Coping with Digital Markets

Published: December 20, 2019

The Big 4 companies which include Google, Amazon, Facebook and Apple has undeniably become the panacea for all our queries. However they have the potential to cause unforeseen harm to the users and India’s laws make it difficult to cope with such situations. The difficulty stems from the difference in digital markets and traditional markets, on which most laws which include competition law are framed. Thus to formulate a competition policy there is a need to understand the differences.

Network effect result from an increased utility as the consumption of a good or a service increases. Take for example, as the user base of a social network increases its possibility of connecting with other users, thus enhancing the utility. Digital products have a strong network effect, thus it is difficult for a new entrant to offer better quality or offering than the existing ones. The manner in which substitution affects needs to be accounted for in digital markets.

The ROI in digital markets is more amplified beyond traditional markets. It results in the exiting players having a huge advantage over new entrants in terms of pricing of a product, thus calling for reappraisal of concerns in such markets.

The congruence of digital with traditional markets requires application of competition law to digital markets. The existing legislation may need tweaking to accommodate for the challenges posed by digital markets. The need of the hour is to replace the policy making which is happening in silos and pursue a comprehensive policy to cover competition law, data protection as well as e-commerce policy.

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