The article is written by Harmanpreet Kaur from Amity University, Kolkata. The article will deal with the dispute between Google and Paytm and will analyse whether Competition Act, 2002 needs to be amended.
Economic offences are pernicious to a nation’s growth and consumer welfare. A welfare state must regulate the anti-competitive behaviour of business undertakings as it is a healthy competition that fosters lower prices and increases quality. The objective of the competition law is to promote competition and prevent monopolization of the market and such a law is crucial in a developing economy like India. So, the Competition Act, 2002 was introduced to suit the requirements of prevalent financial and market conditions. Corruption of falsified practices that were disruptive to the competition was penalized. The requirement of effective execution of competition law is pivotal to uphold the ideals of public welfare and social order and ensuring the ownership and control of the material resources that are distributed to serve the common good as enshrined in the Constitution of India.
Robust competition law and policy is thereby quintessential for enhancing efficiency and consumer welfare. An efficient competition law regime helps ensure the application of rules, regulations, policies that ensures the companies, enterprises and other business ventures compete fairly with each other in the market. This made the companies and ventures invest in the applications, and make them available for the consumers thereby making their lives easier and amicable.
The competition law has encouraged the enterprises and the companies to attain efficiency, by creating a wider choice for consumers and also helped in reducing the prices and improving the quality of products, goods and services. Consequently, stating that there must be healthy competition between the firms and the companies, and any kind of rivalries must be avoided. It equally accorded powers to the companies, but the concerns arise when there are disputes i.e, market distortion among the companies either by way of anti-competitive agreements or abuse of dominance or mergers and acquisitions.
As the Indian economy is emerging with advancements in every field, there are concerns over a player in the market abusing its dominant position and acting arbitrarily against other ventures and enterprises. In 2019, the Competition Commission of India had probed Amazon for the abuse of the dominant position, but after further investigations concluded that the retailer did not commit any abuse of dominant power. In 2020, Google was brought under the same lens when it was accused of using its dominant position, thereby raising concerns for the illegal practices in India’s market system.
Dispute between Google and Paytm
The search engine Google is a multinational company that has its specialization in internet-related services and products that includes online advertising, technological inventions, software, and hardware. The company has shown considerable improvements by introducing new applications to its services like google docs, google sheet, youtube, play store, etc. Though there were improvements in its service-providing schemes the company has also been involved in various controversies and faced wrath from other big startups. The application has either been accused of tax avoidance, misuse and manipulation of search results, violation of data protection policies and others, copyright, censorship of results, and privacy.
The company was recently involved in a dispute with the startup system i.e., Paytm. Paytm is one of the ruling e-commerce online payment systems. The digital payment platform was founded in August, 2010 to provide help to consumers by making online deals, bus ticketing, and other schemes. The application has shown considerable improvements by introducing Paytm wallets. It has become the first application to cross over 100 million downloads in the year 2017.
The application landed into controversy with the google play store, a digital distribution service that was developed by Google and serves as an official application store for certified devices running on the Android operating system and was created for the welfare of the public to allow the users to browse and download applications.
Google’s claim against Paytm
The dispute arose between Google and Paytm in the year 2020, when Paytm was unlisted and removed from the google play store by the supreme authority i.e, google abruptly. Google justified its actions of removing the application stating that the application had violated the company’s guidelines and policies. The company claimed that its policies were totally against the online gambling games, contests, and other schemes with cash prices that were being conducted by the application and specified that the enlistment was not due to any of the security reasons of the company.
After the sudden deletion of the application, Google India in its official blog post on Twitter stated that as per its official guidelines and policies, the company had no place for allowing online casinos or gambling activities that facilitate sports betting to be made accessible to the public platforms as it was acting against the welfare of the public and would lead the consumers to an external and inappropriate website forcing them to participate in paid tournaments and earn or win cash prices and real money, which as a result acts as an infringement of its policies, and held the application’s conduct liable for infringing the laws of the company.
As per the rules and regulations of Google, it has been conferred that if any application is found infringing the policies of the company then it has all the authoritative rights and powers to terminate the services of that particular application from the Google play store. Google also very precisely stated that it had multiple times informed and warned the concerned authorities of the application i.e, Paytm to remove the applications ahead of the termination, but the developer did not take pay heed to the company’s order, which resulted in the company taking immediate actions by terminating the Google play developer’s accounts i.e., suspension of the application.
Retaliation of Paytm to the claims of Google
Google India’s claim of violation of policies and regulations by Paytm was confronted by the concerned authorities of the application. The developer and the concerned authorities of the application contended to the claims of the company stating that it was a slamming move of using monopolistic power by the big tech companies to defame and slander the startups, which as a result has harmed and is continuously harming the Indian startup ecosystems.
The developer hinted towards the search engine i.e, google stating that it was acting as the ‘judge, jury and the executioner’. The authorities further contended towards the claims of the company and clarified that it had no fraud and deceptive intentions to avail money from the users and the online games introduced by the application were not real-money gaming schemes but offered various schemes to the consumers wherein the stickers can be acquired by the consumers on making certain personal payments under the scratch card schemes, that was made available to the consumers ahead of the Indian Premier League.
It can be stated that the application was trying to maintain a marketing position so that the consumers can get fascinated, making the application gain success in the market.
Settlement of the issue
The developer of the Paytm application firmly confined that the developers and the other concerned authorities controlling the application had no malafide and fraud intentions behind the conduct of the online games and the contests and were not infringing the public welfare thereby contending that it had no real money involved in any of the online games and competitions, but gave the chance to the individuals to win cash prizes and other stickers.
The developer and the authorities, however, removed the scratch card schemes and other online games and competitions from the application and was restored by Google back on the play store, making it available on the public platform for its use by the people.
Though the matter and the dispute between Google and Paytm was a temporary issue and was solved instantly. But this dispute raised a lot of questions that Google used its arbitrary and unfair powers to suspend the application, which as a result violated the provisions of the Competition Act, 2002 i.e., the unfair trade practices and abuse of dominant power. Though the matter has been resolved, there are possibilities that the same instances can be reported in the future.
Abuse of dominant power by Google
Section 4 of the Competition Act, 2002 prohibits any enterprise, company, venture, or any other individual from exploiting its supreme and dominant position. ‘Dominant’ position can be termed as a position of supremacy, superiority, and strength that is enjoyed by any company, enterprise, high tech, and even an individual or a group in the market. The position acts as an advantageous shield for any company or enterprise by making them operate independently without getting influenced by the competitive forces, which acts as a disadvantage for the other competitive forces and the consumers by affecting their positions in the market and infringes the policy of the public welfare and healthy competition.
The company, enterprise, venture, group, or an individual can be found misusing its powers in the cases when the authorities:
- Directly and indirectly imposes an unfair, partial, and discriminatory condition either in the price and purchase or sale of goods, products, and services.
- Exercising of limiting and restrictive powers regarding the price and purchase of goods, products, and services or on the technical or scientific development on the purchase or sale of goods and services.
- Indulgence in any illegal or unfair practices or using the powers of dominance, thereby resulting in a denial of market access to the other competitors.
- Utilizing the strength of its position to enter the market.
- Using its authoritative power to remove the company from entering the market for the sake of competition.
- Imposing supplementary obligations and commitments that have no connection with the contracts.
Assumptions on Google’s action on its use of dominance
For the disputed case of Google and Paytm, it can be assumed that:
- Google had arbitrarily used its dominant position of not permitting online games and suspending the application of Paytm from the play store. Online games have not been declared illegal by the judiciary and executive, though gambling has been declared illegal by the legislators.
- It can be argued by affirming that the suspension of the Paytm application from the google play store, actually denied the market access of the application, thereby resulting in the infringement of Section 4 of the Competition Act.
Thus, the power of dominance is not considered inadequate and inferior, but if it’s used arbitrarily and capriciously it can result in unhealthy competition. So, the abuse is said to have occurred when any company, enterprise, group, or individual uses its dominant position in the market in an exploitative manner.
Role of the Competition Commission of India
The Competition Commission of India has been appointed under Section 7 of the Competition Act to exercise control of any of the anti-competitive practices in the market that could harm the competition policies by the companies, enterprises, and a group or individuals. The Committee has the power to prohibit any kind of anti-competitive agreements between the companies, which can resultantly be declared void by the commission.
The Committee has the power to investigate the matters if any company or enterprise is found violating its supreme dominant power and appoint a Director-General under Section 16 of the Competition Act to inquire into the matters related to the abuse of dominant power.
The commission was established and appointed to investigate matters related to the malpractices exercised by the companies and the enterprises in the market. It is the statutory body in India that is responsible for enforcing provisions under the Competition Act, 2002 throughout the territory of India.
Section 18 of the Act provides the commission with basic duties that are necessary to be enforced to maintain a healthy competitive spirit. They are:
- It has been asserted with the duty to eliminate any kind of unfair and illegal practices in the market that could be detrimental to the competition.
- It must protect, promote and strengthen the competition in the market.
- It has to safeguard the rights and privileges of the interests i.e., public welfare should be of a prime importance.
- Freedom of trade should be carried on by all the competitors and the committee must ensure it.
- Cooperation and coordination should be maintained by all the companies, enterprises, and groups.
Punishment for infringement of abuse of dominant position
The Competition Act,2002 has empowered the Competition Commission of India to penalize a delinquent enterprise, company or individual apart from cessing desist orders. It has the power to punish the enterprises or the company if they are found violating their supreme and dominant position in the market. It can penalize the enterprise by:
- It has the power to order the concerned company, enterprise, and group to discontinue the practice of its dominant position unjustly and arbitrarily.
- It has the power to impose penalties that would not be exceeding the limit of 10 percent of the average turnover earned by the company or enterprise, or group for the last three financial years.
- It can even direct for the modification of the business of the company, enterprise, or a group.
- It can pass any order against the company practising such malpractice of an abuse of dominant position according to the facts and circumstances of the case.
The fines imposed by the Competition Commission of India are one of the highest economic policies in India. It has made an indelible impact on the industry and has imposed fines on the enterprises and companies to approximately 140 million. It has also been authorized with the power to investigate practices of companies, enterprises, and groups that are outside the territory of India if their conduct is causing any anti-competitive effects in India.
Concerning the Google and Paytm dispute, if the matter had not been solved then the issue would have been referred to the Competition Commission of India for further inquiries and investigations and the company responsible for conducting malpractices and abuse of dominant power could have been held liable under Section 27 of the Act. There is no scope for partiality by the Competition Commission of India as the Act seeks to maintain a level playing between the private and public enterprises and sectors and seek competitive neutrality i.e., the government and the state-owned enterprises are prohibited from using their legislative and fiscal powers to advantage their own business over the private sector. In a few of the cases, the state-owned enterprises and the big multinational technologies have also been penalized by the Competition Commission of India like Coal India Limited v. Competition Commission of India (2019), wherein the corporation was held liable for abusing its dominant position under Section 27 of the Act.
The necessity for enforcing criminal sanctions in the arena of competition law: a wakeup call for the legislature
The competition law is a set of rules and regulations and judicial decisions that have been introduced and developed by the government and judiciary through judicial decisions to promote healthy competition in the market as well as prevent the occurrence of malpractices that could pose threat to the competitive spirit and would be against the public welfare policy. The competition Act, 2002 entails provisions that deal with the unfair practices which affect the competition in the market such as anti-competitive agreements, abuse of dominant power by the dominant firms and companies, and other groups. The Act provides for the penalty provisions for infringement in the form of monetary confinement and criminal liability.
- Monetary confinement is imposed in cases where the companies or enterprises enter into anti-competitive agreements, abuse their respective dominant positions, or enter into any combinations and mergers and acquisitions that would harm the competitive spirit.
- Criminal liability, under the competition law, is only imposed when the party rejects or does not comply with the provisions of the Act.
This affirms that there are no developed criminal liabilities against the companies and enterprises practising such malpractices and unfair trade practices. Now the question arises as to whether the legislature should take initiatives to impose criminal liability against the companies and enterprises involved in the anti-competitive practices and amend the Competition Act, 2002.
The use of criminal law for the prevention of malpractices in the market should be considered a necessity in modern times because of the expansion of markets and the growing increase in the economy and the growing competition in the companies and the enterprises. Monetary penalties have been enforced in the competition act, but it suffers from a serious weakness, as the fine imposed on the violators are negligible on the part of the companies and the enterprises and it is not adversely affecting them since they are already in the process of high-profit making and have large assets in the market. These monetary penalties are ignored by the companies and such huge amounts are considered negligence on their part. For instance, in 2012 the Competition Commission of India imposed a fine of Rs.1,17 crores on the Aditya Birla Groups Ultratech, the company without any contention paid the monetary penalty, which states that these monetary penalties do not affect the companies. Therefore to remedy this weakness, the legislature should introduce new provisions in the Competition Act, 2002 criminalizing the anti-competitive practices and imprisonment should be imposed as a criminal sanction upon them.
The possible criminal legal framework that can be adopted by the legislature for the amendment of the competition law framework are:
- The anti-competitive attributes i.e, abuse of dominance, unfair trade practices, and unlicensed agreements that have been declared illegal by the Competition Act, 2002 should be categorized as criminal offences under the competition law.
- The principle of Mens Rea should be imputed upon the companies and enterprises committing such malpractices. It has also been cited by the Supreme Court in the case of Iridium India Telecom v. Motorola Incorporation (2011) that the companies if found committing any illegal acts against other competitors can be prosecuted for offences involving mens rea.
- The doctrine of vicarious liability should be imposed upon any enterprise or a group committing such anti-competitive practices.
- A separate judicial body or courts should be formed for the administration and management of the trial of criminal competitive cases.
- A transparent and proper committee should be formed and established for investigating criminal competition cases.
The dispute between Google and Paytm was resolved timely, otherwise, the controversy would have been taken up to the courts, and the rules and laws of the Competition Act, 2002 would have been enforced. Thus, the legislators should impose limited powers upon the big multinational companies so that big techs do not abuse their power of dominance.
The Competition Act, 2002 is modern legislation that was introduced to protect the companies and the enterprises from anti-competitive practices and free, fair, and healthy competition should be promoted. The Act has evolved significantly, but still lacks awareness about the consequences and the safeguards and the interpretations, not only among the general public but also among the members of the business community, primarily in whose direct interest the legislation has been introduced.
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