Dear Reader,
The 34th edition of Spotlight brings you a concise overview of the Competition Commission of India’s (CCI) market study on artificial intelligence and competition. As AI becomes increasingly embedded in business decision-making, the study by CCI explores how it is reshaping markets, influencing competition, and raising new questions for enforcement.
This spotlight covers the CCI’s key observations on the role of data, algorithms and scale in AI-driven markets, and what these developments could mean for businesses, consumers, and competition policy in India’s digital economy.
We look forward to your comments and suggestions!
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CCI'S MARKET STUDY ON AI AND COMPETITION
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I. THE ISSUE
India’s AI market is growing rapidly, projected to rise from US$6.05bn in 2024 to US$31.94bn by 2031, reflecting a compound annual growth rate (CAGR) of 39-43 percent. While this expansion enables smaller businesses to access advanced technologies, it also raises competition concerns, including algorithmic collusion, data concentration, ecosystem lock-in, and the increasing dominance of major technology firms. The CCI’s Market Study on AI and competition analyses how AI is transforming competition dynamics across both the AI value chain and various user industries.
AI Ecosystem Structure: The Eight-Layer Stack
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Upstream (Infrastructure and Development)
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This includes the data layer (Appen holds 23.4 percent of the market, AWS 19.2 percent, and Google 15.3 percent), computing infrastructure (AWS 32.6 percent, Azure 20.8 percent, GCP 11.5 percent), AI development (machine learning, natural language processing, and computer vision), and generative AI or foundation models, which Google, Meta, Microsoft, and OpenAI mainly lead.
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Downstream (Deployment and Application)
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This covers AI model fine-tuning for specific uses, release and deployment, user interaction through customer-facing AI, and governance and control of AI systems.
About 67 percent of Indian AI startups focus on applications, 20 percent on data, and only 10 percent on infrastructure. This shows that most startups rely heavily on major global companies (such as AWS, Microsoft, and Google) for core computing and AI infrastructure
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II. COMPETITION ISSUES IDENTIFIED
The Report highlighted the following competition issues:
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III. CCI'S ACTION PLAN: KEY RECOMMENDATIONS & CHALLENGES
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Downstream (Deployment and Application)
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4. NCLAT Re-Affirmed Unfair Conditions Imposed by WhatsApp
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The NCLAT also unquestionably affirmed that sharing WhatsApp data with Meta led to the denial of market access to competitors, as having control over more consumer data gave Meta an unfair advantage in the display advertising market.
A New Observation
Interestingly, the NCLAT agreed that the CCI had failed to establish Meta’s dominance, noting that a “leading position” is not the same as dominance. Yet, it still upholds the finding of denial of market access under Section 4(2)(c), reasoning that the provision does not explicitly require dominance. This approach is problematic because Section 4 treats dominance as a necessary precondition for any abuse, making a finding of denial of market access without first establishing dominance inconsistent with the statute’s structure.
On the other hand, NCLAT held that an established claim (WhatsApp leveraged its dominance to benefit Meta by sharing WhatsApp data with Meta) is not an established claim, as “Meta and WhatsApp are two distinct legal entities”. The question remains: why would this stop a finding of leveraging, since the relevant provisions apply to both enterprises and groups composed of legally distinct enterprises? Why would this stop a finding of leveraging, since the relevant provisions apply to both enterprises and groups of legally distinct enterprises?
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5. Anti-Competitive Effects Proved
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The “extensive qualitative effects analysis” carried out by the CCI, coupled with statements from competitors, was used to establish anticompetitive effects. Moreover, a sigh of relief came for the CCI, as the NCLAT held that the CCI need not demonstrate actual effects and can find abuse of dominant position based on likely effects, especially in fast-moving digital markets.
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In the end, they upheld. CCI upheld the INR 213.14 crore penalty imposed on Meta and WhatsApp. The NCLAT held that the penalty was correctly calculated and would “work out to be the same” even with “slightly modified orders”. The remedies mandating transparency, user choice through opt-outs, and continued future compliance were upheld. Furthermore, a five-year restriction on cross-platform data-sharing imposed by the CCI was set aside, as (i) this became redundant once users were given opt-outs; and (ii) the rationale for the duration was missing in the CCI’s decision.
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