This article has been written by Yash Pratap Singh pursuing Diploma in Technology Law, Fintech Regulations and Technology Contracts and has been edited by Oishika Banerji (Team Lawsikho).
Table of Contents
Antitrust is an ‘American word’ for legislation meant to curb unfair trade practices to protect both the consumer and the traders. Antitrust laws are part of the economic policy that deals with monopoly and monopolistic practices. Antitrust laws around the world are The Sherman Antitrust Act, The Clayton Act, The Federal Trade Commission Act of the US, the Digital Markets act of the European Union, The Anti-Monopoly law of China, and the Competition Act, of 2002 of India, to name a few. The absence of these laws will lead to the formation of monopolies, cartels, and collusion. In the current era where companies are bigger than the countries in terms of resources and capital, it becomes important to discuss how countries are controlling them so that they don’t exploit the country and people for profit. We will see a comparative analysis of the antitrust laws of the United States, the European Union, China, and India. We will see how the big tech giants like Google, Meta (Facebook), Amazon, and Apple are dominating the market and what is the latest trend in this area by analysing the latest case laws and legislations. By analysing the laws through primary sources, we will see which country has more stringent laws than others and which provider is better. The strategies used by the tech giants to dominate the market will be discussed in brief. We will also discuss the latest steps taken by the legislators and judiciary to curtail them and make the market suitable for consumers as well as emerging organisations.
Antitrust laws around the world
The United States of America
With the advent of industrialization, laissez-faire economics, and the government giving free hand to businesses in the 19th century, the industries in America grew so fast that by the end of the 19th century, huge monopolies began to grow. Farmers faced the effect of the monopoly of the railroads as they were overcharging them so by 1890 due to public pressure the government passed the Sherman Antitrust Act, 1890. Section 2 makes it a felony to engage in the activities mentioned in the act. But in the beginning, it was used to repress unions rather than big businesses. Teddy Roosevelt, for the first time, used it against Northern securities railroad trusts which were controlling the railroads. The Supreme Court in Northern Security Co. v US(1904) reversed the precedent and allowed the act to be used for the breaking up of monopolies and trusts.
Section 2 of the Sherman Act categorises mainly three types of offences:
2. Attempted monopolisation
3. Conspiracy to monopolise.
There are two ingredients to constitute the offences stated above: firstly, you should possess the power of monopoly in the relevant market, and secondly, it must be acquired through anti-competitive practices or illegal means. If you are utilising lawful means to reap the benefits of the monopoly you will not be liable but if you use illegal means and try to destroy the competition itself, then this practice will be condemned. The Sherman Act has an extraterritorial effect to the extent it affects or is intended to affect the commerce of the US as was laid down in United States v. Aluminium Co. of America (1945).
The Clayton Antitrust Act was passed in 1914 to strengthen the Sherman antitrust act by using much more specific language and adding additional rules on topics such as price fixing and unfair business practices. The Clayton Act has been amended many times:
Robinson-Patman Act of 1936 amended it to protect small businesses from the unfair pricing practices of large retailers. Celler-Kefauver Antimerger Act amended it to close the loophole that enabled companies to acquire and kill competition as well as the covered acquisition of companies that are not direct competitors. Hart-Scott-Rodino Antitrust Improvements Act amended it to make it necessary for companies to inform the FTC and U.S. justice Department of mergers and acquisitions beforehand. Competition and Antitrust Law Enforcement Reform Act of 2021 also amended it concerning anti-competitive acquisitions and also enhanced the enforcement abilities.
The Federal trade commission Act was also created in 1914 as congress felt that an agency is required to watch over unfair- business practices. FTC has both quasi-legislative and quasi-executive functions which include investigations, enforcement actions, and consumer and business education.
Nearly 70 years after the US Sherman Act, EU competition law was established in 1957 as a part of the Treaty of Rome. However, in nations like Germany and France in the 19th century, the tradition of competition law began to form in Europe. The European Union Antitrust policy is developed from Article 101 and Article 102 of the Treaty on the Functioning of the European Union (TFEU) which prohibits anti-competitive agreements between two or more independent market operators and abusive behaviour by companies holding a dominant position in any given market. This also has an extraterritorial effect to the extent that it affects the competition in the European Union and the commerce of the member states.
The European Commission evaluates the legality of a merger using the EU test. The European Commission is permitted to block the merger of the two companies if a company gains a materially stronger position of market dominance because of the transaction. Now, let us see when this power was exercised by the European Commission. The European Commission denied Ryanair’s proposed acquisition of Aer Lingus, because it would have improved Ryanair’s position in the Irish market. The merging of Dutch package delivery company TNT and its American rival UPS was another merger that the Commission managed to stop. The European Commission was concerned that after the acquisition, UPS, and DHL would be the only two major players left on the continent. Although General Electric and Honeywell’s proposed combination had already been approved by American authorities, the EU banned it in 2001. The combination would considerably reduce competition in the aircraft market, according to the European Commission’s justification for intervening.
The Standing Committee of the National People’s Congress (NPC) adopted the Anti-Monopoly Law on August 30, 2007, and it went into effect on August 1, 2008. Except for the two Special Administrative Regions of Hong Kong and Macau, it is applicable throughout the PRC. The Anti-Monopoly law of China prevents mergers, acquisitions, monopoly agreements, abuse of dominance, and administrative positions that are aimed to destroy the competition in the market. It also has an extraterritorial extent to the practices which has the potential to affect the competition in PRC. Anti-monopoly law in China is enforced by an agency called the Anti-Monopoly Enforcement Agency (AEA) while there is another agency called Anti-Monopoly Committee (AMC) responsible for creating regulations and laws pertaining to competition, issuing rules, and organising the administrative enforcement work.
In India, the abuse of dominant positions, mergers, acquisitions, agreements, and other anti-competitive powers are prevented by the Competition Act, of 2002 that replaced the Monopolistic Trade Practices (MRTP) Act, of 1969. MRTP Act was based on the pre-liberalization and pre-globalization phase but in 1991 when economic liberalisation and globalisation were introduced there was a need for a competition law that will benefit the domestic industries to maintain competition in the market as well as comply with international practices.
The government realised that now it should not only restrict monopolies but also promote competition to maintain a free, fair, competitive, and innovative environment that will safeguard consumer interests and promote the country’s long-term economic growth. This act established the Competition Commission of India which has the function of maintaining competition in the Indian market and protecting the interests of consumers and traders by preventing adverse practices and by promoting and sustaining competition. Section 32 of the act empowers the CCI to act against the organisations which cause Appreciable Adverse Effects on Competition (AAEC), so it has the power to pass orders against the entities causing AAEC in India.
How is GAFA (Google, Amazon, Facebook, and Apple) dominating
The term GAFA was coined by the French newspaper Le Monde in 2012 to address the big tech giants and new problems arising in the digital business and the term became popular in 2019 when French publishers and newspapers started using it. More than 91% of internet searches are made through google and almost 13% of all e-commerce purchases are done from Amazon. Google platforms like YouTube have 2.56 billion users with the largest user base from India of 467 million and with 5 billion videos watched per day on the platform. Gmail has 1.8 billion users holding 29.5% of the email client market share while Apple is the largest holder with 57.4%. Facebook has 2.96 billion monthly active users worldwide. Talking about market capitalization these companies have a combined market cap that is more than the GDP of some developed countries. Alphabet Inc., the parent company of Google, has a market cap of $1.24 Trillion, Meta Platforms Inc. had a market cap of $921.93 Billion (2021), Apple Inc. has a market cap of $2.26 Trillion, and Amazon.com Inc. has a market cap of $1 Trillion.
The administration must see that the companies don’t become a monopoly as the US administration has done three times in the past 100 years. The US had broken Standard Oil in 1911 alleging that its acquisition was restraining the trade and as a result of the split big companies like British Petroleum, ExxonMobil, and Chevron were born. The US broke AT&T (American Telephone and Telegraph Company) in 1984 into seven Bell corporations based on geographical lines. The US tried to break Microsoft in the 1990s but after appeals, Microsoft remains one company today. Only the US has the pockets deep enough and clout to break up the technology giants, but it is now also tilted towards keeping the jobs and money flowing in the country and other countries are taking hard steps.
Google always argues that its products are free, and no one is bound to use them but essentially Google’s customers are the advertisers and we users are its product. Google makes more than 80% of its revenue from Google Ads and it does so through the analysis of the data of users and giving them personalised ads. It made agreements with mobile manufacturing companies to promote Google apps and browsers by making them default on the device. Google has a history of acquiring the best technologies so that it can expand its business. Google acquired Applied Semantics in 2003 which invented AdSense and Keyword sense and Android Inc. in 2005. It acquired Orion, a search engine with unorthodox capabilities which was praised by Bill Gates himself, in 2006.
The best acquisition of Google was YouTube which is the biggest video-sharing and uploading website. It has made more than 250 plus mergers and acquisitions to reach where it’s today in terms of technology and services. Do you know that Where is my Train was also acquired by Google in 2018? Similarly, the other three companies have a history of acquisitions either to kill the competition or to acquire state-of-the-art technology. Apple has a monopoly in the distribution of software for its devices, so it charges extra from developers and earns supra-normal profits. Apple also has made more than 120 acquisitions. According to the research, Amazon stood out among its tech competitors by allegedly investing at least $16 billion in 19 acquisitions in the previous three years while Alphabet lagged spending at least $11.87 billion to purchase 25 businesses. On the other hand, Meta and Apple spent considerably less; according to the report, they spent $2.51 billion and $1.62 billion, respectively, on acquisitions.
Facebook has established itself as a monopoly due to its robust network effects, high switching costs for users, and considerable data advantage. By discovering rivals who might be a threat to the business and either buying them, imitating them, or eliminating them. Like it acquired Instagram for $1 billion and WhatsApp for $16 billion and in 2021 it generated a revenue of $47.6 billion and $790 million respectively. By replicating the products that small businesses offer on the Amazon Marketplace and then selling its own branded version, Amazon kills their businesses. By pricing its Alexa-enabled goods below cost, Amazon has also created entry barriers for other voice-enabled device producers. They are charged with favouring homemade goods and amassing as much user information as they can. You should also keep in mind the instances when details or amounts of acquisitions are not made public.
The US is not taking hard steps as it should take because these companies are sources of jobs and money inflow. Even in September 2022, it held a meeting outlining six reforms for Big Tech platforms. In accordance with the six guiding principles, the technology sector should be encouraged to compete; strong federal privacy protections should be adopted, as should stricter privacy and online protections for children; special legal protections for major tech platforms should be eliminated; more information should be made public about platform algorithms and content moderation decisions; and discriminatory algorithmic decision-making should be eliminated.
Europe now has stringent laws regarding the anti-trust domain as it has two new laws, namely, Digital Markets Act and Digital Services Act which make Europe well-armed to tackle these tech giants and maintain the competition in the market. Digital Market Act (DMA) requires the explicit consent of the users for the personalization of ads. It has also made these companies give a choice to consumers concerning search engines, voice assistants, and browsers. Penalties for non-obligation are high, amounting up to 10% of the global turnover and 20% for repeated infringements. It is imposed on so-called “gatekeeper companies” which are providing core platform services like search engines, social media platforms, and messengers. This legislation enabled the smaller players to inter-operate with bigger ones, now you can send a message from the Signal app to Whatsapp.
The Digital Services Act applies to companies having more than 45 million active users in Europe. They have to do a yearly analysis of the dissemination of illegal consent. Misleading interfaces will be prohibited, and online marketplaces will now have a “duty of care”. Now platforms have to give users the option to opt out of personalised ads based on history and other information. Not obliging can lead to a fine of 6% of Gross revenue.
In Europe, other incidents also took place, Meta was fined $414 million by the Ireland Data Protection Commission for violating GDPR (General Data Protection Regulation) as it was wrongly taking consent for giving personalised ads on Instagram and Facebook. Apple was fined $8.5 million by France for giving personalised ads in the App Store without obtaining valid consent.
As most of the google apps including YouTube, Facebook, and Instagram are banned in China and amazon stopped most of the services in 2019, there is no GAFA in China, but BATX which means Baidu, Alibaba, Tencent, and Xiaomi. The final version of the updated Anti-Monopoly Law (AML) was published by the Standing Committee of the National People’s Congress (NPCSC), China’s legislature, on June 24, 2022. Several significant amendments and additions are made by the revised law, which takes effect on August 1, 2022. These include a ban on the use of specific technologies for anti-competitive behaviour, an increase in the maximum fines that can be imposed for violations, and a reduction in abuse by administrative organs and organisations. The recent AML amendments, which provide the legislation supporting China’s anti-monopoly regulatory framework with more legal heft, will have a big impact on big businesses, particularly but not exclusively huge technology and platform firms.
The Competition Commission of India imposed a fine of $162 million on Google. The Competition Commission of India received a complaint against Google for monopoly practices in the Android smartphones market. Google was mainly using two agreements named MADA (Mobile application distribution agreement) and AFA (Anti Fragmentation agreement) to mandate the pre-installation of the GMS (Google mobile suite) which is the collection of pre-installed apps and services and gives no option for their uninstallation. This has led to a violation of Section 4 of the Competition Act. NCLAT (National Company Law Appellate Tribunal) has recently denied staying the order of the fine and started the recovery of the penalty, but the Supreme Court of India has agreed to listen to the case of Google.
A fine of $117 million was also imposed by CCI on Google for its play store policies as it was forcing app developers to use GPBS (Google play billing system) for paid apps and in-app purchases. It was not doing the same for YouTube where it was allowing third-party payment systems, this made Google’s practice discriminatory. India is taking a tough stand and recently in late December, a Parliamentary panel recommended that the government should pass a Digital Competition Act. The government of India is also planning to pass the new telecom law and tighten up the grip on IT companies and increase surveillance.
If the government doesn’t regulate these companies, then they will become so big that the competition in the market will be negligible and they will start doing business and charging as they want if they digress from their goodness. If governments regulate them it will surely lead to an increase in surveillance for the reason of improvement of content available online and security. These actions will lead to a threat to the privacy of consumers. If the government only regulates these companies to make sure that they don’t misuse user data and it leaves the autonomy of user data to the user himself and not to any company or government, then also the risk of harmful content and mischief by criminals will increase. All these aspects have to be balanced and then also there will be a need for a global law that is followed by all countries and companies as now local laws are of less use in this digitally globalised world. The only way to stop them from becoming a monopoly is to separate them, like separate YouTube from Google, Amazon web services from Amazon marketplace, and Instagram and Whatsapp from Facebook. The US has done this in the past but it is not going to take that risk again as it wants to maintain its software monopoly and it doesn’t want to face the demerits it faced after separating the companies in the past. Europe is taking the strictest actions against these companies, and we have to see now what developments this year brings and how the legislations regarding users’ data take shape.