NCLAT's 'effects analysis' order on Google may hinder other big tech probes

Present competition law does not provide for effects analysis. Conducting one would mean letting anti-competitive practices continue and taking action once adverse effects have already been created

The recent National Company Law Appellate Tribunal’s decision to call for “effects based analysis” in the Google matter could spell trouble for ongoing investigations by the Competition Commission of India (CCI) on some other big-tech firms such as Amazon, Apple and Whatsapp.  

The NCLAT in its order has said, “For proving abuse of dominance under Section 4, effect analysis is required to be done and the test to be employed in the effect analysis is whether the abusive conduct is anti-competitive or not.”

The present Competition Law does not have the provision for an effects analysis. Policy experts said that CCI has an obligation to prevent unfair competitive practices.

A competition law expert said there can be two types of effects. One is exclusionary, where one party is driven out of the market. The second is exploitative, where the consumer bears the brunt. “Conducting an effects-based analysis would mean letting anti-competitive practices continue and then take action once such a practice has already created adverse effects,” a policy expert said.

This isn't the first time that CCI has been told to do an effects-based analysis. The Parliamentary Committee of Finance in its report on the Competition Amendment Bill had also suggested a mandatory effects-based analysis.  The panel had said CCI should study different factors such as impact on consumers, innovation and competition before adjudicating a conduct as violative of the competition law.

CCI had rejected the proposal as it could delay corrective action and create an anti-competitive environment.

“It is hard to predict the outcome of the effects based analysis vis-a-vis the other ongoing investigations, however, from a competition stand point, the effects based analysis should not cause any detriment to any party. The CCI has adopted this approach in the past as well though it varies from case-to-case,” said Kanika Chaudhary Nayar, partner, DSK Legal.

In December 2021, CCI had launched the probe into Apple’s policies on allegations by Together We Fight Society, a not-for-profit organisation, about the high commission charged by Apple and the lack of third-party payment options. The anti-trust watchdog is also looking into WhatsApp's updated privacy policy of 2021.

In the case of cartels, there is a presumption of adverse effect on competition, so CCI isn't expected to get into the question of effect-based analysis. For vertical agreements between manufacturer and distributor, the onus is on CCI to prove there is an appreciable adverse effect on competition. In abuse of dominance cases, such analysis has been a subject of debate.

“Hereafter, since this is a direction of a higher court, CCI would have to  pursue or follow an effect based approach. CCI has all along been inconsistent in its approach. This will set a precedent and may lead to enhanced litigation,” said G R Bhatia, partner, Luthra and Luthra Law Offices.