This article has been written by Oishika Banerji, from Amity Law School, Amity University Kolkata. This is an exhaustive article that deals with the challenges faced by competition law for Big data and AI.
Table of Contents
Competition law is that branch of law which helps in regulating and restoring the balance in the market competition by anti-competitive conduct of the companies. With the world slowly moving towards the adoption of artificial intelligence in every sphere, machines are replacing manual labour in the workplace. This has led to the evolution of an uncertain competition in the market for the adjustment to a new normal which is time-consuming. The market is filled with questions as to will there be a complete replacement of the human workforce with that of AI or will both equally exist in a market. AI is accompanied by digitalization globally. This has accelerated the growing trend of the economy as well. The disadvantage of digitalization is access to a huge amount of relevant data in the hands of corporations as well as startups. Big data in simple terms can be referred to as a large amount of various data which after being collected at a high velocity is processed by computation of software which helps in the production of databases that are unique in their own way. This database has a significant commercial value of its own. This entire data processing procedure and production of Big Data in the form of software comes under the domain of data protection laws. The issue that is coming up nowadays is whether this production of data can impact the competition existing in the market or not and therefore challenges arise in the competition law domain. The working of AI is regulated to some extent by Big Data. Therefore, the collaboration of AI and Big Data acts as a stumbling block in the pathway of competition law globally, which can only be resolved if market players are well versed with the same and technology is used as a boon rather than a curse.
Ways in which big data affects competition law
The growing concerns of Big Data in the field of market competition have led to the thought that accumulation of a large amount of data can act as a dominance for any company over the market and other companies inclusive in that market. But just having the access to data cannot wholly contribute to a company becoming dominant in the market. There are several aspects that need to be taken into consideration in such a situation. Some of them are provided hereunder:
- Whether the competition in the market is fair in the sense that all companies should have access to the same data as the company who already has access.
- Whether there is the presence of supplementary data to replace the collected data from the company.
- Along with the access to the data, the company should also be in possession of the ways to analyse and monitor the data collected.
- The features of the data collected by the company should also be taken into concern.
The aspects provided above outline the fact that if a company has the access to a large amount of data also, it is not sufficient for the company to gain dominance in the market and thereby bring changes in the competition existing in the market. But the fact is these aspects are not taken into concern; rather what is observed is the possession of a company in terms of the amount of data present with the same. This creates a challenge for the competition law governing market trends. Further Big data, which features varieties, is data that is not an information source by itself hence comes privacy, a luxurious problem for personalized information. The very idea that develops among oneself is that the larger the amount of data one gathers by itself, the harder it gets to get in contact with the actual information. This is because handling a large amount of data is complicated by itself. Therefore, it becomes necessary to look into the grounds that determine market power. They are:
1) Quality of the data gathered: The two types of data that can be gathered by a company are analysed data and raw data. While the former is already processed as reflected by its name itself, the latter needs to be processed in order to be utilized. This makes it transparent that if the company has possession over raw data, the dominance of the company over the market will be very less for the value of the data is less as external effort is required by the company to be exercised to help in processing the data. Whereas the possession of analysed data which carries a greater value can be responsible for providing success to the company in possession of the same amidst the competition existing in the market.
2) Quantity of the data collected: If one goes by the economic theory of diminishing returns, then it can be said that after collecting a significant amount of data, the company will not be interested in the collection of any further data for it will by then be satisfied completely. Hence, the quantity of the data collected is also one of the grounds for determining market dominance by a company.
3) Availability of the data: One of the factors to determine market dominance by a company is the availability of data with that company compared to the other companies in the market. Some data are easily accessible and available to the companies as the companies in a market mostly prefer personalised data over any other data. Therefore, the availability of data is one of the determining elements for competition existing in the market.
Role of big data in the transport sector
Big Data has a significant influence in the transport sector. Companies associated with this sector who have a well-built structure and network can use digitalization for the growth of their entities. The prominent illustration of the same is the coming of the apps that provide service of online cabs that are Uber and Ola to be specific. These apps have raised the competition existing in the field of transportation relatively by means of the usage of data and technologically mechanized procedures. These companies are involved in tracking the data of the riders along with their location and routes to reach the destination that wants to. All these are carried out while booking the cabs itself. Thus, these are preferred over normal taxis on the road or any other means of public transportation. The one thing that must be noticed in this is that these companies having dominance in the market can as well exploit the personal data available to them from their users. What can be carried out is that the data available to them can be sold off to insurance companies by them and the insurance company in return can increase the level of car insurance premiums if the users are found to carry out activities that are beyond permissible limits like riding at a very high speed that is noticeable, using routes that are meant to be dangerous etc. Although the companies will be able to regulate a user’s data, not much harm can be caused to the user for the requirement of proper legal evidence to judge the individual in case of any unreasonable activity carried out by the person.
Big data in supply chain industries
The industries or entities that work on the mechanism of the supply chain have benefited immensely by the coming of Big Data. Companies can utilise this data better in order to reach out to the customers providing maximum service. But, two factors are to be noticed in this situation. They are:
1) Understanding the complex supply chain system.
2) The use of the data available in the supply chain system.
Although the concept of the supply chain is very old, the most familiar system that is used by this industry is a spreadsheet to carry out planning procedures. With the increase in the complexities in the market, it becomes difficult to represent the same in a spreadsheet and therefore, the hurdle that arises is detrimental for the industry as a whole. Thus, companies fail to use supply chain analytics in such a situation. Thus, data management helps in making way through this difficulty in one way. But challenges seem to be present for adoption of the new system. It will still take time to be taken in the grip. Some of the major challenges faced by the supply chain industry in today’s time are provided below:
1) The global supply chain is lacking visibility on a greater extent.
2) Demand volatility requires management.
3) Fluctuations in cost in the supply chain.
It is only through planning and strategies, that the supply chain industry can overcome such challenges and in return adopt analytics for a better future.
Big data: a weakness or strength for the market
Big Data is often a source for the market to gain power. The indicator of such a power is when users provide access to their data in terms of payment for the purchase of any good or service by their own willingness. When the customers themselves are in preference of the usage of Big Data, then the entities will do the same in order to reach out to more and more customers. Further large amounts of consumer’s data can be used as a barrier for entry in the market. Therefore, whenever a new company enters the market, what will be assessed is how fast the company is able to get a hold on the data of the consumers. Thus, the entire competition existing in the market will transform into a digitized platform for the companies in the market. The problem that arises for competition law is the problem of governance. Data is not finite like products and services and the same can be replicated by other companies as well. The existence of data is not the sole element to determine the authority of a company as has been discussed previously, rather it is the way the data can be used by the company. The analysis and application of the data are way more complicated compared to the data itself. Not many companies are aware of the way the data can be applied. This leads to serious problems in the market. Companies who are not aware of the handling of data are often ignored and therefore, removed from the competition track. The competition existing in the market this becomes unfair. Another problem that can arise is that if also the companies are well equipped with data, the scope of securing them is less for competition also exists in the intellectual property domain. The anti-competitive agreement that includes Big Data is the agreement of getting a license that will be exclusive to the company. Due to the influence of Big Data, companies now compete on grounds of the extent of privacy protection it can offer to the data in hand. An illustration of this concept can be better explained with a mobile texting app called WhatsApp. This app provides its customer with the guarantee of an end to end encryption that is privacy about the chats. This is one way in which companies can reduce their cost involved in guaranteeing privacy. Hence, this can be cited as the prime example of the application of Big Data by companies. Therefore, Big Data is a strength or a weakness is on the perception of the companies. If they fail to pay this, then it is detrimental for the companies. Whereas if the company is successful in processing and applying the data, it is the company who will benefit.
AI and competition law
Artificial Intelligence is a term that is being used in several fields in recent times. The report that has been recently published by the German Cartel Office and the French Competition Authority lays down the challenges and risks faced by competition and antitrust laws due to the usage of algorithms. The four issues that were dealt in by the report were:
1) Artificial Intelligence can play the role of a facilitator in the horizontal collusion of any market. This means that if the market high price is set artificially, the only setting of price would not lead to competition concerns. Rather this rise in price can help in knowing the efficiency of companies in a market.
2) The second issue is whether the competitors are acknowledged with the anti-competitive measures adopted by the third party in the market. If yes, then can they foresee the same and act accordingly.
3) How will companies determine a reasonable standard of care that is required to be exercised by them and to look after the employer’s activity in the company?
4) The fourth issue draws concern as to how to handle challenges associated with the functioning of the algorithms in a company.
The report deals with issues that highlight the fact that the competition laws that are present are flexible enough to deal with the new trends in market competition. Although there is existing uncertainty in the process, the reports are encouraging for the competition law to encircle within its ambit the scope for AI as well. Discussions associated with the usage of competition laws to govern artificial intelligence is at initial levels at present. But Competition Law is relevant in the field of data because the amalgamation like Microsoft-LinkedIn, Facebook-Instagram, Yahoo-Verizon demands prior attention from the law enforcement bodies and that’s why the potential possessed by competition law cannot be ignored in totality. The coming of Artificial Intelligence has led the Competition Law regulators to think and discuss more. This is because AI can prove to be detrimental for not only Competition Law but also fields like Intellectual Property, data protection, privacy and tort law if the same is powered by strict liability. The 9th Amendment of the German Act Against Restraints of Competition (ARC) 2017 that governs competition law in Germany has been noticed to focus mostly on the aspect of Artificial Intelligence.
Big data and AI: challenges for competition law in India
Artificial Intelligence brings accuracy in market alignment along with a reduction in risk factors. International communities along with the World Intellectual Property Organization have significantly appreciated this development brought on by the AI. The Competition Act,2002 that governs market competition in India, has certain aims to achieve by regulating the market. Some of them are:
1) Elimination of practices that appear to be detrimental for market competition.
2) Nourishment in market competition and promoting the competition globally.
3) Ensuring freedom of trade and fair practices in the market.
4) Safeguarding the interests of the consumers.
This Act does not include Artificial Intelligence within its ambit and therefore, any cases which arise from the same will take time for disposal. Artificial Intelligence has the potential to provide suggestions that are pre-determined by nature and this can affect the competition existing in the market invariably. Therefore, in order to regulate the mobility of AI in Indian markets, statutes are necessary. It was in the case of Rajasthan Cylinders and Containers Limited v. Union of India, that the Supreme Court decided that it is the responsibility of the Competition Commission of India to ensure that competition should be existing in the market and the same competition must be a healthy one and the consumers associated with the market should be able to benefit from the competition that is existing. Therefore, until there is a regulatory framework for governing AI, the commission must focus on curbing conduct of anti-competitive nature through AI mechanization. The threats for market domination by an innovation like AI cannot be ignored easily. The impact of Big Data is felt far beyond markets based on digitalization and mergers for it has been noticed in a number of cases that Big data is responsible for company convergence in several other sectors as well. AI promotes thinking and therefore, if the market sectors are able to adapt the same then the same can prosper well. India is a diverse nation and therefore is also the home for diverse amounts of data. India can actually benefit in the field of AI and Big data for the mechanization and processing of such a large amount of data cannot be carried out by human brains alone. Therefore, in order to have proper utilization of the data, the requirement of AI is necessary. Now, the legal issue that arises pertaining to this field is that the Competition Law, 2002 is not wide enough to involve Artificial Intelligence within it for back in 2002 nobody was aware of the fact that Artificial Intelligence existed. With the change in the worldwide market, Indian markets also started changing to keep in pace with the globe. What did not change is the governing regulation for without the same the regulation of AI in India markets is not possible. Like the markets around the world, there have been several issues associated with Indian markets because of AI also. Due to the lack of relevant provisions, the same issues have been resolved by reasonability. But the ground of reasonability will not suffice for long hence the requirement of the new provision is felt all across the globe.
Google search bias case
The Competition Commission of India imposed a penalty on Google for abusing the dominance it has over other search devices in India’s platform. The Commission ordered prohibition in Google’s activity as a connecting space for users with the contents. The Commission further dismissed the contentions that the internet users are provided access to information by Google for free. Google was also held to be showing specialized search results according to its own preferences. This means that Google was preferring its own website over other websites as the company runs on its own algorithms which are designed by the company itself. This provides Google with the advantage of managing the ranking display on the Search Engine Results Page as well. The two arguments raised by the Commission against Google were:
1) Google’s preferential treatment in the search engine market and discrimination with other company’s websites.
2) Google has access to a large amount of personalized data with itself.
The Commission was finally of the opinion that Google must execute some extra responsibility as a search engine and provide equal importance to all other companies without using arbitrariness. There have been several other cases like this in the nation. Companies which can master artificial intelligence and have access to a large number of data can be said to dominate the market. In the process, several companies have gone against the provision laid down by the Competition Act, 2002. Just like Google, the Competition Commission of India has also taken into notice the activities of Amazon and Flipkart. These online apps have access to huge amounts of data for the way they carry out their business in the market, overpowering those competitors who lack access to similar kinds of data. Artificial intelligence has been a threat to the sovereignty granted to the technological world. The threats possess by AI can be categorised into three different points as laid down below:
- Foreclosure of market.
- New patterns and forms of collusion.
- Strategies for implementation in price discrimination.
A lot of factors are approaching the Competition Commission of India for the introduction of artificial intelligence in the Indian markets. Some of them are giving rise to several issues, few of which can be solved while others remain unsolved. Combination of several companies are adding to the thought that there will be the elimination of several competitors from the market for these mergers are backed by data and Artificial Intelligence.
The present regime of competition law is still searching for answers to the hurdles created due to algorithms through AI. Usage of sensitive data by companies leads to data protection infringement which is another aspect that needs to be looked after by the competition law domain. The system of Artificial Intelligence is responsible for making the market profitable and therefore, is welcoming for the market operators. The only loophole is the set of rules and regulations that should be present in order to govern the usage of artificial intelligence which is missing and is required desperately. The solutions that can work with its potential efficiently are:
- Increase in transparency in the working of the companies in the market.
- Increase in cooperation within the entities for the public disclosure of data being used by the companies for regulations of the algorithms.
- Processing of computer programming in order to make sure that the sensitive information that comes into concern should be ignored relatively to avoid any kind of problems arising from the same. This will also help competitors to make a decision regarding the competitive prices active in the market.
Thus, what needs to be done is the adoption of a flexible statute in order to handle the evolving nature of artificial intelligence and also to tackle problems that will be unique each day.
Competition Law like all other laws comes with the aim of maintaining a balance in the markets around the globe. Different countries have different ways of interpreting the same. The world is fast progressing and advancing technologically in every aspect. The fact that Artificial Intelligence will be with us for the days to come cannot be ignored completely. One cannot just eliminate it from this world for it will be a loss to humans only. The creator of AI was the man himself and therefore, the challenges faced in the already existing statutes will also be suffered by the man himself. The only way out from this conflict is by slowly and gradually, with all due care and diligence, adopting AI and Big Data as a part and parcel of daily life activities. When it comes to the market which governs the economic background of every nation in this globe, AI adoption can help in bringing efficiency in the market if the application of AI is well versed by the market operators. It is high time to bring in change in the statute of Competition Law in the sense that it needs modification with the growing changes in the market sector. Technology and digitalisation should be adopted for good and that will be the only way to deal with the challenges swiftly and efficiently. As the market is changing so are the competitors in the market, therefore, the governing law should also change accordingly for if one tries to fit in the existing statute in the present market scenarios, challenges are bound to arise. Digitalisation and artificial intelligence are unfolding several new fonts that are completely new for a lot of companies competing in the market. Equal opportunities should be provided to all these companies to compete fairly. Competition can never be healthy and fair when competitors are fighting over their own shortcomings. Hence, countries who have not yet brought in amendments or repeal in competition laws should do so for betterment.
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