The Interaction Between Blockchain and Competition Law in the Indian Competition Regime

By Sabrina Bath

INTRODUCTION

Whilst rapid technological improvements have added tremendous comfort to human lives, they have also brought significant unintended consequences for humanity to consider. Blockchains are such a technology that has lately experienced a massive explosion in economic systems. It is one of the most transformative outcomes of the improvement of digital commerce, which is predicted to hold around 10% of total gross domestic product by 2025-2027.[1]

“Blockchain” relates primarily to “a distributed ledger technology that maintains data in blocks across multiple nodes without the intervention of a central authority or third parties.”[2]

The transactions in our blockchain occur with the approval of each node, without the intervention of a central government entity. These transactions are irrevocable which adds to the credibility of the blockchain. Owing to these qualities blockchains are a preferred form of transaction for a wide variety of reasons such as cryptocurrency, supply chains, healthcare industry, finance and explaining their connection with diverse domains of business technology and law.


The majority of the interconnections have been debated numerous times, but the interaction between competition law and Blockchain is still in its infancy with few legal precedents. The use of this technology has inevitably raised significant problems about how several components of competition law should be applied.


BLOCKCHAINS UNDER THE INDIAN COMPETITION LAW

The Act’s definition of a blockchain as an ‘enterprise’ is critical for assessing different anti-competitive acts. To reiterate, a blockchain can be considered an enterprise and is therefore subject to various provisions of the Act.[3] Additionally, the issue if or not blockchain participation can be regarded as an agreement is critical to the Act’s scope to blockchains in view of Section 3.[4] Given that the term is broad enough to incorporate “situations in which parties act on the basis of a nod”, it clearly covers blockchain.[5] This is partly since the blockchain's numerous parties act in unison or agreement via the use of a unanimity protocol to preserve or amend the ledger's status, which is critical to the blockchain's operation.[6] Thus, it can be said that blockchain allows the various nodes to encourage anti-competitive behaviour by using mutual consent, so satisfying the acts criterion for an agreement. Another significant point is with regards to the jurisdiction. Blockchains typically span multiple nations and operate as a worldwide network, with individuals maintaining an anonymous identity.[7] This appears to be a blow for regulatory bodies, as determining which entity would have jurisdiction and against whom. Even though the CCI is authorized to exert power over global blockchains in instances where they have a material impact on competition. But in the Indian market sector, their use will provide significant difficulties.[8]


ARE BLOCKCHAINS ANTI-COMPETITIVE OR PRO-COMPETITIVE?

Due to the extremely complicated character of blockchains, their classification as pro- or anti-competitive is extremely controversial, but their usage raises a variety of anti-competitive issues due to the multiple basic tenets entailed.[9] One of the most distinguishing characteristics of blockchain technology is its decentralized character, in which each stakeholder is completely engaged and has fair opportunities to the equal quantity of information. A more hopeful view would indicate that devolution and the resultant openness can be successful in increasing competition by providing customers with more data, leading to more efficient transactions. Nevertheless, it is much more possible that this large volume of information will lead to the implementation of anti-competitive behaviours since it will facilitate the interchange of commercially confidential material and subsequent illegal collusion between multiple stakeholders.[10] The decentralised nature also presents regulatory agencies with issues of enforcement because there is no central identifiable organization to bear responsibility. Furthermore, several significant difficulties arise due to the anonymous character of blockchain players. On the positive side, the creation of anti-competitive agreements is much less probable in the event of permission-less blockchains given a large number of anonymous players, rendering agreement formation very difficult. But even if such agreements were reached, relative anonymity would present a significant barrier to regulating agencies, as identifying and responsibility in massive permission-less blockchains are not practicable. On the other hand, permission blockchains would not present these compliance issues, as they are typically administered by a central organisation and their players are vetted and registered.


CCI OR THE BLOCKCHAIN?

A blockchain’s anonymous character and transparency will provide substantial hurdles to the CCI. To begin, such characteristics of a blockchain will preclude the competition authority from acting suo moto, as data concerning current or perceived anti-competitive behaviour may not reach the CCI, and the CCI’s incapacity to retrieve such data will compound its incompetence. Secondly, blockchain does not rely on human intervention to work, instead, it relies on computational procedures to carry out all of its operations. As often as the regulators would like to handle the ensuing conflicts, the Indian competition law does not have a mechanism authorizing the agencies to execute the computerized users. The Law stipulates that a human factor be involved in order to give remedy in this kind of circumstances. As demonstrated by the judgment of Samir Agarwal v. ANI Technologies, programmatically set prices do not constitute conspiracy or cartelization inside the scope of competition law.[11] Importantly, each activity associated with the operation of a blockchain is algorithm-driven, which will undoubtedly present complications for India's competition regulator.

Furthermore, the absence of a preliminary framework for asserting and recognizing any anti-competitive issues is another impediment to identifying and fixing issues arising from the usage of blockchain technology. The decision of Plasser India v. Harbour Sales Pvt. Ltd. is instructive in this regard, as the CCI determined that the sheer potential of cooperation does not constitute anti-competitive behavior and so cannot be addressed under Section 3 of the Act.[12] Even though if we believe CCI to be exceedingly cautious and vigilant, it does not appear to be prepared to cope with the variety of issues that could develop when blockchain technologies are used.


CONCLUSION

CCI’s attempts in identifying risk associated with the use of blockchain technology remain highly laudable. Even so, merely acknowledging anti-competitive issues does not guarantee their settlement. As a result, there is an urgent requirement for an interim system capable of immobilizing and deterring the creation of such problems. While it is clear that blockchain is within the scope of the Law, the present framework under Section 3 may not be sufficient to settle the conflicts that arise. Surprisingly, the CCI does not perceive the employment of analytics to be a source of competitive risk, despite the fact that practically every activity in blockchain technology involves algorithms. Additionally, the anonymous character of such activities will provide the necessary exit route for such techniques to evade regulatory scrutiny. Thus, the CCI should broaden the scope of Section 3 of the Act[13] to govern the application of algorithms and eliminate the need for a human factor in assessing and labeling anti-competitive behaviors and practices.

[1] Ernesto R. Garcia, Blockchain and Competition Law, 70(2) GRUR International. (2021). [2] OECD, ‘Blockchain Primer’, ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT, (Oct. 16, 2021, 5PM), https://www.oecd.org/finance/OECD-Blockchain-Primer.pdf. [3] The Competition Act, 2002, s. 2(h), No. 12, Acts of Parliament, 2002. [4] The Competition Act, 2002, s. 3, No. 12, Acts of Parliament, 2002. [5] Builders Association of India v. Cement Association of India and Ors., (2012) CompLR 629 (CCI). [6] Id at 2. [7] Id at 1. [8] The Competition Act, 2002, s. 32, No. 12, Acts of Parliament, 2002. [9] OECD, ‘Antitrust and the Trust Machine’, ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT, (Oct. 16, 2021, 5:30 PM), https://www.oecd.org/daf/competition/antitrust-and-the-trust-machine-2020.pdf. [10]Almudena Arcelus, Commentary, Mitigating Antitrust Concerns When Competitors Share Data Using Blockchain Technology, Harv. J.L. & Tech. Dig., (2021). [11] Samir Agarwal v. ANI Technologies, Case No. 37 of 2018 (CCI). [12] Plasser India v. Harbour Sales Private Limited, Case No 45 of 2019 (CCI) . [13] The Competition Act, 2002, s. 3, No. 12, Acts of Parliament, 2002.


Author: SABRINA BATH

Course: LLM

Collage: SYMBIOSIS LAW SCHOOL, PUNE

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