Addressing Competition and IP Issues in the Rapidly Evolving Online Markets

Online markets today are not just digital replicas of traditional bazaars – they are structurally different ecosystems governed by network effects, data accumulation, and platform dominance. This structural uniqueness creates a peculiar legal challenge: existing competition law, designed for brick-and-mortar markets, must grapple with the business models of tech giants who simultaneously hold intellectual property (IP) rights and dominant market positions. In India, this tension has moved from academic debate to active regulatory enforcement, with landmark cases, proposed legislation, and evolving CCI jurisprudence reshaping how we think about fair competition in the digital age.

Why online markets are different from traditional markets 🔗

Traditional competition law assumes that market dominance can be checked through consumer choice, new entrants, and price competition. Online markets disrupt this assumption fundamentally. Digital markets are prone to concentration and “tipping” due to features like economies of scale, network effects, economies of scope, high entry barriers, lock-in effects, and users’ status quo bias – all of which make it difficult to protect competition. Once a platform achieves a critical mass of users, competitors find it nearly impossible to catch up, regardless of how good their product is.

A second complication is the role of data. Platform markets are characterized by two sides – sellers and buyers on one side and advertisers on the other – and their viability depends on generating economies of scale and scope. This advertising-data-platform loop creates what is sometimes called a “data flywheel,” where the largest platform collects the most data, which improves its services, which attracts more users, generating yet more data. For a new entrant, replicating this flywheel from scratch is practically impossible.

Third, by the time a dominant player is subjected to competition law scrutiny under the traditional ex-post framework, the market has already suffered possibly irreparable harm, since enforcement proceedings are lengthy and begin only after the harm has already occurred. This is a structural weakness in applying the Competition Act, 2002 – a law drafted for traditional markets – to fast-paced digital ones.

The IP-competition law conflict in digital markets 🔗

The most intellectually complex dimension of competition regulation in online markets is the tension between intellectual property rights and competition law. IP law grants exclusivity – patents, copyrights, trade secrets – as a reward for innovation. Competition law, on the other hand, aims to prevent exactly the kind of market power that exclusivity can create. In digital markets, these two frameworks collide constantly.

Section 3(5) and the IP exemption under Indian law 🔗

The Indian competition regime explicitly provides an exemption for imposing reasonable conditions in protection of IP rights in relation to anti-competitive agreements under Section 3(5) of the Competition Act, 2002. However, no such exception is granted for abuse of dominant position under Section 4 of the Act. This creates an important asymmetry: an IP holder can impose restrictions on how its technology is used by others, but cannot use those same IP rights as a shield against a finding of abuse of dominance. The practical implication is significant – being a patent or copyright holder does not exempt a dominant digital platform from competition law scrutiny.

Refusal to license and the essential facilities doctrine 🔗

One of the sharpest points of conflict in online markets is the question of what happens when a dominant platform refuses to give competitors access to its technology or data. The “essential facilities doctrine” provides a framework: if an IP-protected resource is so indispensable to competing in a market that rivals cannot practically duplicate it, a refusal to license that resource may amount to an abuse of dominance. Competition law does not condemn refusal to license per se. However, in exceptional circumstances, competition law may intervene and order compulsory licensing.

Courts and regulators have identified key conditions that trigger intervention. From the Magill case, the European Court of Justice evolved a three-factor test: the refusal relates to an indispensable facility in the downstream market; the refusal will significantly harm competition in the relevant market; and a new product could not be developed due to such refusal. Indian regulators have begun applying analogous reasoning. In the Auto Parts case, the CCI held that car companies’ refusal to license diagnostic software tools to independent repairers and workshops was an abuse of their dominance, constituting an anti-competitive refusal to deal.

The CCI has also clarified that not every refusal to license is automatically anti-competitive. The CCI identified three conditions upon the satisfaction of which a refusal to deal would qualify as anti-competitive: where the refused input is indispensable for an entity to compete in the downstream market; where it would likely eliminate competition in the downstream market; and where there is no objective justification for the refusal. This calibrated approach matters because overly aggressive compulsory licensing could undermine the incentive to innovate – the very purpose of IP protection.

Key cases shaping India’s digital competition landscape 🔗

CCI vs. Google: the Android ecosystem case 🔗

No case better illustrates the competition-IP interface in online markets than the landmark battle between the Competition Commission of India and Google. The CCI examined various practices of Google with respect to licensing the Android mobile operating system and various proprietary mobile applications, including Play Store, Google Search, Google Chrome, and YouTube, across five relevant markets.

On October 20, 2022, the CCI passed an order against Google directing it to refrain from anti-competitive practices and imposed a penalty of INR 1,337.76 crore. The CCI found that Google controlled nearly 98% of the smartphone market in India and was found to be violating competition laws to maintain its dominance. Specifically, the CCI identified anti-competitive practices including mandatory pre-installation of the entire Google Mobile Suite with no option for OEMs to uninstall these apps, and leveraging its dominance in the Play Store market to protect its position in online general search and online video hosting platform markets.

The IP dimension surfaced directly when the NCLAT examined CCI’s directions. The NCLAT turned down CCI’s direction requiring Google to allow access to its Play Services Application Programming Interface (API) to OEMs, app developers, and competitors, citing reasons for protecting Google’s intellectual property. This is a significant ruling – it shows that even within an abuse of dominance finding, IP interests can carve out limited protection for genuinely proprietary technical assets.

After hearing arguments from both sides, the NCLAT on March 29, 2023, upheld CCI’s decision and ruled that Google had perpetuated its dominant position in the online search market, resulting in the denial of market access to other competing search apps. The NCLAT upheld the imposition of the fine of INR 1337.76 crore.

Google Play Store billing case 🔗

A separate but equally significant dispute arose from Google’s billing policies on the Play Store. The CCI launched an investigation in November 2020 into Google’s billing policies, examining allegations that Google abused its dominant market position by imposing mandatory use of the Google Play Billing System for in-app transactions while exempting its own services – including YouTube – from similar commission structures. The case is now before the Supreme Court, with Google, CCI, and the Alliance of Digital India Foundation (representing Indian startups like Shaadi.com and Kuku FM) all filing appeals. The Supreme Court will examine critical issues, including the scope of Google’s dominance, the legality of its billing practices, and the appropriate penalty calculation methodology.

Ericsson vs. Micromax: Standard essential patents 🔗

The conflict between IP rights and competition law also arises around Standard Essential Patents (SEPs) – patents that cover technologies so foundational that any product complying with an industry standard must use them. In Micromax Informatics Ltd. v. Telefonaktiebolaget LM Ericsson, Micromax filed a complaint alleging that Ericsson had abused its dominant position by imposing excessive royalties and unfair licensing terms for its Standard Essential Patents. The CCI, recognizing the potential anti-competitive implications, directed the Director General to investigate the matter. The case highlighted that FRAND commitments (Fair, Reasonable and Non-Discriminatory licensing terms), which SEP holders must give during the standardisation process, are enforceable through competition law when violated.

Regulatory responses and India’s proposed Digital Competition Act 🔗

India’s existing ex-post competition framework has proven inadequate for digital markets. Since 2017, the CCI has considered over 30 cases involving digital markets, over half of which were dismissed as non-problematic without detailed investigation. Of the remaining, the CCI has issued four infringement orders relating to online search, mobile operating systems, app stores, and online travel intermediation. This enforcement record reflects both the growing regulatory attention to digital markets and the difficulty of proving competition harm case by case.

Recognising this gap, the Ministry of Corporate Affairs constituted the Committee on Digital Competition Law, which in February 2024 published the Draft Digital Competition Bill (DCB). The Committee’s three main recommendations are: the need for India’s digital markets to be governed by a new ex-ante competition law to ensure timely intervention against large digital enterprises engaging in anti-competitive practices before the harm occurs; the need to strengthen technical capacity within the CCI’s Digital Markets and Data Unit by onboarding technology experts; and the need for a separate bench within the NCLAT for speedy disposal of competition appeals.

The proposed Digital Competition Act would define large digital enterprises as “Systemically Significant Digital Enterprises” (SSDEs) based on value or turnover, with mandatory self-reporting obligations to the CCI. The Bill mandates interoperability of third-party applications with SSDE platforms, coinciding with the European Commission’s enforcement requiring Apple to allow sideloading of apps from third-party stores under the EU Digital Markets Act. Interoperability, in this context, is competition law’s answer to the essential facilities problem in digital platforms – rather than forcing a dominant platform to license its IP, regulators can require it to allow other services to work with it seamlessly.

Ex-ante vs. ex-post: the central regulatory debate 🔗

The Draft Digital Competition Act would mark a paradigm shift for Indian competition policy. The Competition Act of 2002 moved analysis away from blunt structural presumptions toward careful observation of economic effects. The DCA, by contrast, would target companies based on size, obviating any effects analysis. Critics argue this risks penalising platform size rather than harmful conduct. Supporters counter that by the time harmful effects are measurable, the market has already tipped irreversibly in favour of the incumbent. This is the core tension that regulators worldwide are trying to resolve – and there is no clean answer yet.

Data as a competitive asset and IP concern 🔗

Perhaps the most under-examined dimension of competition and IP in online markets is the role of data. In digital markets, data is both a competitive asset and a form of informational property. User trust in data markets is especially important because user data – comprising sensitive personal information – is a key determinant of competition and innovation. Platforms that accumulate large proprietary datasets have an inherent competitive advantage that rivals cannot replicate, even with comparable investment. This raises genuine questions about whether datasets can constitute essential facilities and whether access obligations can be imposed on dominant data holders – questions that the Digital Personal Data Protection Act, 2023 and the proposed Digital Competition Bill are beginning to address, though not yet comprehensively.

The Competition Law Review Committee recommended including “data” within the definition of “price” under the Competition Act, and including “network effects” as a parameter for assessing the dominance of an enterprise. These amendments, if implemented, would allow the CCI to treat non-monetary transactions – like giving away a free service in exchange for personal data – as a form of pricing that can be assessed for fairness, a genuinely novel legal concept.

Balancing innovation and competition: the way forward 🔗

The fundamental challenge in online markets is that both IP protection and competition enforcement are designed to promote innovation – they just disagree on the path. IP exclusivity incentivises investment in creating new technology. Competition law prevents that exclusivity from calcifying into permanent market power that blocks subsequent innovation. As markets grow increasingly digital and innovation-driven, the interplay between these two regimes will continue to evolve, and a nuanced, context-specific application of the Competition Act, 2002 – especially Section 3(5) – remains essential to ensure that India fosters both a culture of innovation and a fair, competitive marketplace.

The CCI’s approach has evolved considerably: it now increasingly distinguishes between online and offline sales as separate relevant markets, recognises network effects in dominance assessments, and has moved toward effects-based analysis in abuse of dominance cases – all of which are necessary adjustments for meaningful digital market regulation. The road ahead requires not just stronger enforcement but smarter enforcement: one that can distinguish between size and harm, between IP protection and anti-competitive exclusion, and between platforms that create value and platforms that capture it at the expense of everyone else.

What do you think? If the Draft Digital Competition Bill were enacted, would designating large platforms as “Systemically Significant Digital Enterprises” and imposing ex-ante obligations on them adequately address the IP-competition conflict – or does it risk discouraging the very innovation that makes these platforms valuable in the first place? And as data increasingly becomes the most valuable competitive asset in online markets, should Indian law treat proprietary datasets as potential “essential facilities” subject to mandatory access requirements?

References

1. https://www.indiacode.nic.in/handle/123456789/2010
2. https://iica.nic.in/images/Working%20Paper_Refusal%20to%20License%20and%20Intellectual%20Property%20Rights.pdf
3. https://www.azbpartners.com/bank/the-intellectual-property-antitrust-review-india-chapter/
4. https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%3D%3D&type=open
5. https://www.meity.gov.in/writereaddata/files/The%20Digital%20Personal%20Data%20Protection%20Act%2C%202023.pdf
6. https://www.nortonrosefulbright.com/en/knowledge/publications/ba1b31d2/competition-law-fact-sheet-india