Artifical Intelligence: CCI Lens On Anti-Competitive Challenges

Al algorithms can result in collusive outcomes and price coordination among rival firms, says Anisha Chand of Khaitan & Co.

<div class="paragraphs"><p>(Image by Freepik)</p></div>
(Image by Freepik)

The Competition Commission of India has disclosed recently that informal consultations were taking place to put forth draft regulations about challenges driven by artificial intelligence.

"The purpose of this study is to look at what are the competition concerns, which could arise from the adoption of AI by various industries," Chairperson Ravneet Kaur had said at a conference on competition law and practice on Jan. 25. "As this is something which is spanning all sectors, so our focus, we are limiting only to aspects which are related to competition."

"We have still not started the study. The terms of reference of the study have been framed and are currently under consideration," Kaur had said, pointing out that the CCI would come out with a tender seeking offers from the top companies to do the study for it.

Here are the AI-driven challenges that can potentially affect fair-market practices.

Data Monopoly

Data monopolies occur when certain companies dominate a specific market, making it challenging for new competitors to enter and compete effectively.

The impact of data monopoly is that big companies with extensive data gain a significant advantage in predicting and influencing markets, according to Ajay Garg, director of digital law and compliance at Anand and Anand.

The suggestion is to make such data available to all, ensuring a level playing field, he said.

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The extensive adoption of AI within a market may amplify the likelihood of collusion among competitors, according to Akshayy Nanda, partner at Saraf and Partners.

Generative AI is the technology that can, in simple words, learn from examples and generate content based on what they've learned. Based on this technology, AI algorithms, when setting prices in response to competitors, can lead to higher prices beyond what is considered competitive, Nanda said.

This can happen because the algorithms react to each other without explicit communication or coordination, potentially resulting in inflated prices, he explained.

Al's algorithms can result in collusive outcomes and price coordination among rival firms, according to Anisha Chand, partner in the competition & antitrust practice group at Khaitan & Co.

The capacity of AI to predict the behaviour of competitors and the regulator and then camouflaging any wrongdoing can lead to a vast spectrum of anti-competitive conducts, such as collusive bidding in e-auctions and AI enabled self-preferencing, according to KK Sharma, partner at Singhania & Co.

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A cartel is like a secret club of businesses that make a deal to control things like production, sales and prices. They team up to limit competition and have more power in the market.

When competitors' algorithms interact without explicit communication or coordination, identifying a potential cartel agreement becomes more challenging for regulatory authorities, Nanda said.

The absence of direct communication makes it harder for authorities to recognise and address collusion, he said.

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What Can Be Expected?

The CCI can examine whether the misuse of market influence may occur through the use of algorithms, potentially leading to the exclusion of competitors, according to Avaantika Kakkar, head of competition law at Cyril Amarchand Mangaldas.

It might be premature to introduce extensive regulations for this sector, Shreya Suri, partner at IndusLaw,

However, it is crucial to recognise that global governments are concerned not only about potential anticompetitive practices, but also other aspects related to this sector, she said.

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