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© Indic Pacific Legal Research LLP.

For articles published in VISUAL LEGAL ANALYTICA, you may refer to the editorial guidelines for more information.

Dynamic Competition Law in India: Prologue

In India, practices related to competitive and anti-competitive practices, in the post-1990 period, are regulated under the helm of the Competition Act, 2002. However, we are aware of the fact that this act requires some tremendous changes, so that it adapts with the information age we all live in. As of now, it has become obvious that India’s key strength at the level of diplomatic engagement and influence, is reliant on a new critical domain, which the Union Government has adapted with time - digital technologies. There are obvious reasons why India aims to become a technology superpower or at least a regulatory superpower in digital technologies, maybe in the lines of/better than the European Union. In this article, it is proposed how India can transform its competition policy, which is dynamic and adaptive, in sync with its technology policy.

India’s Technology Policy at a Glance

India’s tech policy is a mixed bag. However, the bureaucratic efforts to stabilise and empower its technology governance efforts has become quite visible. Now, there are some key areas, which complete the trajectory of the technology policy. In some ways, the developments should have been achieved way before, but maybe one advantage that India does have as compared to Japan, China, Singapore and other Asian economies is the Indo-Pacific situation. It is assumed that technology as a domain area for being distinctive need not be interconnected to other policy domains of concern.

However, the generalising (and homogenising) tendency of technology as we know, has led us to the reality where the role of technology has become generalist in many ways possible. Even in jurisprudence, technology law has the potential, in real terms, to gain the status of generalist purpose, akin to international law and public law. That is accounted due to the penetrable nature of the field, which countries across the world are concerned about. Not only it complicates the policy discourse surrounding technology governance, but it compels policymakers to propose sensible interconnected legal and policy conundrums, which germinate the purpose and extent of digital technologies in this information age. Of course, the extent of digital technologies may not be the same in every domain or industry, even if many technology enthusiasts and industrial leaders might envision the same. It is therefore necessary that India adapts to pursue rejuvenating its technology policy, which is all-comprehensive with its own speciality and mobility.

As discussed in the Book Review of “The Network State”, there could be a situation, where technology policies of the US and China would target the most active and evolving element of critical technology - mobility. Legal thinking can be used to create visible spaces for positional inference to guide tech-oriented mobility in various industries, which is where India’s concerns largely would lie. As of now, it is visible that technology governance in India, despite the absence of relevant legislations (and the presence of some sector-specific regulations), guides international trade, sustainable development, entrepreneurship and innovation.

Now, a regulatory regime is essential to India’s technology policies, which has a clear juristic understanding of ethical and unethical practices. The problem with the earlier withdrawn Data Protection Bill clearly was its arbitrary nature on multiple grounds. Another major reason for the withdrawal of the Bill is that India is required to enact a data protection law, which is effective, reasonable and far-reaching in line with other technology regulators in Europe and Asia.

It is true that certain big tech companies did not adhere with the IT Rules of 2021 in a proper manner. However, a pre-emptive approach to create pressure and constraints for foreign companies would not be helpful in handling the issues associated with the intermediaries. There is another issue with India’s technology law approach that it lacks a sectorial vision in understanding technology governance. Nevertheless, the effective measures that the Reserve Bank of India and SEBI adopt to govern fintech companies and their activities & operations are still better than those of the IT Ministry. It is thereby proposed that shaping competition policy can help in cultivating a sector-to-sector approach towards technology regulation. Considering the scope of the proposed Competition (Amendment) Bill, 2022 (currently under review in Standing Committee in Lok Sabha), it is proposed that India requires to assess the possibility of a dynamic competition policy, which enables Indian market players and regulators to establish more equitable positions amidst the regulatory systems of the US, China and the European Union. Regulating competitive practices is not possible under obsolete frameworks and legal definitions. This also links to the entrepreneurial culture and management practices which shape the trajectory of corporate governance in India. Looking it from a perspective of knowledge management and systems, making competition policy dynamic enhances the bargaining power of Indian regulators. It also enables to have a design-oriented perspective on anti-competitive practices in the markets. In the next section, the theory of dynamic competition and its scope in the Indo-Pacific region is proposed and discussed.

Dynamic Competition Law in the Indo-Pacific

Dynamic competition has been discussed as a concept for long. This article, entitled Dynamic Competition in Antitrust Law, authored by Sidak and Teece explains dynamic competition and its development in American Law:

Schumpeter was among the first to declare that perfect competition was incompatible with innovation. He noted that “[t]he introduction of new methods of production and new commodities is hardly conceivable with perfect—and perfectly prompt—competition from the start. And this means that the bulk of what we call economic progress is incompatible with it.” […] The fact that perfect competition is inconsistent with innovation does not necessarily mean that monopoly is a requirement. Schumpeter himself recognized, as we do, the importance of pluralism and rivalry in the economic system. However, one need not define rivalry as occurring inside some tightly circumscribed “antitrust market” containing only existing competitors, with their capabilities proxied by existing market shares. Moreover, numerous variables complicate any simple relationship between the generation of monopolistic rents and the allocation of resources to develop new products and processes.

In general terms, dynamic competition implies that innovation and evolutionary considerations guide the transformation of markets and their product & process innovations. The neoclassical understanding of regulating prices as the key aspect of competition law does not bode well for the Global South countries, including India, because it is essential to incorporate the potential and scope of complexity science to determine how digital products and services affect unrelated industry sectors and their economic cycles.

For example, the policy discourse on responsible artificial intelligence ethics completely ignores the competition law outlook on the ethics of AI. There are economic considerations behind the inclusion and democratisation of AI technologies, and the mere process if is not understood from a corporate governance perspective, then merely having oversight boards and self-regulated solutions, generally do not serve the cause of AI ethics. The 2nd-order effects of such activities could be reckoned in unrelated sectors and the complexity behind the manipulation of digital markets must be understood properly. According to Anouk van der Veer in Calling For a New Theory of Dynamic Competition (2022), for Network Law Review:

Dynamic competition draws on innovation economics as defined by Austrian School economists, e.g., Schumpeter and Hayek. Whereas neoclassical economics focuses on reaching economic equilibrium, Austrian economists see competition as a process in a state of disequilibrium. By extension, elements such as products, demand, and supply should not be taken as static data. These elements are subject to constant change due to companies striving for innovation and growth rather than economic efficiency. Dynamic competition looks at competition coming from “the new commodity, the new technology, the new source of supply, the new type of organization”.

Taking into perspective the digital realm in the Indo-Pacific region (most of Asia), dynamic competition, especially in the case of digital technologies - is an important necessity to understand. It enables actors and regulators to work on empowered legal, policy and entrepreneurial solutions, which enable sustenance and growth. Now, according to van der Veer, there are four aspects1, which shape dynamic competition per se in her article - (1) innovation economics; (2) evolutionary theory; (3) complexity theory; and (4) resource-based theory. My assessment is that (the proposition may relate to the regulatory landscape in Europe, yet) this approach is contextually relevant even in the case of India as an aspiring regulatory superpower. Thus, as per the diagram below, India must ponder upon adopting a dynamic competition approach, which caters to four important factors: innovation, transformation, adaptivity and values.

Let us understand how each of these four factors are necessary. Innovation relates to questions related to intellectual property rights, and impact analysis examining ripple effects in other relevant sectors and industries. Transformation, which relates to the evolutionary theory, implies how regulatory expectations keep up with times and promote Soft Law measures (for example, self-regulation measures to be undertaken by Cab Aggregators as directed by the Competition Commission of India, recently) and the interconnectedness of digital markets is dealt in a creative manner. Adaptivity, refers to Complexity Theory (also known as Complexity Science), which is also important because understanding risks, development cycles and trends help us to find bottom-top regulatory solutions when top-down measures incur limitations and are static. It also enables us to adopt mature and flexible legislative solutions in future. Now, Values, refer to the moral component of dynamic competition here. However, they also include the adoption of resource-based theory, where, let us say any digital product or service would be subject to value assessments. The ethics behind these assessments and background checking for sure guide the moral compass of decision-making at best, and makes dynamic competition rooted to realities. In the next section, the propositions to shape India’s Competition Law regime are discussed.

Initial Propositions and the Conclusion

Usually, dynamic competition has been misinterpreted as a means to justify the financialisation of the “free market” as we call it by the big tech companies, especially the FAAMG companies. However, understanding dynamic competition for sure enables countries like India, which as of the current economic situation, despite pitfalls, has survived and is growing sustainably. As a developing country and a middle power, India’s economic outlook towards assessing any potential anti-competitive practice may be different. Although it could be an early proposition to anticipate the need of dynamic competition policies in India, due to the economic situation and the maturation of market players. At least to begin with, India may address two important questions:

  • How much inherent and connected digital technologies have become to restrict or affect competition?

  • How much multi-sector or cross-sector impact of digital technologies as products or services could be determinable under the current Competition Act, 2002 and the regulatory landscape?

We have to anticipate the proposed Digital India Act, and maybe a newly introduced Personal Data Protection Bill to see how the Union Government addresses these 2 questions. However, looking at the trend of technology companies gaining impetus, it is apparent that the penetrability of digital products and services in certain cases, can become cross-sectoral. We are already seeing that trend with several fintech applications, and the restrictions on cryptocurrencies by RBI. Even several tech-based aggregator companies are under the radar, which shows that like any information and innovation economy, India is not innovating enough in that way as players in the EU, China and the US are seeking towards.

Nevertheless, the language of innovation in economics does not end with the static vision of “monopoly” and there are possibilities of mediating the protectionist and all-pervading tendencies of innovation. Even in the recently proposed Indian Telecommunication Bill, 2022, the Union Government has proposed to broaden the definition of telecommunication services to include OTT communication services, internet-based communication services and broadcasting services among others. This is intriguing because it may be possible that market players in the OTT industry, for example, would have to take licenses, share revenue with the government and be treated to same rules as telecom service providers. A little relatable example comes from France where Netflix was obligated to invest 20-25% French revenues in French content under the Audiovisual Media Services Directive of the European Union. Creative solutions like these can be achieved in their own realms and economic-legal basis, if self-regulation serves some developments. It however does not mean that dynamic competition justifies any state-led or private sector-led weaponisation of technology-based market economy. Where India stands is perhaps at the aisle of preventing major competition law violations, and also mediating way for sustainable and distinctive innovations, which may further the cause in Africa, Latin America and the rest of the Indo-Pacific as well.