The US antitrust hearings on big tech have an important lesson for India

Nothing new here.
Nothing new here.
Image: Reuters/Pool/Mandel Ngan
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The allegations against big tech in the US antitrust hearings this week had a feeling of déjà vu for India.

On July 29, the CEOs of Facebook, Amazon, Google, and Apple were put under the scanner in the US facing a line of questioning about anti-competitive practices at their companies. The big four of the internet economy were accused of abusing dominance, killing competition, selling counterfeit products, and compromising data, among other things.

Several of these allegations have been levelled against Facebook, Amazon, and Google, in India over the years—multiple times.

So far, most have remained unresolved, raising concerns that if proper checks are not put in place, sooner or later, India will grapple with issues similar to the US.

“These hearings will be important to understand the misuse that can happen,” said Arvind K Singhal, chairman of retail consultancy firm Technopak Advisors. “Whatever happens (in the US hearings) will not only have a bearing on these companies’ operations in India, but Indian lawmakers will have no choice but to create laws to neutralise such companies.”

These allegations become particularly worrisome at a time when India has banned a host of Chinese apps, giving American players like Amazon and Google a bigger opportunity.

Here’s a look at some of the allegations that came up in the antitrust hearing, and why the Narendra Modi government must take note of them:

Mistreating third-party vendors

Small sellers in India have been accusing Amazon of undercutting them for several years now. Most recently, the issue gained prominence in January when prime minister Modi and several other top government officials reportedly refused to meet Amazon founder Jeff Bezos during his India visit as they did not want to upset local sellers ahead of the upcoming Assembly elections in Delhi.

Amazon and its local rival Flipkart have also faced antitrust probes in India. Recently, the All India Online Vendors Association (AIOVA), a lobby group of 3,500 online merchants, reached out to the Competition Commission of India alleging Amazon used sellers’ data to design its own private labels and selling products of certain “preferred sellers” at deep discounts.

During the congressional hearing, Bezos said Amazon is still investigating whether employees use data it acquires from its third-party sellers to launch competing products.

This allegation should worry India because Amazon is at the forefront of building and expanding the e-commerce industry in the country. Along with Walmart-owned Flipkart and a handful of other homegrown players, Amazon has been instrumental in bringing third-party sellers from the most remote parts of India to the internet for the first time.

“They (sellers) are very small in size and strength so these entrepreneurs are squeezed to the maximum,” said Dhairyashil Patil, national organising secretary of Confederation of All India Traders (CAIT).

In August 2019, Amazon had half a million third-party sellers offering over 200 million products on its platform in India.

Given that e-commerce is relatively new in India, the government policies are still playing catch up. In February 2019, the Indian government made a new law that prohibits e-commerce companies from entering into exclusive deals for selling products on their platforms and from having a single vendor supply more than a quarter of the inventory. However, there is not much clarity on how online marketplaces use the data related to third-party sellers.

Predatory pricing

A congresswoman questioned Amazon on the classic monopoly abuse of lowering prices to drive competitors out of the market and then raising prices again.

In India, trade bodies that represent nearly 70 million small merchants, have time and again protested and accused Amazon of deep discounting. The Modi government tried to address the issue in a new e-commerce policy in July 2018, by baring marketplaces to control the pricing of products on their platforms. But not much has changed.

“Sellers are still treated very badly by e-commerce portals. All the practices they’re accused of in other countries, they’re doing more of in India,” said CAIT’s Patil.

In January this year, India’s commerce minister Piyush Goyal called Amazon a capital guzzler, chalking its mounting losses up to “predatory pricing or some unfair trade practices.”

Privacy concerns

The US congress members raised concerns about mishandling of data by the big tech firms, accusing them of hurting competition and gaining advertisers by exploiting user data. Google’s Sundar Pichai was questioned about child safety on YouTube. Apple was called out for removing parental controls shortly after launching its “screen time” feature.

The Modi government has been obsessed with data privacy, but it has lacked effectiveness.

Last month, India banned several mobile apps over concerns that they shared Indian users’ data with the Chinese government. But other than this move, most of the government’s data security-related concerns have been limited to asking all global internet players to store information of Indian users in the country.

While that is hard to execute given the lack of infrastructure in India, among other things, in the interim, the country must come up with laws that ensure the data is not exploited.

“US has seen that misuse of data can be done in multiple points…India has only said data must be housed with India but it didn’t move full strength ahead in terms of making anything illegal,” Singhal said.

Staying on top

US lawmakers also accused the big four of abusing their “gatekeeper status.” These companies “enjoy the power to pick winners and losers, shake down small businesses and enrich themselves while choking off competitors,” said Rep. David Cicilline, chairman of the House Judiciary Committee’s antitrust subcommittee.

Google, for instance, was accused of manipulating results. The internet search giant has faced the same allegations in India in the past.

During the 2014 Indian elections, Google was accused of swinging votes through search manipulation. And in February 2018, India’s competition commission fined the Sundar Pichai-led company $21 million for abusing its dominant position.

Of course, there is no easy answer when assessing an internet platform’s dominance anywhere in the world, including India, experts say. The traditional ways of judging dominance based on market share cannot be useful with digital networks.

“Even if more than 90% of people use Google’s search engine, the fact that it can be rather easily be changed—it’s each individual’s free choice—makes it very different to a Facebook, where it’s very difficult for people to opt-out if all your friends are there, the companies you work with are there, your customers are there,” explains Pranesh Prakash, policy director of non-profit Centre for Internet and Society (CIS).

Counterfeit sales

Rep. Hank Johnson posed a question to Bezos about Amazon making money off counterfeit product sales. Bezos even admitted to the problem.

Indian e-commerce universe is flooded with counterfeits. A May 2018 survey showed that nearly one in three Indians had reported receiving counterfeit products through online shopping, an industry that is led by Amazon alongside Flipkart.

In October 2019, homegrown beauty e-tailer Nykaa’s CEO had called Amazon out for stocking inauthentic Huda Beauty products. This was after the Delhi high court had in 2018 asked Amazon to delist fake products after lifestyle brand Beverly Hills Polo Club reported fake copies of its belts, perfumes, apparel products, accessories, and watches, were selling on the e-commerce marketplace.

While Amazon brought its anti-counterfeiting program Project Zero to India last year, the majority of brands in the US seem to be ineligible to enroll for it, according to Kiri Masters, CEO of Bobsled marketing, a digital agency that helps brands grow their sales on Amazon. That might be the case in India, too.

Stifling competition

One of the major allegations during the hearings was that these companies kill competition by either stealing technology or acquiring rivals. Given Facebook and Google’s involvement in India’s young and booming startup ecosystem, India must take these concerns seriously.

In 2014, Facebook acquired Bengaluru-based Little Eye Labs. Google has made at least two startup acquisitions in India, including artificial intelligence startup Halli Labs in 2017 and railway tracking platform Sigmoid Labs a year-and-a-half later. 

These companies have also been making investments in Indian startups, picking up minority stakes. For instance, in 2018, Google pumped in $25 billion into hyperlocal delivery startup Dunzo. In September 2019, Facebook invested an undisclosed amount in social commerce platform Meesho and five months later, it backed edtech startup Unacademy. Also, Facebook founder’s philanthropic organisation Chan-Zuckerberg initiative has invested in India’s leading edtech platform Byju’s.

Apple has also been trying to deepen its ties with the Indian startup community as it looks to increase sales in India. In 2016, the company hosted around 40 Indian entrepreneurs at its headquarters in Cupertino, California, and discussed mobile app development. Some of the attendees had told Quartz at the time that Apple may set up local teams in India to engage with developers

Most recently, both Facebook and Google invested in Jio Platforms, the telecom and digital business of India’s richest man Mukesh Ambani. While Facebook bought a 9.99% stake in Jio Platforms for $5.7 billion, Google spent $4.5 billion for a 7.73% stake in the company.

Jio’s massive ecosystem is viewed as an emerging threat that has India’s small businesses worried for the same reasons that the US is scrutinising big tech.

“As of now, there are no Indian platforms with the reach (big tech has). The only company that could come somewhere close to that is Reliance Jio,” said Singhal. “Basically telecom operators provide the digital highway but they don’t necessarily own data. Jio not only owns the highway but knows where the people have stopped, what have they eaten, and so on. Sooner or later, it’ll catch the attention of Indian society at large.”