#1 Updates in Law, Economics, Policy
This thread of posts is for me to shed laziness about reading and connecting law and economics where necessary. On most days it will be brief links and notes. Do share feedback.
CCI, Meta and the Indian wrestle with Big Tech
CCI in its suo-motu proceedings fines Meta and WhatsApp for forcing Indian users to adopt its new privacy policy in 2021 on a take it or leave it basis.
Unfair Trade Practices, Abuse of Dominant position alleged in two relevant markets.
Market 1- OTT messaging over smartphone in India - Found to be dominated by WhatsApp
Market 2- Online display of advertising in India - Found to be dominated by Meta
Unfair conditions in Market 1
WhatsApp was held to be forcing upon the users their updated privacy policy without meaningful opt-out of expanded collection and forced sharing of user-data with Meta. No choice was given to users, no control over sharing of data was extended and purpose of data collection was vaguely defined. The CCI held requiring users to mandatorily share data with Meta amounts to imposing an unfair condition for accessing the service u/s 2(4)(i)(a) of the Competition Act.
Restricting access to Market 2
The CCI held that sharing of data from WhatsApp to Meta for purposes other than those required for WhatsApp Messaging imposes an entry restriction on other online platforms displaying advertisements leading to higher entry barriers for other players in online display of advertisements market. Held to be Abuse of Dominant Position as per section 4(2)(c) in Market 2.
Leveraging dominant position in Market 1 to protect position in Market 2. Held abuse of dominant position as per 4(2)(e).
While the order is not out yet the emphasis of the press note seems to be on this part of the privacy policy:
As part of the Meta Companies, WhatsApp receives information from, and shares information (see here) with, the other Meta Companies. We may use the information we receive from them, and they may use the information we share with them, to help operate, provide, improve, understand, customize, support, and market our Services and their offerings, including the Meta Company Products.
…..
"improving their services and your experiences using them, such as making suggestions for you (for example, of friends or group connections, or of interesting content), personalizing features and content, helping you complete purchases and transactions, and showing relevant offers and ads across the Meta Company Products;”
You may also review Meta’s privacy policy here [Why and how we process your information].
Related links
Earlier order. CCI Press Release here pertaining to the latest order, Report of the Digital Competition Committee [Summary] , the updated Privacy Policy.
Challenge to previous changes in its 2016 privacy policy remains pending before the SCI in Karmanya Singh after being dismissed by the Delhi High Court.
Final order from the CCI awaited.
“The problem with theory is usually reality”
Ben on Stratechery fleshes an excellent and brief economic history of the making of Silicon Valley with a challenge for all of us, can it change? Can we re-create it here and now?
Ben suggests the story of the boom post-invention of semiconductors begins with new Tariff legislation and Tariff schedules in the US. Extracted thus:
With this, importing labor-intensive output from across the border into the US became virtually duty-free. Commoditized, low-marginal cost, labor intensive services could be imported easily. Value-heavy tail-end production on the value chain like designing chips and marketing them and was centered in the US, the less value-intensive tasks of assembly were outsourced.
Low cost of labor for labor-intensive manufacturing in much of South East Asia meant they could unlock income opportunities through value addition. US debt remaining attractive throughout this period, facilitated first by Bretton Woods arrangements and then by USD being a reserve currency. This meant a lot of investment and labor payments could flow into these Asian countries from the US while still keeping the USD from depreciating.
Early in this century, software rose with near zero marginal cost. Talent from across the world pooled into the States, software picked pace. The US in other words optimized and affixed its position on the tail-ends of smile curve of value-addition in semi-conductors. It then again did so for AI. The high-value, creative and less labor-intensive bit was done by American firms and they outsourced the labor to where it was cheap.
This rock-solid stability that made possible the greatest symphonies in value creation in the world; Ben argues, may begin to be irritated if Trump actually does what he promised: ratchet up tariffs. Redrawing the trade and tariffs paradigm, like blanket flat tariffs on all goods and labor, might shake up value-seeking firms’ supply chains and lead to a major upheaval. Besides being inflationary, the tariffs and immigration restrictions may disturb the inertia and direction of the six-decade-long tariff and talent regime that made the Silicon Valley possible. Importing labor, and assembled products may become cost-incompetitive for American high-value producers opening opportunities for other country producers or for a new turn of American producers to develop complete manufacturing chains.
Related readings:
Hinrich foundation lists the anxieties of Trump- the tariff man coming back.
In the Diplomat, Can China still make it in high-tech manufacturing despite the tariffs? Also, answered in the affirmative in Bloomberg.
Where Rajan and Lamba’s argument that India should optimize to be on the high-value, creative tail of the smile curve as against labor-intensive manufacturing was critiqued for shooting for the stars with no earth to stand on.
Gulzar clarifies the ideation of PLIs drawing also on Studwell- Catch the big fish, incentivise productivity and its growth, kill the firms that don’t perform, incentivise moving across value-creation levels to complete the manufacturing chain. More on Industrial Policy for Services.
A fresh perspective on on-going debates. Good work, Shashank! 👍