By Sujit Bhar
While the US capitalist environment allows the growth and subsequent nurturing of super commercial behemoths, the system, at the same time, also has mechanisms that can break monopolies, preventing them from completely owning markets, destroying public entrepreneurial aspirations and stifling innovation, virtually institutionalising price gouging. The first such case, when a super monopoly had been hammered to bits, was the breaking up of Standard Oil.
The US has for decades used anti-trust laws like the Sherman Antitrust Act (1890) and the Clayton Act (1914), the Federal Trade Commission Act (1914), etc., aiming to promote economic fairness and competition. Standard Oil and AT&T cases have remained shining examples.
Not so long ago, the US courts deemed Microsoft Corporation to have engaged in monopolistic practices, though the company escaped the axe, but now Google has been accused of using its monopoly to reduce competition through exclusionary agreements.
Recently, the Department of Justice (DoJ) in the USA has declared Google and its search engine Chrome a monopoly and has ordered Google to immediately sell Chrome to avoid a penalty in an anti-trust case. This could have far reaching effects on the tech perimeter of the world, signalling a possible end to the iron grip that tech companies around the world have had on the entire tech scenario and on smaller companies.
The possible divestiture of Google Chrome (Google has said it will appeal this judgment) is among remedies sought by the DoJ’s anti-trust division in a proposal filed, signed by acting assistant attorney general Omeed Assefi, all part of a suit initiated in 2020.
The DoJ has argued that Google has used the Chrome browser to establish a monopoly in online search and advertising. The tech-giant also paid third parties to use Chrome as its default search engine. The plaint, authored by the DoJ and more than 45 states, says: “Google’s conduct presents genuine danger to freedom in the marketplace and to robust competition in our economy.”
US District Judge Amit Mehta has already declared “Google is a monopolist, and it has acted as one to maintain its monopoly,” in an opinion filed last August.
What really irked the plaintiffs were that Google’s distribution agreements-such as paying Apple and Samsung billions of dollars each year to make Chrome the default search engine on smart phones and tablets-have allowed it to gain monopoly power in search and general search text ads. Judge Mehta wrote in his opinion that these payments have “anti-competitive effects,” adding, “That conduct has allowed Google to earn monopoly profits.”
It is known from judge Mehta’s observations that in 2021, Google paid a total of $26.3 billion to Apple, Samsung and other companies such as AT&T, Verizon and T-Mobile to ensure Google’s search engine as the default for consumers. “Google has unlawfully used the distribution agreements to thwart competition and maintain its monopoly in the market for general search services and in various online advertising markets,” Mehta wrote. “Google’s dominance eventually attracted the attention of anti-trust enforcers-the US Department of Justice and nearly every state’s Attorney General.”
According to a report by Bloomberg, if the judgment forces Google to sell Chrome, the company could fetch a price in the region of $20 billion. Yet, despite this possible massive financial gain, it would be a major blow to the tech-giant.
The Big Fallout
More importantly, other tech-giants, such as Facebook, Nvidia and others, would no longer be able to rest on their past laurels, being forced to reorganise their businesses to fall in line with what anti-trust laws demand. This will leave open large alleys for smaller tech disruptors that had been forcefully sidelined by the massive influence that these tech-giants wielded.
In an extension of the definition of a tech company, even the likes of Amazon might be reined in, or even the recently bashed up group called the PayPal Mafia, which, at one time included a specific person called Elon Musk.
By a further extension of definition, the recent surge in valuation of Artificial Intelligence (AI) companies, including Open AI’s ChatGPT and Google’s version of a large language model, might see pre-emptive pruning. China’s DeepSeek would have a field day, then, though the San Francisco, California-based Perplexity AI, founded in 2022 by Aravind Srinivas, Andy Konwinski, Denis Yarats and Johnny Ho, would have to explain its sudden rise in its valuation to $9 billion from a pittance months back.
Hence, added to the loads of disruption instituted by new tech, old anti-trust laws could pitch in with a disrupted tech field.
The India Effect
How do these activities reflect on the Indian business and legal scenarios? They could be pretty inspiring for India. The country, of late, has become vigilant in monitoring and regulating the practices of tech-giants to ensure fair competition. In October 2022 the Competition Commission of India (CCI) had imposed a fine of Rs 1,337.76 crore on Google for abusing its dominant position in multiple markets within the Android mobile device ecosystem.
The CCI’s investigation had revealed that Google’s restrictive agreements with original equipment manufacturers (OEMs) prevented them from developing and offering devices based on alternative versions of Android, thereby eliminating competition and restricting user choice.
If the DoJ’s appeal and judge Mehta’s order does have the effect of Google having to sell Chrome, then it is possible that the CCI might go ahead and consider structural remedies. The CCI could also mandate the divestiture of certain business units of dominant tech companies to prevent anti-competitive practices. This would be a big shift from the existing mild, monetary penalty system of India.
This could also bring back into focus the Indian government’s proposed Digital Competition Bill, 2024, which aimed at preventing tech-giants from self-preferencing their own services and exploiting user data without consent. This Bill seeks to establish presumptive norms to curb anti-competitive practices proactively and imposes substantial penalties for violations.
Stricter enforcement of anti-trust laws in India can help create a more equitable environment for start-ups and smaller enterprises. By curbing the monopolistic practices of dominant players, new entrants may find it easier to innovate and compete, fostering a more dynamic and diverse market landscape.
This could lead to many positive developments in the Indian tech firmament, with a possible surge in the development and adoption of indigenous alternatives to services like browsers, search engines, and app stores.
More importantly, this could lead to a reduction of dependency on foreign technology and stimulate local innovation.
The Investment Scenario
In an atmosphere where the Indian stock markets are being hammered to the ground-and the hammering at the Dow Jones and Nasdaq aren’t helping-investors might become more cautious. They might have to consider the regulatory risks associated with large tech companies. This could lead to a re-evaluation of mergers and acquisitions, with a focus on compliance and anti-trust implications. This could potentially affect the valuation and attractiveness of Indian tech firms.
That would not be good news, but the change has to happen, and it will. The end of the stranglehold that big tech has had on smaller innovators could open up a Pandora’s Box of opportunities, as well as pitfalls. India would have to deal with it. This is a grown ups’ world now.
The flip side, actually, isn’t scary all the way, though. While the European Union has for long been at the forefront of implementing stringent regulations to curb big-tech’s dominance, exemplified by the Digital Markets Act, India’s proactive stance, as seen with the proposed Digital Competition Bill, aligns with this global trend, indicating a unified effort to promote fair competition.
One can only hope that this will lead to the empowerment of smaller companies
and start-ups, allowing them to compete on merit rather than being overshadowed by dominant incumbent