national security, and technology.

Big Tech companies have a global reach and can significantly impact the domestic economies of countries where they operate, influencing job markets, investments, and overall economic growth.

Concerns include anticompetitive behavior, privacy violations, tax avoidance, job displacement, disregard for local laws, dissemination of misinformation, and political influence.

Europe has introduced the Digital Markets Act (DMA) and Digital Services Act (DSA), while the USA has adopted antitrust legislation to address Big Tech dominance.

Recommendations include creating a Digital Competition Act, defining SIDIs, implementing ex-ante regulations, global harmonization, harmonizing with consumer protection laws, ensuring consumer compensation, strengthening the CCI, and setting a code of conduct for SIDIs.

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Big Tech: Impact, Dominance and Anti-Competitive Practices

What is Big Tech? – The Dominant Players in the Information Technology Industry

The Global Significance of Big Tech: Shaping Economies, Societies, and Political Landscapes

Challenges and Controversies Surrounding Big Tech: A Critical Analysis

An Investigation into the Anti-Competitive Landscape of Big Tech Companies in India

India’s Path to Regulating Big Tech and Safeguarding Competition

Global Perspectives: A Comprehensive Analysis of Big Tech Regulations Worldwide

Way Forward: Proposals for a Balanced Digital Competition Framework in India by The Standing Committee on Finance

Conclusion:

Big Tech FAQs

What is Big Tech, and why are they important?

How do Big Tech companies affect the economy?

What are the concerns associated with Big Tech's influence?

What international measures are being taken against Big Tech's dominance?

What are the key recommendations from the Standing Committee on Finance in India?

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