Competition law talks in terms of economic market in relation to product and geographical which are distinctively homogeneous, and can be distinguished from conditions prevailing in any other market.  In an attempt to define such market, it is entirely possible that it may be spread across various nations. Laws which govern are generally national and have territorial implications while markets have become international in various cases. Like in the recent judgment of WhatsApp the Competition Commission of India (Case No. 99/2016), [i] appreciated that the impact which particular policy change of the WhatsApp are “Global”, but they had to stick to India for purposes of evaluating the same.

Thus, for similar cases need for international competition law and international cooperation amongst various competition /antitrust authorities for various purposes including imposing of injunctions and other relevant remedies, obtaining evidences which might not be accessible otherwise, and also enforcing judgments, especially in a case where the company does not have any registered office in the country where it is found in breach of competition law, arises at this juncture.

This article attempts to sources for International Competition law which might be enlisted in treaties whether bilateral or multilateral platforms and also international principles of competition law which are widely accepted throughout the world which might have binding nature over Competition Commission of India.

Case for Extraterritorial application of Competition Law

National Competition law in many ways are meant to self-serve the interest of the nations. Competition law of one nation may not generally apply to foreign firms until and unless such enterprise seem to have an adverse impact on their domestic economic markets and many say this is means to counter “cross border economic terrorism” (as reiterated by Supreme Court in Haridas Export Case). It is quite common to see the cross border impact of foreign firms in the age of globalization and digitalization, with the emergence of MNC’s, INC’s, and outsourcing (to name a few common phenomena’s).

There may be broadly two solutions to such a problem, one is finding a solution at international level, and another one would be to find one at the national level. In the absence of International Biding competition policy, unilateral national enforcements have been sought for, whereby each commission on its own deals with antitrust issues based on effect particular conduct will have in its own jurisdiction. This may be proceeding from the assumption that extraterritorial conduct can be addressed at the national level through national antitrust law ( as can be seen in AGCM (Italian Competition Commission) initiating its own enquiry and imposing fine of 3 Million Euros, on WhatsApp-Facebook for changing privacy policy in spite of having European Competition Commission). [ii]But caution must be born in mind that unilateral conduct will reveal the very different story in practical situations.

In general most of the countries have tried to model their international model around that one followed by the European Union and one that of United States, thus it will be peculiar to discuss the same. Both of the regimes have in general extended their applicability of competition law beyond the national boundaries where adverse impact within their borders was found.

Extraterritorial application of US Antitrust Law

 S. 1 of Sherman Act 1890, provides for extraterritorial application of United States antitrust law. The Same principle was applauded in United States v. Aluminium Company Case [iii](Also popularly known as “Alcoa Case”) wherein “effects doctrine” was propounded, according to which any conduct of foreign firm having a detrimental effect on the domestic markets, can be enquired under US antitrust laws.

This decision was indeed met with massive backlashes around the world, with various countries attempting to prevent discovery of evidence quintessential for overseas prosecution. Like British protecting of Trading Interests Act, 1980 was enacted to block discovery; such adverse reactions were again met by US Congress by passing Foreign trade antitrust Improvement act, 1982, wherein they attempted to clarify and limit extraterritorial jurisdiction, to “direct, substantial, and reasonably foreseeable effect”, on US market.

Extraterritorial application of European antitrust law

EU nations also seem to have incorporated “effects doctrine” in their respective statutes. This doctrine was also given credence in European Courts judgment of Ahlostron Osakeytio v Commission,[iv] wherein EU’s competition rules were applied on foreign enterprise (economic entity is defined as “enterprise” under EU competition law), and affecting commerce between member states.

Extraterritorial Application of Indian Competition law

S 32 of Competition Act of 2002 gives extraterritorial jurisdiction to Commission, to inquire into conduct which may have an appreciable effect on competition within India, which may have been transacted outside India. Though s. 32 is not comprehensive in regards with what kinds of Orders may be passed in such cases, the language of MRTP act which was previously enforced in India can provide valuable light on the same. But for the present paper, it would be sufficient to limit the same to understanding that there does exist extraterritorial application of Competition law in India.

Since now we have looked at different regimes of Competition law, each having extraterritorial application which includes EU, USA, India besides these various other prominent antitrust law can be traced in Japan, Australia, Russia, South Africa, China, etc. all of them to certain extent provide for Extraterritorial application, which may have impact on international environment, thus looking at the International Competition law and its sources become important.

International Cooperation treaties

Principles of the market economy have been widely appraised around the globe since the early nineties, and subsequent to spread of competition law around the world, various treaties on the competition law has been concluded around the world. Though they may widely differ in their nature, some may provide for close cooperation (which might include facilitation for international enforcement of competition law violation), while others may contain only vague statements which are very general in nature (may possibly include only agreement to have regular talks). This agreement can be seen as a significant step towards international coordinated settlement and leniency programs for Competition law.

Bilateral Treaties

In the absence of coordinated international efforts, the problem of multilateral enforcement is mostly solved by bilateral, multilateral agreements between various antitrust agencies providing a working solution to the problem. This cooperation is primarily sought in the field of investigation, collecting evidence, claiming reliefs, and enforcement of orders, carrying business in the particular country. Thus, paving way cooperative unilateralism, wherein one agency can receive cooperative review from other organizations, and the appropriate remedy may be given.

The following table makes an attempt to identify all the Memorandum of Understanding which Competition Commission of India has entered into with different competition agencies around the world under the power bestowed under section 18 of Competition act. [v](The list may not be exhaustive, but the effort has been made to ratify the same of errors to the maximum extent.)

The International Competition Network (ICN)

It may be noted though there does not exist any binding international platform for Competition policy, there are international forum in which competition policy is can be coordinated (mostly bilateral in nature between the antitrust agencies of different nations) the most prominent ones are International Competition Network (ICN) and the OECD, paving the way for multilateral cooperation.

International cooperation within ICN network is gaining more and more prominence, with comprising of more than 132 competition authorities from more than 120 jurisdictions across the world. It has become platform for raising issues, for competition law enforcement, setting best practices, and standards besides facilitating cooperation amongst different agencies. [vi]

The annual conference of the ICN is held in member country every year, Annual Conference of 2021 being scheduled at Abu Dhabi. [vii]

Conclusion

Progressively with the interconnectedness of markets have made different jurisdictions come to the realization to come together to enforce and enact competition laws. Almost all jurisdictions around the world have provisions for the extraterritorial application of their domestic antitrust law around the world. Which has made it necessary to enter into agreements and treaties with other nations/antitrust authorities around the world; such efforts may take place at various levels from highly coordinated ones to general statements of understanding.  

Though binding international platform does not exist as of now in competition law arena, a number of reasons, but there certainly exist multilateral platforms such as ICN providing platform for coordination at the bilateral level. Bilateral agreements entered among different nations provide substantial insight into the sources of International Competition law.  Increasing cooperation among different agencies throughout the world is certainly the way forward for the International Competition law.

Views expressed are personal, please take independent Legal advice from a professionals.

[i] Vinod Kumar Gupta v. WhatsApp Inc.,  Order under 26(2) Case no. 99/2016  Competition Commission of India.

[ii] WhatsApp fined for 3 million euro for having forced its users to share their personal data with Facebook, Press Release, Autorita Garante Della Concorrenza E Del Mercato, 11 May 2017.

[iii] United States v. Alcoa, 148 F.2d 416 (2d Cir. 1945).

[iv] Ahlström Osakeyhtiö and others v Commission of the European Communities, C-89/85.

[v] International Cooperation, Competition Commission of India, http://www.cci.gov.in/international-cooperation (last accessed on 6th Sep 2017).

[vi] About ICN, Competition Commission of India, http://www.cci.gov.in/about-icn (last accessed on 6th Sep 2017).

[vii] Competition Commission of India (CCI) selected to host ICN 2018 Annual Conference in New Delhi in March –April 2018, Press Information Bureau, Government of India, Ministry of Corporate Affairs, 09-November-2016.

Digital economy has raised various new questions in front of various competition enforcement authorities. Wide reliance on new methods for interacting with users, new business strategies involving huge reliance on data (accumulation and use of the same), have baffled authorities. What is the remedy for the same has further intrigued authorities across the globe.

The scope of this paper is to find search for out of the box equitable remedies which can be enforced by Competition Commission of India, which can bring competition to life in the field monopolized by few firms. For the purposes of this researcher has limited himself to study of Social Networking and Consumer Communication applications alone, by taking up Facebook Inc, and its services i.e. Facebook and WhatsApp as prime example.

Setting up background

Network Effect stifling competition:-

WhatsApp services are a part of the instant messaging communication industry where the value of service to the user increases as the number of users of the service grows. The classic example is the telephone. The more people own telephones, the more valuable the telephone network is to each owner. If there are N owners, each one of them can call the other N-1 owners: a total of N(N-1) communications can be made. Thus the network’s value grows with exponentially with number of users. The value of a network is proportional to the square of the number of members within the network. Thus, when a product/service becomes valuable with the increase of the number of users it is known as Network Effects.

The concept of network effects is not new to the Indian competition law jurisprudence and has already been recognized by Competition Commission of India as ‘Network effect means that a product/service become valuable with the increase of the number of users.’  (Prasar Bharati Vs. TAM Media Research Private Limited).[1] Furthermore, in another case Competition Commission explained network effect as the concept by which the value to the users in an industry increases with increase in the number of its users (MCX Stock Exchange Ltd. vs. National Stock Exchange of India Ltd.)[2]

WhatsApp introduced its services in the year 2008 and it was the first of its kind application that linked the user’s contact number in providing the communication services. Since WhatsApp used internet connectivity in sending messages and was free, thus it completely substituted erstwhile, similar service of SMS and grabbed an instant popularity in the relevant market. In mere span of five years, WhatsApp became the most popular means of instant messaging communication in the society and had emerged to be the only app that had an enormous user base of active users. In the present situation, WhatsApp has become a need of the hour and has the most monthly active users. In the present scenario, if a person is not using WhatsApp, he will be handicapped in communicating instantly and purposefully with his peers as it is the most popular consumer communication app and at the end of the day, he will, howsoever unwillingly, have to use the services of WhatsApp for communicating with them. Resultantly, the person becomes a part of the network and increases its network size, following to the same, his peers who desire to contact him will also join the network and start using the services of WhatsApp, thus giving a birth to a chain reaction.

In the present scenario, because of network effects, the consumers are dependent on the services provided by WhatsApp as it has become a valuable service for them because it has such an enormous base of active users. WhatsApp has become a must have application in every smartphone.

Therefore, one cannot simply shift to another consumer communication application available in the relevant market without bearing high switching costs. Thus, bringing WhatsApp to a position in which the users are dependent on its service because of network effects in which no matter what conditions WhatsApp imposes on its users they will have to accept it.

In light of Whatapp’s ignorance for privacy protection, a consumer may prefer a better technology or the benefits of a competitor’s business; however, he/she is prevented from doing the same by the presence of network effects. Consumer communication applications such as the present one rely entirely on the presence of a user network to be meaningful to their users. High concentration of users on one app means the existence of a wide network on it, which is difficult to replicate on another network in a short-term or with minimum effort. Even where the switching cost from the dominant network to another is low or even absent, as in the present case, the consumer will still not be able to switch to another network since network effects ensure that there is a high level of coordination required between the consumers; given the number of consumers, this coordination will be impractical and difficult to achieve.

The Researcher has used only the examply of WhatsApp in this particular case, while the same analogy can be stretched even towards the working of Facebook, due to constrain of wordlimit the researcher has made a decision to not include the same in the paper.

User as true asset for these companies

Herein it is to be noted that Facebook Inc and WhatsApp Inc. both are service providing platform, which is later used by users and the usage of the same creates value for the platform itself.  Thus user is the real asset for any platform providing service, in following two ways:-

Asset in form of License: WhatsApp in consideration for providing its service takes a license from its users.[3] This license includes right to use, process, store, and sublicense, transfer these rights to others amongst various other rights. While the user continues to be the owner of the data so processed, they can use these data in the manner so provided in the License. Similar Licenses are also taken by Facebook Inc.[4] Later these entities utilize data so obtained under license for the purpose of processing, and providing services to the users, and further sustain the platform. Thus the license it has individually obtained from users is an asset for both entity i.e. Facebook Inc and WhatsApp Inc.

Global Perspective in regards with asset:- For the internet based services like that of WhatsApp Inc. which provides platform to its user, it is to be noted that valuation on basis “value per user” is prevalent practice. It is to be noted that European Competition Commission while considering the basis of valuation of WhatsApp took into account the value per user.[5]  Thus it in fact shows that the real asset of any platform based service which includes Facebook and WhatsApp Inc is the users on its platform. Other Consumer Communication Applications similar to WhatsApp were also evaluated on the criteria on multiple occasions i.e. Rakuten’s acquisition of Viber, or Skype’s acquisition by Microsoft, Instagram acquisition by Facebook, or even when Line took out IPO in 2014.

Company’s own perspective:- Facebook Inc in “Unaudited Pro Forma Condensed Combined Financial Information (Exhibit 99.3).”,[6] filed before U.S. SECURITIES AND EXCHANGE COMMISSION, under head Intangible Assets acquired in connection with acquisition of WhatsApp title “Acquired Users”. Thus, Company admits that USERS on the platform are the true assets of the company.

Interoperability as remedy

Interoperability in its simplest terms can be defined as one platform’s ability to interact and work with other platforms. In regards with web software this is generally achieved through Application Programming Interfaces (API)- which by far allow different softwares to interact with each other in. Simplest example could be when different websites use Facebook’s API for the verification purposes on their website and also use the same to access various sets of data and sometimes even post on their behalf.

The benefits arising from interoperability provided by platform can significantly improve the overall conditions in the market. With new and noble markets emerging, such as various developers entering and developing tools which in turn make the platform more usable and valuable because of the innovative steps taken by future developers. Further it also paves way for entry of various new players in the market, making market more and more decentralized and federated, as we can see in the case of telephone services, email services and World Wide Web. Lack of interoperability and systematically closing down possibility of interoperability has helped Facebook/WhatsApp cement the position they currently enjoy in the market, unchallenged, and powerful enough even to topple elections.

The systematically closing down opportunity to interoperate can be seen very evidently from the “platform policy” of the Facebook itself. Although it is all done in the name of user, they generally tend to serve the purpose of enterprise. This has been elaborately deal in next session. Just to highlight attempt to frustrate the interoperability can be seen from condition wherein the Facebook actively prohibits developers from changing UI or / and further prevent even users from adjusting the same according to their own needs. Section 4.2 prevents offering “experiences that change the way Facebook looks and functions.” Read with other clauses such as “respect the limits we’ve placed on Facebook functionality,” evidences Facebook Company’s intend maintain tight control over their platform.

Perhaps the most express bar can be seen from the condition where Facebook explicitly bars any social network from communicating with Facebook which is enshrined in condition Section 4.1 states, “Don’t replicate core functionality that Facebook already provides.”

As a general practice most successful interoperability is powered by open standards. For example we can look at Email, which uses the protocols of SMTP and IMAP, which facilitates sending emails across the platforms, from Yahoo to Hotmail to Gmail, AOL, and virtually every other platform seamlessly. This has allowed users to choose the platform though which they want to host their messages as well the kind of service they want to avail in order to send across their messages. This has made Email a truly decentralized and federated market wherein competition still does exist.

Similar API’s for Social media services also exist in the market, these API have been approved and developed by World Wide Web consortium, ActivityStreams and ActivityPub, are prime examples of the same. Either Facebook could be forced to adopt either of these two open standards or open source the standard they are already having in place. This would allow new players to come into market, and make Facebook one of the many players in the market. Giving users more power and flexibility in terms of choosing platform which hosts their data on terms and conditions they find agreeable, and still manage to connect with their groups.

Thus these remedy not only cures the problem of concentration of the market, but also further paves the way for future development of the market, both in the direct competition in upstream and downstream, while at the same time ensuring the benefits to consumers.

Data Portability as remedy

Data portability defined in simplest terms is facilitation of movement of data from one platform to another platform. Data portability allows user to move from one platform to another, like in case you might be user of WhatsApp for years and have created multiple chats, stared message and other data; you might be hindered from actually moving to another platform for the fear of losing all that data. Thus allowing unhindered movement from one platform to another is facilitated by data portability for the existing users of the services.

Facebook has been one of the first firms to take advantage from data portability efforts taken up by different platforms, which in turn helped it growing its network. This could be seen where Facebook in its inital days used to borrow contact lists from Gmail and Live, for its users and which in turn built its social network.

While the Facebook while citing security reasons have very often than not shied away from giving its share in data portability. It would very often show the email address on profile (amongst other details) in form of images instead of text, thus making it impossible to download data in readily usable form.

One interesting development in this regards is Europe’s GDPR (General Data Privacy Regulation), which took effect from 25^th May 2018. It made it obligatory on part of social media to provide for data portability. Though Facebook has taken steps in that regards and allowed users to download their data in JSON format, but it is to be noted that the data so downloadable is only subset of total data which Facebook has in regards with user. Thus it is only compliance factor which has been changed and users have not been empowered in true sense. Thus using that data user cannot move to new platform.

Facebook has built itself taking advantage of data ported from other services and now it is high time it returns the favour.

It is also to be noted that the ownership of the data the user creates continue to lie with user as per “Statement of Rights and Responsibilities” issued by the Facebook. [7] “You own all of the content and information you post on Facebook,” further the definition of post not only include the information which is actively provided by user but also the information which Facebook automatically collects by observing the behaviour of the user pattern over its platform.

As the owner of the data the user ought to have more right and control over the data. As previously mentioned that Facebook has merely license to use the same, thus how that particular license has been used must be informed to user. And if user wants to revoke the license and take control over their data the same must be allowed.

Thus data portability is not only an issue of importance from point of view of competitors and upstream and downstream market, but also an question equity and justness from point of view of User.

Conclusion

The remedies so suggested in this paper that is Interoperability and Data Portability, possibility and power to enforce the same exists in the hands of Competition Commission of India. Not only these remedies remove the major hurdle in innovation and centralization which these company have caused, but also further pave the way for further innovation. And also at the same time ensure consumer welfare. Currently pattern of asking to pay damages causes only temporary setback to these companies and without any long term consequences which can improve the market. Once these remedies are being implemented on these companies, they will be forced to compete on strength of their product rather than just the dominant position they currently enjoy in the market.  Further the users will be unfettered from sick system in which they are trapped. Freeing their data and giving them control are the first steps towards a cure.

Views expressed are personal, please take independent Legal advice from a professionals.

[1] Prasar Bharati Vs. TAM Media Research Private Limited , COMPETITION COMMISSION OF INDIA Case No. 70 of 2012.

[2] MCX Stock Exchange Ltd. vs. National Stock Exchange of India Ltd, COMPETITION COMMISSION OF INDIA, CASE NO. 13/2009.

[3] Your License to WhatsApp. In order to operate and provide our Services, you grant WhatsApp a worldwide, non-exclusive, royalty-free, sublicensable, and transferable license to use, reproduce, distribute, create derivative works of, display, and perform the information (including the content) that you upload, submit, store, send, or receive on or through our Services. The rights you grant in this license are for the limited purpose of operating and providing our Services (such as to allow us to display your profile picture and status message, transmit your messages, store your undelivered messages on our servers for up to 30 days as we try to deliver them, and otherwise as described in our Privacy Policy). https://www.whatsapp.com/legal/#terms-of-service

[4] https://www.facebook.com/legal/terms/plain_text_terms

[5] CASE M.8228 – FACEBOOK / MERGER PROCEDURE, European Commission, http://ec.europa.eu/competition/mergers/cases/decisions/m8228_493_3.pdf

[6] https://www.sec.gov/Archives/edgar/data/1326801/000132680114000047/exhibit993unauditedproform.htm

[7] https://www.facebook.com/legal/terms/previous?ref=new_policy