9.1 Introduction
In the last two decades, six out of eight South Asian countries have adopted some version of a modern competition law: India was the first to do so in 2002, followed by Sri Lanka in 2003, Pakistan and Nepal in 2007, Bangladesh in 2012, and most recently Maldives in 2020. Although the remaining two countries, Bhutan and Afghanistan have not yet adopted modern competition laws, they have not remained untouched by the growing momentum of what may be called the competition law movement across the region: Bhutan adopted a national competition policy in 2014 which it revised and updated in 2020, and Afghanistan finalised a draft competition legislation in 2011 it is yet to enact. However, with the exception of India and Pakistan, South Asian countries are yet to meaningfully implement their competition laws and policies: among them, Bangladesh has established the first-tier competition authority as envisaged in the Bangladeshi Act, but at the time of writing had still not operationalised it; and Nepal and Sri Lanka though not obliged by their respective competition legislations to establish specialist or fully independent competition authorities, have the requisite competition enforcement infrastructure in place but have not taken up any competition matters. Maldives, despite enacting its competition legislation in 2020, had allowed itself a reprieve until 2021 to implement the law, however, at the time of writing there was still no information as to whether it had commenced competition enforcement beyond the 2021 deadline. Consequently, the region’s overall competition enforcement experience remains weak and uneven at best, and the anti-competitive practices that the competition legislations are designed to address, continue unchecked and unabated.
As discussed particularly in Chapter 8, the extent and quality of competition enforcement in the South Asian countries that have already adopted competition legislations is in large part attributable to the strategies and institutions through which they adopted these legislations: while the Indian Act, adopted through socialisation and the interplay of a relatively wide range of experienced bottom-up, participatory, and inclusive institutions and the Pakistani Act, adopted by coercion through a narrow category of top-down, exclusive institutions have both proceeded to the implementation stage, the Bangladeshi, Sri Lankan, and Maldives competition legislations adopted through a combination of coercion and relatively less experienced bottom-up, participatory, and inclusive institutions, and the Nepalese Act, adopted by an executive order, are yet to be enforced. This suggests that competition legislation is more likely to be enforced in one of two situations: if it is socialised through extensive, domestic consultations with a wide range of stakeholders, or if it is introduced through coercion and delivered through an all-powerful executive.Footnote 1 While the former situation generates the compatibility and legitimacy necessary for meaningful implementation, the latter displaces the need for such compatibility and legitimacy, at least temporarily, by keeping the adoption and implementation firmly within the executive. In contrast, legislations introduced through coercion and then enacted through parliaments that do not have the history, experience, or even the requisite inclination to aggregate or apply local knowledge, are only superficially compatible with context and have, at best, only a degree of formal legitimacy that does not translate into the ownership and understanding necessary for meaningfully operationalising the adopted legislation.
While the failure of countries to generate sufficient compatibility and legitimacy in the adoption process is not fatal to their ability to implement their competition legislations, the ‘success’ they are likely to enjoy in this regard depends in large part on their governments’ commitment to competition enforcement which in turn is linked to the extent of compatibility and legitimacy that the adopted legislations enjoy in their domestic contexts. In countries where competition legislations mandate independent competition authorities such as in India, Pakistan, and Bangladesh, the governments’ support may be discerned by the efforts they make for operationalising these authorities, including appointing their members, and allocating funds for their activities. On the other hand, in countries where legislations do not envisage fully independent competition enforcement authorities (such as Sri Lanka, Nepal, Maldives) or that are yet to adopt competition legislation (such as Bhutan and Afghanistan) the government’s support makes the difference by generating greater awareness of and acceptability for the legislation in their contexts.
This chapter argues that regardless of the scenario in which these countries adopted their competition legislations, it is argued that their, governments are more likely to support competition enforcement if they are themselves convinced of competition’s potential to help deliver their broader and more pressing economic and social goals. The chapter further argues that not only is it possible for multi-lateral agencies that have influenced and shaped the diffusion and transfer of competition legislation in nearly all South Asian countries to play a role in generating this understanding, but also it is open to countries to learn from each other in this regard. To this end this chapter is organised as follows: Section 9.2 makes the case for the connection between competition enforcement and economic development across South Asia; Section 9.3 examines the growth in digital economy in these countries and explores how competition enforcement may help South Asian countries address the competition concerns arising from the digital economy; Section 9.4 explores the possibility of South Asian countries benefitting from each other’s experiences in competition law enforcement in the traditional as well as the digital economy; and Section 9.5 discusses possible implementation strategies for South Asian countries that can harness competition regulation to realise the potential for traditional as well as digital economic growth in their contexts.
9.2 The Development Imperative
Economic growth and development feature very prominently in the economic and political agenda of South Asian countries. It is likely, therefore, that the governments of these countries may be more inclined to publicise, operationalise and enforce their adopted (or proposed) competition legislations if they understand that doing so would help deliver the development and growth dividends they very much desire. This section identifies the key economic challenges faced by South Asian countries and explores how competition law may help in addressing these.
9.2.1 Economic Profiles and Challenges of South Asian Countries
In varying degrees all South Asian countries are characterised by low levels of per capita income, low Gross Domestic Products (GDP) and high economic vulnerability. Among them Bangladesh, Bhutan, India, Nepal, Pakistan, and Sri Lanka are classified by the World Bank as lower-middle-income countries;Footnote 2 Maldives is classified as an upper-middle-income country,Footnote 3 and Afghanistan as a low-income country.
Afghanistan, Bangladesh, Bhutan, and Nepal are also categorised by the United Nations as ‘least developed countries’ due to their low GDP and considerable economic vulnerability.Footnote 4 All South Asian countries are characterised by considerable income inequalityFootnote 5 with Gini indices ranging from 39.8 (Sri Lanka) and 31.3 (Maldives):Footnote 6 the Gini index in Bhutan and India is 37.4Footnote 7 and 37.8Footnote 8 respectively; Bangladesh and Nepal have a Gini index of 32.8 and 32.4 respectively;Footnote 9 and Pakistan of 33.5.Footnote 10 The considerable income equality in all these countries is further exacerbated by a sizeable proportion of their populations living below the poverty line: 54.5 per cent in Afghanistan, 25.2 per cent in Nepal, 24.3 per cent in Bangladesh and Pakistan respectively, and 21.9 per cent in India.Footnote 11
South Asian countries also have an extensive history of state control and central planning which despite efforts at liberalisation persists in the form of state-owned or controlled enterprises (SOEs) operating throughout these countries.Footnote 12 Historically, these countries had established a range of SOEs in the belief and hope that these would deliver industrialisation while also safeguarding the public interest. Given the public nature of their mandates these SOEs were not particularly interested in instituting measures for the greater efficiency, accountability, and transparency of their operations, and remained largely unconcerned about the significant losses they incurred in the absence of such measures. In time, several South Asian countries launched privatisation drives in an attempt to address these issues and in response to changing global priorities in this regard: Sri Lanka was the first to do so in 1977,Footnote 13 with India, Pakistan, and Bangladesh following suit in 1991, Nepal in 1993,Footnote 14 and Maldives in 2006 with technical assistance from the World Bank.Footnote 15 Despite these efforts however, these countries were not able to reorganise the operations of several remaining or even privatised SOEs along competitive lines and therefore, failed to achieve the desirable levels of economic efficiency.
9.2.2 Do Multi-lateral Packages of Economic and Institutional Reform Address Development?
The considerable economic challenges that South Asian countries face have led the majority of them to rely extensively on Western multi-lateral agencies for financial aid. guidance and technical assistance in carrying out their legal reforms. In most cases these countries have have also fully accepted the conditionalities on which multi-lateral agencies have provided this aid and assistance.
The majority of these countries have obtained support from the International Monetary Fund (IMF). From the 1980 onwards, the IMF launched its first-generation reforms, which aimed to alleviate global poverty and inequitiesFootnote 16 by revitalising markets through economic liberalisation and reducing, if not altogether eliminating, state ownership of commercial enterprise and state intervention in market entry, market exit, and product pricing.Footnote 17 Within two decades, however, the IMF had realised that market liberalisation and deregulation alone were not sufficient either for establishing sustainable market-led growth or for maximising social welfare. This led to the launch of the IMF’s second-generation reforms whose purpose was to sustain, consolidate, and boost market-led growth by ‘re-regulation’ and ‘institution building’ through positive state action and in co-operation with civil society.Footnote 18
Given the market focus of IMF reforms, it was only natural that the reform packages introduced by it throughout South Asia would also include the market regulating competition laws.Footnote 19 However, even as South Asian countries adopted these laws as part of the reform packages prescribed for them, they often failed to grasp the potential of these laws to contribute to their economic development.Footnote 20 This was partly due to the fact that the majority of these countries were adopting competition laws in response to external stimulus rather than indigenous demand, and partly because despite encouraging and urging South Asian countries to adopt competition legislation, the IMF perhaps did not sufficiently clarify or emphasise that these laws were appropriate for their stage of economic development and would support them in realising their economic potential and goals.
The extent to which the different South Asian countries understand the possibility of a connection between competition regulation and economic growth and development may to some extent be deduced from the preambles of their respective competition legislations. A review of these preambles suggests that India and Bangladesh had some awareness of possible links between competition legislation and economic development: the Indian Act adopted through socialisation and a range of bottom-up, participatory, and inclusive institutions keeps ‘in view the economic development of the country’,Footnote 21 and the Bangladeshi Act, acquired through coercion but enacted through democratic institutions recognises that adopting such legislation is necessary in the ‘context of gradual economic development of the country’.Footnote 22 However, both the Indian and the Bangladeshi Acts relegate economic growth and development to the background by making it part of the context in which competition takes place rather than acknowledging its potential as a tool for realising economic growth and development. In contrast, the preambles of the Sri Lankan ActFootnote 23 and the Pakistani Act (and the Ordinances preceding it),Footnote 24 both of which were adopted through coercion by multi-lateral agencies albeit with a different combination of institutions, do not appear to recognise the connection between competition and economic growth and development. However, while the Pakistani Act recognises achieving ‘economic efficiency’ as a goal of competition, the Sri Lankan Act does not even do that. The Nepalese Act is the only South Asian legislation which recognises competition law’s potential to enhance ‘national productivity’.Footnote 25 However, in the Nepalese Act as in all other South Asian competition legislations, the focus on protecting consumer interests and facilitating internal trade overshadows any awareness of the link between competition and economic growth and development. Throughout these countries therefore competition legislation is cast as an essentially consumer protection role and is thereby rendered peripheral if not altogether irrelevant to the economic growth and development priorities of these countries.Footnote 26
9.2.3 Adapting Competition Legislation for Economic Development
Scholars argue that for developing countries (including South Asian countries) to be persuaded to enforce, rather than merely adopt their competition legislations, they must be convinced that competition enforcement would spur domestic productivity and economic growth, and while it cannot directly alleviate poverty, may help avoid harm to the poor, create an enabling environment for achieving other social objectives,Footnote 27 and generate positive distributional effects.Footnote 28 In the South Asian context, it may also be important to make governments appreciate that rigorous competition enforcement would help break up old, politically supported market power, attract fresh capital investment and entrepreneurship, and encourage both investors and entrepreneurs to adopt innovative production and process strategies.Footnote 29 Unfortunately, the historically strong nexus between economic and political power in most of these countries, means that their governments may be reluctant to enforce competition in areas where such power is concentratedFootnote 30 even if those are the very areas where enforcement is most needed and where doing so is likely to lead to more equitable distribution of both economic and political power.Footnote 31
Matters are likely to become even more complicated when it comes to the question of employing competition law to achieve social objectives such as reduction of inequality, promoting sustainability, and poverty alleviation. Some scholars argue that such social objectives are beyond the remit of competition law and if included in competition analysis are likely to comprise its efficacy. They therefore recommend that competition authorities may at best be mindful of the impact of their enforcement decisions on social welfare rather than actively working towards it.Footnote 32 Other scholars, however, are of the view that even though competition law cannot alone be burdened with the ‘delicate task of changing the current socio-economic fabric’ of developing countries,Footnote 33 it has the potential to reduce inequality of opportunity as well as of wealth,Footnote 34 and given the often dysfunctional distribution systems in these developing countries, may also be called upon to address distributive concerns without compromising its traditional focus on economic efficiency.Footnote 35
Despite these complications, barring state capture by vested interests, it is entirely plausible that if the governments of South Asian countries and their competition authorities (where they have been established and have the autonomy and capacity to take decisions), appreciate the development dividends that even traditional competition enforcement may deliver for their economies, they may be more amenable to meaningfully implementing their competition legislations. This means that South Asian governments and competition authorities must understand that sanctioning cartels, checking abuses of dominant power, or monitoring mergers and acquisitions that significantly lessen competition will not only generate competitive prices, choice, and transparency for the benefit of consumers (whether natural or legal) and end-users in the short run, but will also spur entrepreneurship in their economies and provide livelihood to more people in the medium run, and thereby help alleviate poverty and re-distribute wealth throughout the economy in the long run. It is also important that multi-lateral agencies working with these countries engaging with these countries in the process of adopting their competition legislations, cast its benefits in development and growth language and thereby help draw competition in from these countries’ peripheral consumer protection concerns to their core agenda of economic growth and development.
9.3 Competition in the Digital Age
South Asian countries are increasingly engaging with foreign e-commerce platforms and developing their own e-commerce initiatives primarily for the economic growth and development that such it promises. This section examines the state of e-commerce in South Asia and the regulatory infrastructure individual countries have put into place to faciliate the digital economy and discusses how they may employ their competition legislations to address the challenges presented by e-commerce platforms.
9.3.1 The State of E-commerce in South Asia
Among South Asian countries India is a frontrunner in e-commerce and ranks among the top ten countries for e-commerce sales throughout the world:Footnote 36 in 2017 India’s total e-commerce sales, 91 per cent of which were B2B (Business to Business) sales, were worth US $400 billion and comprised 15 per cent of India’s total GDP.Footnote 37
The remaining South Asian countries are only gradually waking up to the potential of e-commerce.Footnote 38 However, with the exception of Daraz,Footnote 39 which commenced operations as a Pakistani e-commerce platform and swiftly grew to become a subsidiary of the Chinese giant Alibaba,Footnote 40 and has a presence in Pakistan, Bangladesh, Sri Lanka, Nepal, and Myanmar, e-commerce throughout these countries remains largely localised.Footnote 41 Pakistan has several specialist and non-specialist local platformsFootnote 42 such as Shopify, Tibolli.net, and Dukanlay which connect buyers and sellers, while consumers in Bangladesh rely more on social media websites, particularly Facebook,Footnote 43 and platforms such as Daraz Bangladesh, bikroy.com, clickbd.com, and bagdoom.com for their online shopping needs. Global e-commerce players are also largely absent from Sri Lanka where e-commerce is dominated by domestic companies like Kapruka.com, Daraz.lk, WOW.lk, Takas.lk, and MyDeal.lk and from Nepal which hosts emerging online shopping portals such as Sastodeal and DarazFootnote 44 as well as a few platforms such as Foodmandu which allow traditional retailers the opportunity to offer their products online.Footnote 45 Maldives, though more digitised than India, Pakistan, and Sri Lanka,Footnote 46 appears not to have explored its e-commerce potential: there are only two major e-commerce platforms in Maldives, Ibay.com.mv and koo.mv that connect small businesses and consumers, however, several businesses employ e-commerce components,Footnote 47 and as in Bangladesh, Facebook e-commerce pages play an important role in connecting businesses and consumers.Footnote 48 Interestingly, Bhutan despite being the smallest South Asian country, has been active in developing its e-commerce: businesses and government organisations have been using social media for sales for some time,Footnote 49 and between 2019 and 2020 the Bhutanese Department of Trade issued thirty-one e-commerce licences primarily to cottage and small-scale industries in a bid to facilitate sales in the international market.Footnote 50
Except for India and Bangladesh, South Asian countries primarily engage in homegrown and domestic B2C e-commerce.Footnote 51 Although there is some indication that Pakistan is working towards B2B e-commerce, there is no evidence of ny such momentum in Maldives, Nepal, Sri Lanka, and Bhutan. Interestingly, however, the operations of the e-commerce platform Daraz, which is a subsidiary of the Chinese e-commerce platform Alibaba, and operates in four out of the eight South Asian countries – Pakistan, Bangladesh, Sri Lanka, and Nepal – creates the possibility for cross-border e-commerce among these countries.Footnote 52 In 2020 Daraz launched a ‘Daraz index’ in Pakistan and Sri Lanka in which it utilised data it had aggregated from these countries to provide insights into consumer behaviour and to map the growth of the e-commerce.Footnote 53
9.3.2 Digital and E-commerce Policies in South Asian Countries
Their varying engagement with e-commerce notwithstanding, South Asian countries are increasingly adopting digitalisation and other policies for facilitating e-commerce. India is the furthest along in this regard: it launched the ‘Digital India Programme’ in 2015 to create a ‘faceless, paperless, and cashless’ India,Footnote 54 and engaged ministries, governmental departments, and Indian states to develop ‘an eco-system to enable digital payments across the country’,Footnote 55 and to promote a range of measures necessary for building a digital infrastructure.Footnote 56 The Indian government also issued Foreign Direct Investment Rules 2016 to facilitate cross-border investment in e-commerceFootnote 57 and drafted an e-commerce policy in 2019 to balance data protection and the growth of the e-commerce sector.Footnote 58 The government also circulated a ‘Model Framework for Guidelines on e-Commerce for Consumer Protection’ for consultation with state governments responsible for regulating trade and commerce in their territorial jurisdictionsFootnote 59 and in June 2019 established a ‘Standing Group of Secretaries Constituted for Promotion of Industry and Internal Trade’ to streamline and co-ordinate these initiatives.Footnote 60 However, despite or perhaps because of these efforts regulation of e-commerce in India remains fragmented giving rise to increasing calls for its rationalisation.Footnote 61
Sri Lanka, despite being a somewhat late entrant to the world of e-commerce, has already adopted legislation to develop a National Policy on Information and Communication Technology – and has devised an action plan for its implementation. The act establishes a Task Force for Information and Communication Technology as well as the Information and Communication Technology Agency of Sri Lanka.Footnote 62 Since it has been operational, the agency has assisted in formulating ‘Digital Sri Lanka’, a national policy which outlines timebound strategies for utilising information communication technology for citizen empowerment and for establishing an infrastructure for digital government and economy.Footnote 63 In 2006, Sri Lanka also enacted the Electronic Transactions Act based on the United Nations Commission on International Trade Law (UNCITRAL), Model Law on Electronic Commerce (1996), and Model Law on Electronic Signatures (2001),Footnote 64 which institutes, among other things, a Digital Signature and Authentication regime.Footnote 65 More recently, after consulting comparable laws in the United Kingdom, Singapore, Australia, Mauritius, and California, and the draft Indian Bill, Sri Lanka has drafted a Data Protection BillFootnote 66 based on OECD Privacy Guidelines, the APEC Privacy Framework, the Council of Europe Data Protection Convention, and the EU General Data Protection Regulation.Footnote 67 At the time of writing this bill awaited certification by the speaker of the Sri Lankan parliament.Footnote 68
Despite making important inroads into e-commerce particularly with Darazpk, Pakistan launched its first comprehensive Digital Policy only in 2018,Footnote 69 which was intended to be a precursor to appropriate legislation in this area.Footnote 70 Like the Indian policy, Pakistan’s Digital Policy is ‘based on a multi-stakeholder model’Footnote 71 which aims to lay the ‘foundation for the construction of a holistic digital ecosystem with infrastructure and institutional frameworks for the rapid delivery of innovative digital services, applications and content’;Footnote 72 and to capitalise on the rapidly growing connectivity in the country to encourage ‘Payment Service Providers (PSP) and Payment Service Operators (PSO)’.Footnote 73 In October 2019, Pakistan also launched an e-commerce policy,Footnote 74 which identifies a range of ‘key players’Footnote 75 in e-commerce and proposes ‘a National e-Commerce Council’ to provide a ‘single window for policy oversight to facilitate e-Commerce players’.Footnote 76 It highlights the need for global connectivity;Footnote 77 establishing an e-payment infrastructure;Footnote 78 ensuring consumer protection;Footnote 79 and introducing a simplified taxation structureFootnote 80 and a data protection regime.Footnote 81 In April 2020, the government circulated a Personal Data Protection Bill which aims to provide a framework for data protection and for a data protection authority. However, at the time of writing, this bill was still to be passed into law.Footnote 82
Nepal and Bangladesh, despite their limited engagement with e-commerce, have also developed digital policies: Nepal adopting one in 2019,Footnote 83 and Bangladesh in 2021.Footnote 84 The Nepalese policy aims to foster holistic economic development by harnessing digital technologies to transform the government, society, and economy;Footnote 85 recognises the need for an e-commerce eco-systemFootnote 86 beyond the Electronics Trading Act (2063) 2008,Footnote 87 the Privacy Act (2075) 2018,Footnote 88 and the Consumer Protection Act, 2075 (2018);Footnote 89 and proposes a ‘thorough assessment of existing policy provisions on data protection, security and privacy’.Footnote 90 The Bangladesh policy, rather than developing e-commerce, is more inclined towards digital government, human resource development, the promotion of the IT industry, and connecting citizens with each other to create a more democratic society and a more balanced and sustainable economy.Footnote 91 In 2016, the e-Commerce Association of Bangladesh (e-CAB) had produced an e-commerce policy at the instruction of the Ministry of Commerce, however, at the time of writing it had still not been approved by the Bangladeshi cabinet.Footnote 92 Bangladesh also enacted a Digital Security Act in 2018, however, this act addresses data crime rather than data privacy.Footnote 93
Bhutan appears to be as invested in developing the regulatory infrastructure for its digital transformation as it is with developing its e-commerce. Since outlining an ‘Information and Communications Technology Policy’ in 2003,Footnote 94 Bhutan has adopted, among others, the 2014 Telecommunications and Broadband PolicyFootnote 95 and e-Gov MasterplanFootnote 96 and has enacted the Information, Communications, and Media Act in 2018 to provide for e-commerce and digital signatures,Footnote 97 consumer protection,Footnote 98 and data protection and privacy.Footnote 99 Interestingly, the more digitised Maldives lags behind in adopting a holistic regime for regulating electronic transactions and privacy and data protection.Footnote 100 However, it is expected that as it rebuilds its economy post-Covid, Maldives will prioritise digitalisation,Footnote 101 and will establish a legal and regulatory framework to facilitate it.Footnote 102
9.3.3 Competition Regulation, the Digital Economy, and E-commerce
Digital e-commerce platforms present significant competition challenges developing country competition authorities are particularly likely to find it difficult to identify situations in which multi-sided analysis may be properly utilised and to recognise variations between different types of multi-sided platforms.Footnote 103 These authorities are also likely to find it difficult to define the relevant market in which the platforms operate, particularly given the zero-pricing policy adopted by the majority of e-commerce platforms, or to understand the complexity of network effects, and the ability of platforms to leverage their power in one market to other markets in which they operate.Footnote 104 In time, these competition authorities are also likely to be confronted with privacy concerns which result from the data collection and aggregation function of digital platforms,Footnote 105 that in any event changes the dynamics of collusion and abuse of dominance making it harder for the collusion or abuse to be detected.Footnote 106 Although privacy concerns are experienced equally in more advanced competition regimes, the adverse impact of breach of privacy in developing countries is likely to be aggravated due to the generally limited understanding of privacy issues, the absence of strong privacy laws or policies, and where these laws or policies do exist, the absence of an infrastructure for implementing them,Footnote 107 making it even more important to consider a competition response to these issues.
Although all South Asian competition regimes contain provisions which would allow for investigating and sanctioning anti-competitive practices of digital platforms, presently the CCI is the only South Asian competition authority to have initiated proceedings against digital platforms. In its early decisions in respect of platforms the CCI treated online distribution channels as interchangeable with brick-and-mortar distribution outlets,Footnote 108 and held that these were simply two different channels of distribution in the same relevant market.Footnote 109 In later decisions, however, as the CCI considered platforms in a wider range of sectors including online search engines, cab aggregators, and online travel agencies it refined its understanding of platforms.Footnote 110 Between 2015 and 2017 the CCI took up several complaints of abuse of dominance against cab aggregators, but did not find a violation.Footnote 111 In 2018 however, the CCI found Google guilty of abuse of dominance for self-preferencing in its search function.Footnote 112 In 2019 it ordered an investigation against Amazon and its Indian counterpart, Flipkart for engaging in anti-competitive exclusive vertical agreements with their ‘preferred’ sellers,Footnote 113 and against Google for abusing its dominant position in the licensable Operating System market by forcing smart-phone manufacturers to pre-install Google Mobile Suite and for bundling various Google services.Footnote 114 In 2020, the CCI directed an investigation of the online Travel Agents MakeMyTrip (MMT) for abusing its dominant position in the online intermediation services market for booking hotels in India and for entering into an anti-competitive vertical agreement with OYO (providers of franchising services for budget hotels).Footnote 115 Also in 2020, the CCI ordered a further investigation against Google for abusing its dominant position by favouring GooglePay over other competing apps in the Play Store and Android Operating System.Footnote 116
In April 2019 the CCI launched a study of the e-commerce sector to ‘better understand the functioning of e-commerce in India and its implications for markets and competition’. The January 2020 report of this study identified a wide range of competition challenges presented by digital platforms and recommended that platforms address these by self-regulating search ranking; collection, use, and sharing of data; user review and rating mechanisms; revision in contract terms; and by adopting a discount policy.Footnote 117 Earlier in 2019, the Indian government had constituted a Competition Law Review Committee to assess among other things whether the Indian Act was equipped to respond to the challenges of the digital age. In its July 2019 report, the committee had recommended amendments to the Act to include ‘hub and spoke’ cartels; to provide for agreements between platforms that do not fit into the traditional categories of horizontal or vertical agreements, and to consider digital mergers.Footnote 118 In February 2020 the government incorporated some of these recommendations in a draft Competition Bill 2020, however, at the time of writing this bill had still not been enacted. Encouragingly, in a 2021 report on the study of the telecommunication industry,Footnote 119 the CCI expressly acknowledged the relationship between data privacy and competition, albeit without clarifying its position on the treatment of privacy issues in competition enforcement.Footnote 120
In contrast, at the time of writing the CCP had still not decided any anti-trust proceedings against digital e-commerce platforms; however, it had approved a merger between the cab aggregators Uber and Careem on the basis that ‘application based Ridesharing Services [are distinct] from all other modes of transport in Pakistan, by reason of [their] characteristics, price and intended usage’.Footnote 121 In arriving at this conclusion, the CCP had considered the two-sided structure of ridesharing apps, network effects, and multi-homingFootnote 122 and applied the traditional Small but Significant Non-transitory Increase in Price (SSNIP) test to establish the limits of the relevant market.Footnote 123 Interestingly, even though after considering the market shares of the merging companies, the CCP noted that the acquisition would substantially lessen competition in the market,Footnote 124 it invoked ‘mitigating factors’Footnote 125 and ‘efficiencies’Footnote 126 unrelated to the direct economic impact of the proposed merger and approved the merger subject to certain commitments and conditions.Footnote 127 In doing so the CCP not only revealed the limits of its understanding of platforms but also its focus on safeguarding and encouraging foreign investment rather than mitigating the adverse impact of increased market power. Although this order has been heavily criticised in the media for causing harm to consumers,Footnote 128 it has not prompted the CCP to undertake a holistic study of the e-commerce sector.
These orders of the CCI and the CCP reveal not only the steep learning curve that these authorities have faced and continue to face when it comes to digital e-commerce platforms but also their respective attitude towards foreign investment. While India has made a strong effort towards understanding competition issues that may arise in relation to e-commerce and has initiated the process of amending the Indian Act to address these, Pakistan has adopted a more passive stance, which suggests that at least at present it prefers to address the challenges as they arise.
The remaining South Asian countries are also likely to encounter similar competition and privacy concerns as e-commerce becomes a greater reality for them. However, the response of their competition enforcement authorities to these issues is likely to depend in large part on the mechanisms and institutions through which the countries originally adopted their competition legislations and the degree of independence these competition authorities enjoy in their operations. The Indian and Pakistani examples are instructive in this regard: India had adopted its competition legislation through socialisation and a wide range of bottom-up, participatory, and inclusive institutions. It, therefore, has the capacity and the experience to adapt its competition legislation to respond to the challenges emerging in the wake of the ever-growing digital economy. India has also established a largely independent competition authority which has reasonable autonomy to form its own view regarding digital platforms free from other governmental priorities. Pakistan, on the other hand, having acquired its competition legislation through coercion and a limited, top-down, and exclusive institutions had established an enforcement authority which, despite having statutory independence, remained subject to governmental discretion in the appointment and removal of its members. Consequently, neither the Pakistani government nor the CCP have taken the initiative to adapt the Pakistani competition legislation to respond to developments in the economy. The CCP particularly remains susceptible to being persuaded by the broader priorities of the Pakistani government and appears to lack the autonomy to initiate any critical evaluation of the digital economy or the laws proposed to regulate it. Given that the remaining South Asian countries have adopted their laws through coercion and that the majority of them have done so through democratic institutions, albeit ones that lack strong legislative experience, their ability to adapt their competition legislations to address the evolving challenges of e-commerce is likely to be limited. However, there is an important option available to these South Asian countries, which is to learn from the Indian and Pakistani examples already available in the region, and to adapt these for their contexts.
9.4 Regional Developments and Competition Law Enforcement
Notwithstanding competition’s potential to support economic growth and development in both the traditional and the digital economy, the limited compatibility and legitimacy of competition legislations in the majority of South Asian countries, due in large part to these countries having adopted these legislations through coercion and without the meaningful engagement of bottom-up, participatory, and inclusive institutions, is likely to continue to pose a barrier to effective competition enforcement in these countries.
However, some comfort may be derived from the fact that it is entirely possible for South Asian countries to overcome this barrier by consciously committing to competition enforcement and engaging in activities that enhance the compatibility and legitimacy of their adopted competition legislations. This, in turn, would enhance the extent to which these laws are applied and utilised by stakeholders in these countries and over time will allow them to integrate into and become important features of their pre-exisitng legal systems.Footnote 129 Interestingly, regional developments in competition enforcement are likely to offer an important impetus in this regard. As South Asian countries observe their regional counterparts implementing their competition legislations and note the impact this has on their ability to generate investment and entrepreneurial activities in their domestic contexts while also attracting foreign investment to their economies they are more likely to consider competition enforcement as an important tool for growth and development. The possibility and potential of competition enforcement in one South Asian country affecting other countries in the region is reinforced by the fact that notwithstanding the very important role of multi-lateral agencies in introducing competition legislations to these countries, a number them have also been influenced by each other in adopting these laws, and for better or worse this though somewhat subtle early influence is as likely to continue through to the implementation stage as the more well-documented influence of the multi-lateral agencies.
South Asian countries had a direct as well indirect impact on each other at the adoption stage: the direct influence is evident in India providing consultation, guidance, and drafting services (whether through its government, the CCI, or thinktanks) to Bangladesh, Nepal, Bhutan, and Afghanistan, and in Pakistan engaging in training and capacity building programmes in Afghanistan, while the indirect influence may be attributed to the regulatory competition between these countriesFootnote 130 which is likely to have been a factor in the South Asian countries adopting their competition legislation in quick succession.Footnote 131
In most instances, the considerable direct and indirect influence of these countries on each other has not diminished even as the competition legislations have entered the implementation stage. For instance, India continues to directly influence several countries in the region through continued consultations and trainings on competition enforcement.Footnote 132 It also continues to have an indirect influence simply through publishing its enforcement actions which is likely to encourage its counterparts to remain regulatorily competitive with India. Even though there is no express of official acknowledgement to this effect it is very likely that both the CCI and the CCP without any direct consultative links with each other, are aware of each other’s enforcement actions and note the sectors to which these relate. It is further likely that the two countries influence the remaining South Asian countries to match such of their the enforcement initiatives as they find most relevant to their contexts.
There is a danger however, that in the particular context of South Asian countries, regulatory competition may generate ‘a race to the bottom’ rather than encouraging a race to the top.Footnote 133 For instance, there may be a race to the bottom in competition enforcement if the smaller South Asian countries take the view that weaker competition enforcement in their contexts will help them attract more investment. Several factors are likely to play a role in this regard: if a particular country is competing for international investment with another country that has stronger competition enforcement, then it may position itself as a weaker enforcer and, therefore, capable of offering a more investment-friendly environment, where investors may capture markets reasonably free of competitive constraints. Whether potential investors seek such an environment is likely to depend on the composition of the sector that the investor seeks to enter: if the desired sector comprises of businesses that are operating at a level and a scale that can exert competitive pressure on the investor, then it is likely to prefer strong competition enforcement to keep existing market power in check. If, however, the sector is populated by small businesses, the foreign investor is likely to prefer weaker competition enforcement so that it may achieve economies of scale and leverage its market power with impunity.Footnote 134
Whether South Asian countries engage in a race to the top or to the bottom may also depend in part on the presence of businesses that operate regionally across these countries Regional cross border business may encourage countries in which they operate to adopt comparable competition rules so that they face a broadly similar competition regime across national markets. An important example in this regard is Darazpk, the e-commerce platform that operates in most South Asian countries and forms a significant proportion of all e-commerce activity in these countries. However, with little or no competition enforcement in the greater part of the area in which Daraz operates, it does not appear to have faced the need to call for the rationalisation of competition enforcement. With more platforms operating across South Asian countries either on their own or as subsidiaries of foreign multi-nationals, regional harmonisation of their competition regimes remains a real possibility.
A 2016 Report issued by the Groupe Spécial Mobile Association (GSMA),Footnote 135 on the operations of mobile service providers in certain Asian countries (including India and Pakistan from among South Asian countries) serves as an example of business-led convergence in competition enforcement. The report highlights the importance of effective competition enforcement for countries seeking to move up the digital value chain,Footnote 136 and urges co-operation and co-ordination between competition authorities of countries in which GSMA members operate, on the basis, that ‘cooperation spreads knowledge and best practice and minimises the risks of diverging decisions and practices among agencies, between countries, making it easier for the market players to operate with legal certainty across borders’.Footnote 137 In fact GSMA goes as far as to call for a supra-national body, particularly to regulate mergers among telecom service providers in these countries.Footnote 138 However, given the complicated political relationships across South Asia, this proposal is unlikely to be realised anytime in the near future.
9.5 Possible Implementation Strategies for South Asian Countries
The importance of appreciating the growth and development promise of competition law and keeping abreast of regional developments notwithstanding, it is essential that South Asian governments and such competition authorities as have been established, develop competition enforcement strategies that are aligned not only with their core economic objectives but also, and more importantly, take into consideration their resource and capacity limitations.
Given the positive correlation between competition enforcement and investment and productivity growth, South Asian governments and competition authorities need only to meaningfully enforce their competition legislations to attract investment and encourage growth. However, achieving sustainable and inclusive economic growth and alleviating poverty through competition enforcement may require a re-interpretation or even an expansion of the scope of most South Asian competition legislations. Given the compatibility and legitimacy deficit of competition legislations in most of these countries and the considerable resource limitations of their governments and by extension of their competition authorities, it may be more appropriate that in the early stages of enforcement, these governments and authorities prioritise competition advocacy and mainstream competition enforcement. Focusing on these two core areas would not only generate of their operations visibility and thereby enhance the legitimacy of their competition legislations but also start levelling the economic playing field which, in turn, would set the stage for economic growth and development in their contexts. The combination of these factors is likely to generate understanding and experience of enforcing competition principles which is further likely to pave the way for more complex enforcement actions going forward.
In focusing on mainstream competition enforcement, South Asian governments and authorities may also consider the areas of enforcement and sectors that need to be prioritised. In terms of areas of enforcement, these governments and authorities may be advised to focus on detecting and sanctioning cartels not only because of the preponderance of cartels across the region (particularly cartels for rigging bids made to public authorities) but also the harm the cartels cause to consumers particularly given the levels of poverty in South Asian countries.Footnote 139 Focusing on the by object or per se anti-competitive cartels is also likely to be within the somewhat limited resources and capacities of South Asian governments and competition authorities. In nearly all South Asian competition legislations cartels are included in the category of horizontal anti-competitive or prohibited agreements and may be established by demonstrating the existence of an ‘agreement’ or concerted practice and without requiring complex economic analysis.Footnote 140 The governmental bodies and competition authorities responsible for enforcing competition laws may further enhance the impact of their enforcement actions by focusing on cartels in the food and pharmaceuticals sectors that have the most direct and immediate impact on a wide range of consumers.Footnote 141
South Asian governments and competition authorities may also consider recognising the harm that their enforcement orders might cause to the ‘poor’ employees of the entities that may be the subject of these orders, without going so far as to make poverty alleviation an objective of their enforcement actions. To this end, these governments or authorities may obtain a no-harm commitment from the entity subject to a competition enforcement order. They may also consider the possibility of penalty reduction in exchange for such commitment along the lines traditionally offered in leniency regulations, thereby simultanously preserving the soundness of the legal analysis of the competition violation and addressing the social welfare concerns arising from the matter.
In time, South Asian governments and competition authorities may also consider proceeding against buyer-side cartels and dominant buyers that abuse their position against their smaller suppliers.Footnote 142 Buyer power, whether exercised unilaterally by a single entity or in conjunction with other buyers, has the potential to cause considerable harm in the labour intensive, relatively unsophisticated South Asian economies that are dependent on their income on large multi-nationals purchasing factors, raw materials, and other inputs from them. In addressing buyer power these countries will also be able to safeguard the interests of the small entrepreneur or the small individual supplier – as, for instance, in the small farmers supplying agricultural produce to the large food processing companies. However, proceeding against buyer power poses considerable challenges, the most significant being the questions of the appropriate welfare standard that may be applied to assess the anti-competitive harm caused by buyer cartels and of extraterritoriality. This is likely to be particularly complicated in situations in which buyer cartels do not lead to increased prices in consumer markets of the country enforcing the competition legislation. At present, due to having adopted their competition regimes on the persuasion of multi-lateral agencies, the majority of South Asian competition regimes also espouse the consumer welfare standard which judges harm primarily on the basis of the price offered to intermediate or end-consumers. However, there is increasing realisation among competition scholars that price does not always capture the harm caused by anti-competitive activities, which creates the possibility for South Asian countries to consider welfare standards more appropriate for their enforcement priorities. A broader conception of consumer welfare is likely to help these authorities establishing anti-competitive effects in their economies rather than seeking extra-territorial application of their laws.
As South Asian competition regimes gain more experience, confidence, and legitimacy in their contexts, they may graduate to addressing the more complex objectives of poverty alleviation, equitable distribution, and enhancing the social, non-economic welfare in their countries. To ensure that in pursuing these complex social objectives the competition regimes do not sacrifice economic efficiency at the altar of populism, it is important that the multi-lateral agencies engaging with them in ongoing trainings provide support on issues ranging from the design of competition authorities, to developing performance and enforcement plans tailored to context, and sanctioning strategies that will punish the offender but not eliminate competition. It is also important that these multi-lateral agencies work with the governments and competition authorities to design trainings in such a way that South Asian countries are able to benefit from each other’s enforcement experiences rather than only looking to developed jurisdictions that are distant not only geographically but also institutionally and do not share their economic concerns. Doing so will help develop a pool of tacit competition knowledge in these countries that will not only gradually plug the compatibility and legitimacy deficit left over from the adoption stage, but in time will form the foundation of South Asian competition regimes that not only have competition expertise but also the conviction and the flexibility necessary for realising the all facets of the goals of economic progress for which these countries had adopted these laws in the first place.
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