Mandatory Sharing Of Non-Personal Data At Odds With Competition Law
A carte-blanche, untested pre-emptive data-sharing mandate is likely to create conflicting standards for achieving competition.
A committee of experts appointed by the Ministry of Electronics and Information Technology has recently published a report that proposes a governance framework for non-personal data.
The report’s stated objective is to leverage the success and strength of digital service providers for the larger social, public, and economic good of India’s entrepreneurs and citizens. To meet this objective, the report proposes that anonymised data collected by large digital businesses—like commuter patterns gathered by cab aggregators or user analytics collected by e-commerce companies—be shared with the Indian government, citizens, and businesses.
The economic justification for data-sharing is to enhance competitiveness and ensure a ‘level playing field’ in data-driven markets. But, this is the very mandate of the Competition Commission of India, a pan-sectoral regulator established under the Competition Act, 2002, tasked with promoting and preserving competition in the Indian market. Given that the primary objective of the report overlaps with the jurisdiction of the CCI, it becomes imperative to consider the report’s proposals against the time-tested principles that underpin India’s competition law and policy.
Jurisdictions across the world are evaluating whether their competition law frameworks have the tools they need to effectively regulate internet-driven markets. An important part of this debate is whether firms’ access to extensive user data as a consequence of providing—often free—services creates entry barriers strong enough to merit state intervention. The report responds to this by proposing to set up an exclusive non-personal data regime to enable economic stakeholders to access non-personal data collected by ‘data businesses’. It recommends that this access be mandatory, albeit at varying pricing mechanisms, depending on the value-addition attributable to the data. The report assumes that open access to such data would help Indian entrepreneurs leverage the value of non-personal data and drive growth.
In making this assumption, the report overlooks various established competition law principles.
Risks Of Collusive Outcomes In The Market
Competition law regulators across the world acknowledge that transparency among producers often restricts competition, rather than promotes it. Free-flow of data—even those that may seem benign at first—risks reduction in strategic uncertainty, increase in market transparency, and facilitation of tacit collusion, particularly in concentrated markets. Harm to competition from sharing competitively sensitive information between rivals that inform the firms’ market behaviour is now well established and proscribed under Indian competition law and most other competition law jurisdictions. Although the report seeks to balance these conflicting objectives by clarifying that the non-personal data framework will take necessary steps to ensure that competitively-sensitive information is not exchanged in the mandatory data sharing exercise, this suggestion undermines the very premise of the non-personal data proposal. The report assumes that non-personal data necessarily exhibits economic value, likely on account of its strategic nature, thereby proposing its (mandatory) distribution to enhance competition. However, ridding non-personal data of its “strategic value” before disseminating would contradict the very rationale that purports to justify the need for its distribution at the outset.
Risks To Incentives To Invest In Data-Driven Technologies
If competitors are allowed to access each others’ non-personal data—like customer preferences or commuter trends—there would also be little incentive for them to invest in developing their independent analytics in the first place. This may also have the effect of stifling entrepreneurship. Apart from setting a ‘data collection metric,’ the report does not set comprehensive qualifying criteria for data businesses that are to be subject to a data-sharing mandate. Once again, a firm’s ability to collect data cannot, on its own, be an accurate reflection of its market power. It is for this reason that competition law regulator consciously distances itself from using any single metric for determining market power. Indeed, the report’s suggestions risks requiring fast-growing Indian entrepreneurs that satisfy the ‘data collection metric’ to share their data—possibly with bigger rivals—and reduce their competitiveness.
Creation Of Conflicting Standards For Achieving Competition
Competition law shows us that there’s no ‘magic formula’ to enhance competitiveness across all sectors. India’s competition law encourages market forces to drive consumer welfare. Consumer welfare is enhanced with high competition, low prices, and improved quality. Competition law intervention is thus reserved for situations when market forces have failed—or are expected to fail—and a firm is found to have the incentives and the ability to act independently of its competitors. For these reasons, most mature competition law jurisdictions, including India, ask only direct ‘dominant’ firms to share their infrastructure with competitors if their infrastructure is objectively indispensable for competition to exist and has non-duplicable characteristics. The report does not set out any empirical basis to suggest that the non-personal data of ‘data businesses’ – regardless of their competitive peculiarities – meet these requirements. Recent evidence, in fact, points to the contrary. If previously-collected data were indeed critical for new businesses independent successes like Snap, TikTok, Zoom, PhonePe, and Telegram would not exist and BigTech would not have any product failures.
A carte-blanche, untested pre-emptive data-sharing mandate is likely to create conflicting standards for achieving domestic competition.
Balancing Regulation And Incentives To Innovate: Is There A Regulatory Vacuum?
This is not to say that regulators should not intervene at all. It is well-acknowledged that data yields network effects. And network effects exhibit different characteristics in different markets. Their strength comes from limitations on consumers’ ability to switch. Competition regulators are well-placed to regulate data-driven markets keeping in mind the twin objectives of ensuring competitiveness: preserving incentives to innovate and ensuring a level playing field among economic stakeholders. They achieve this by ensuring that switching between data-driven platforms by consumers is not cumbersome. Indeed, data interoperability and cross-compatibility remedies, implemented by competition regulators often after a detailed investigation to avoid false negatives, serve the same end-goal as the report. They allow new innovative players to leverage the strength of existing data-networks without compromising the platforms’ competitive incentives.
A U.K. government report on ‘Unlocking Digital Competition’ studied exactly this and advised its competition regulator to adopt a ‘pro-competition’ agenda which would enhance personal data mobility and systems with open standards. It considered data-openness, of the kind that the report suggests, to be the last-resort which may be enforced cautiously and proportionately only where no less-interventionist methods are available. The European Union is also consulting stakeholders to understand whether it should adopt possible ‘ex-ante’ rules for digital companies that play a gatekeeper role, but has not determined ‘data openness’ as a tool that it must adopt.
The CCI already has the legal mandate and experience spanning a decade to ensure competitiveness in Indian markets, including all forms of digital markets. The CCI’s role was carefully crafted after deliberating the importance of maintaining a degree of competitive neutrality among economic stakeholders and ensuring that its intervention has minimal collateral effects on consumer choice. It serves its ‘corrective’ role by adopting ex-post conduct-based interference and a ‘proactive’ role by undertaking advocacy efforts and market-wide studies. The report does not make a case for creating another regulator to achieve the same goals as the CCI with a singular focus on one economic resource. It does not explain why the CCI is not—or cannot be—equipped to enhance the competitiveness of data-driven markets. This is a critical question that must be duly considered before proceeding with the proposed non-personal data framework.
Hemangini Dadwal is a partner and Aakarsh Narula is a senior associate with the competition law practice of AZB & Partners. Views expressed are personal.
The views expressed here are those of the authors and do not necessarily represent the views of BloombergQuint or its editorial team.