Monopolisation and Market Concentration

Rapid digitisation has helped businesses achieve efficiency, market linkages and other benefits. However, the benefits of digitisation have not been accessible to all businesses. Many continue to be exposed to monopolisation and market concentration risks.

In recent years, India has emerged as one of the fastest growing digital economies with 14% of the total app downloads across the world (in 2020).124 Digitisation has changed how business is done, providing 86% of small startups with opportunities to utilise cross-border markets. It has also led to innovative, affordable products and services which are beneficial to consumers, businesses and governments.125

Despite these benefits, there is an increasing risk of monopolisation of the digital economy by a few big players which tends to reduce the benefits that small businesses can reap. This monopolisation is driven by the quantum of data and infrastructure available with businesses, as well as the effects of far-reaching networks forged by the big players. At times, unfair trade practices related to search results and fake reviews have also been witnessed in the ecosystem.126

Monopolisation refers to attempts by a dominant firm to maintain or increase market control through various anti-competitive practices such as predatory pricing, foreclosure of competition and so on.128

Antitrust laws are regulations that encourage competition by limiting the market power of any particular firm.129

Mahesh lives in Coimbatore. He was working as a Sales Executive in a leading private company till 2020. During the pandemic, he lost his job and eventually started his sustainable disposable crockery venture.

He has listed his venture on all online marketplaces and has also tied up with leading e-commerce platforms. While his business has been doing well in the city, his online experience has not been good. He is not getting any orders through the platforms even though sales of similar products by his competitors on these platforms is high.

He assessed these platforms and realised that his products were listed towards the end of the search list, while products manufactured by subsidiary companies of these platforms were listed among the top 10. This has started to impact his financial stability.

Over the past six years, the system’s response to monopolisation has moved from the latent to the emerging stage. There is a growing recognition of antitrust concerns globally and in India, causing the regulatory focus on market concentration to increase significantly.

2016 status: While the risk had begun to manifest, there were no major discussions around it.

2022 status: Multiple regulatory measures to curb the risk are emerging. Apart from increasing CCI investigations, the discussions on ONDC, and NPD framework have also advanced the discourse on platform/digital economy.

In the petition filed by Bharat Matrimony and CUTS, Google was found to be abusing its dominant power to create a search bias. It was fined ~USD 21 mn.130

The All India Online Vendors Association filed a petition against Flipkart for using their dominant market position to favour certain sellers.131

The Department for Promotion of Industry and Internal Trade is building an Open Network for Digital Commerce (ONDC) to curb digital monopolies and standardise the onboarding of retailers on e-commerce sites.132

The Standing Committee on Finance submitted its report on anti-competitive practices by leading tech companies. Among other measures, it proposes a ‘Digital Competition Act’ to ensure fairness, transpareny and contestability, and a specialised ‘Digital Markets Unit’ within CCI.133 134

There has been an increase in CCI investigations on large private-sector firms

There has been an increase in platformisation to control monopolisation and unlock broader private sector play

In 2016, discussions around digital monopolisation was limited. Recent years have seen an increase in scrutiny of tech firms by Competition Commission of India (CCI).

In 2018, the CCI fined Google over USD 21 mn for its biased search functionality.135

In 2020, the CCI accepted a complaint against Amazon’s interaction with Cloudtail, owing to allegations on anti-competitive practices. In 2021, the CCI launched an investigation into the new WhatsApp privacy policy. MeitY urged the Delhi High Court to restrain WhatsApp from implementing the privacy policy.136 In 2022, the CCI fined Google in two separate cases and issued directives for changes to Android and Playstore in India.137 138

In 2016, UPI came up as the first effort at platformisation. In 2021, the government of India discussed the creation of an ONDC to ‘democratise digital commerce’. It is an initiative aiming at promoting open networks for all aspects of exchange of goods and services over digital or electronic networks. ONDC is to be based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform.139 The government has also conveyed its apprehensions around e-commerce giants on multiple occasions.140

IT for Change pioneered the concept of ‘community data’ and thereby influenced policy.

Constant and continuous flow of data is an axiomatic feature of the digital age, with an increasing number of services being accessed via digital platforms - from transport and hospitality to retail and finance. Every user interaction with digitally-enabled products or services generates data in the background about the user’s preferences and her digital characteristics, thus amassing vast amounts of granular data about every aspect of daily life. This data, when aggregated, can provide highly accurate, useful and valuable insights about the social and economic interactions taking place in a given community. Unfortunately, though, it is primarily large digital platforms that, by virtue of being at the receiving end of this data, are able to exploit all of its economic value to the exclusion of the communities that generated it. (Communities, here, is intended broadly to include any group bound by common interests or purpose, such as geography, life, livelihood, economic interactions, social interests etc.).

The idea of individual rights in personal data (like privacy) has begun to gain significant acceptance globally. However, collective rights of communities in the aggregate (nonpersonal) data they help generate are yet to be recognised. This, in turn, leads to the misappropriation and misuse of their collective data for the exclusive benefit of a few dominant platform while those who contribute the data – users, business entities, and communities – are largely left in the hands of digital corporations. Therefore, there exists a pressing need to determine the economic rights of groups / communities to their aggregate data and develop frameworks for redistributing its value in a more inclusive and fair manner.

IT for Change applied the Institutional Analysis and Development (IAD) framework, developed by Elinor Ostrom to examine the management of data and digital intelligence resources at the community level. They worked towards treating data and digital intelligence as common pool resources under common property regimes, hence pioneering the concept of ‘community data’.

The concept of community data has been adopted by the draft e-commerce policy and the Kris Gopalakrishnan Committee on the NPD framework. IT for Change is also in discussion with international organisations to develop a global model framework law on community data.

Creating new concepts and vocabulary, and leveraging strong and credible relationships with decision makers were success factors that helped IT for Change shape e-commerce policy and the NPD framework.

9: Integration of Businesses through Digital Platforms | Monopolisation and Market Concentration

Despite the increased regulatory efforts to ensure fair market competition, the evolving nature of the digital economy is yet to be fully understood by policymakers and other stakeholders. Our research suggests the following pathways for philanthropic investment to move the system to the next stage of evolution:

Building consensus through large datasets, policies and, legal ecosystem.

Piloting private sector solutions that eliminate the trade-offs in diverging priorities of private, public and social sectors.

The table below presents gap areas and illustrative funding opportunities for philanthropy to advance the discourse and prevent monopolisation and market concentration:

Conduct credible and pan-India research and build knowledge on the needs, requirements, and opportunities to support local startups, MSMEs, etc.

Support policy dialogues to strengthen the competition regulations, associated public institutions and safeguards.

Pilot and support new technologies that support interoperability and are anti-monopolistic. For example, low cost solutions that help small businesses digitise and be compliant.