By Advocate Rishabh Kumar
Edited by: Bharti Verma, Associate Editor at Law Insider
Published on: 26 September 2023 at 10:40 IST
“Tech giants” is a term commonly used to refer to some of the world’s largest and most influential technology companies. These companies typically have a global reach, significant market capitalization, and a major impact on various aspects of the tech industry and the broader economy.
Tech giants like Google, Amazon, Microsoft, Apple etc tends to evade scrutiny, as people seem to have respect and loyalty towards these companies, and hardly bat an eye towards their invasion of privacy.
A surge in recent instances of corporate governance failures has cast a shadow of doubt not only on the effectiveness of board oversight but also on the prevalence of compliance irregularities within major tech giants.
As these Tech Giants like Amazon, Google, Oracle, Apple and the likes continue to expand their influence across various tech frontiers like cloud computing and engage in what some perceive as unfair trade practices, concerns have emerged about potential malpractices and malfunctions in their corporate governance structures.
This trend raises critical questions about ethical conduct, transparency, and accountability in the tech industry, in this article we will be comprehensively discussing regarding the malpractices committed by these tech companies as shedding light on such a complex landscape of corporate governance woes that demand close examination and reform.
Malpractices by Tech Giants
Tech giants, like any large corporations, can be involved in various controversies and allegations of malpractices. It’s important to note that not all tech giants engage in malpractices, and many of these allegations are subject to legal investigations and public scrutiny. Some common areas where tech giants have faced allegations of malpractices include:
- Antitrust and Monopoly Behavior: Tech giants have been accused of anti-competitive practices, where they allegedly use their market dominance to stifle competition. This may involve unfair business practices that harm smaller competitors, limit consumer choice, or result in higher prices for consumers.
- Data Privacy: Tech giants often collect and store vast amounts of user data. Concerns arise when they are accused of mishandling or improperly sharing user data without consent, leading to privacy breaches. Allegations of data abuse can result in legal and regulatory actions.
- Misinformation and Content Moderation: Social media platforms and online marketplaces face challenges related to the spread of misinformation, hate speech, and harmful content. They are criticized for their content moderation policies, which can be seen as either too strict or too lax, depending on perspectives.
- Tax Avoidance: Some tech giants have been accused of using complex financial structures and tax loopholes to minimize their tax obligations, which can result in reduced tax revenues for governments.
- Labor and Employment Practices: Allegations of poor labor practices, including issues related to employee working conditions, wages, and treatment, have been directed at tech giants. This includes claims of discrimination and harassment within these companies.
- Market Manipulation and Disinformation: Tech giants, particularly social media platforms, have faced criticism for their role in spreading disinformation, fake news, and conspiracy theories that can influence public opinion and even elections.
- Intellectual Property Infringement: Tech companies may be accused of infringing on patents, copyrights, or trademarks held by other companies, resulting in legal disputes.
- Environmental Impact: Some tech giants have been criticized for their environmental impact, including energy consumption in data centers and manufacturing processes for electronics.
- Supply Chain Ethics: Companies involved in hardware manufacturing may face allegations related to unethical practices in their supply chains, such as using conflict minerals or exploiting labor in developing countries.
Case Study on Involvement of Google in Malpractice
The Competition Commission of India (CCI) had been investigating Google for alleged anti-competitive practices. These investigations were related to Google’s dominance in the online search and advertising markets.
The Competition Commission of India (CCI) imposed a 1337 crore fine on Google for abusing its dominant position in the android ecosystem in India.
There has been a lack of Personal data protection bill or any dedicated laws which can specifically prohibit such practices, tech giants had been trading in the grey areas with unfair trade practices and abuse of dominant position.
It was one of the biggest high-profile cases between a tech giant and regulator.
Even NCLAT upheld the CCI penalty in this case, while it may seem as a win for the regulators but we still need a comprehensive data protection law and tech company regulatory guidelines like EU.
CCI flagged multiple instances where Google had abused its market dominance and was not limited to only mandating pre-installation of key Google apps like Chrome, Google search, Youtube, Google Maps, etc.
NCLAT largely backed the CCI’s findings in its final verdict, but there were also some relaxations for Google, Google won’t have to host third-party app stores inside the Play Store; it will also not need to allow users to remove pre-installed apps like Gmail and YouTube
The body has held that Google forcing original equipment manufacturers (OEMs) to pre-install apps is an abuse of its dominant position. It has also held that there was no violation of the principles of natural justice, and the lack of a judicial member did not affect the CCI’s decision.
However, the NCLAT has upheld six CCI directions, stating that Google cannot force OEMs to pre-install a suite of apps, position apps in a certain way, license the Play Store to be linked to Chrome, Search, Maps, YouTube, or other apps, pay OEMs for search service exclusivity, impose anti-fragmentation obligations on OEMs, or prevent OEMs from selling smart devices based on Android forks. Additionally, Google must allow users to choose their default search engine during device setup.
The CCI had imposed a penalty on Google for anti-competitive practices related to Android mobile devices, which Google challenged before the NCLAT. Google contended that the investigation was tainted and the CCI failed to conduct an impartial and legally sound investigation.
The NCLAT’s ruling is expected to have significant implications for tech companies operating in India and may set a precedent for the operation of dominant players in tech markets and their relationships with OEMs and app developers.
The appeal against the order of NCLAT filed by Google will be heard by Supreme court on 10th October, 2023. This case highlights the allegations on Google abusing its dominant position in the market.
Case Study: Alleged Malpractices by Amazon in India Sparks Controversy
In a recent turn of events, US Senator Elizabeth Warren has called for the breakup of tech giant Amazon. Simultaneously, Indian retailers are demanding a government investigation into the company following a damning Reuters investigation that uncovered alleged malpractices by Amazon in India. The report has exposed Amazon’s tactics, including copying products and manipulating search results to promote its private brands in the rapidly growing Indian market.
The investigative report, based on internal Amazon documents, paints a concerning picture of the company’s strategies in India. It revealed a systematic effort by Amazon to create imitation products and manipulate search results to favor its own brands. Amazon employees, as per the internal documents, extensively studied proprietary data of other brands on Amazon.in, including customer return information. Their goal was to identify specific products, often referred to as “reference” or “benchmark” products, and replicate them. Amazon’s 2016 internal report outlined the strategy for their Indian brand, “Solimo,” which involved using data from Amazon.in to develop and market products on the same platform.
Surprisingly, Amazon’s Solimo project in India has had international repercussions, with numerous Solimo-branded health and household products now available on Amazon’s U.S. website, Amazon.com.
The 2016 document also revealed that Amazon employees working on private-brand products aimed to collaborate with the manufacturers of the products they intended to copy. This partnership was sought because these manufacturers possessed unique expertise and processes that influenced the quality of the products. The document referred to this manufacturer expertise as “Tribal Knowledge.”
These revelations provide insight into Amazon’s practices, which the company had long denied. Amazon’s founder, Jeff Bezos, testified before the U.S. Congress in 2020, stating that the company prohibited the use of individual seller data to benefit its private-label business. Additionally, another Amazon executive in 2019 claimed that the company did not use such data to create its private-label products or favor them in search results.
Senator Elizabeth Warren, a vocal critic of Amazon, expressed her concerns on Twitter, stating that these documents confirm her fears about Amazon’s monopoly power and its willingness to manipulate its platform to benefit itself while harming small businesses and entrepreneurs. She reiterated her call to break up the company.
The Confederation of All India Traders (CAIT), a group representing millions of Indian brick-and-mortar retailers, called for a government investigation into Amazon’s practices. CAIT alleges that the e-commerce giant is causing significant disadvantages to small manufacturers and retailers in India, representing 80 million retail stores.
Amazon responded to the report by vehemently denying the claims, stating that they were factually incorrect and unsubstantiated. The company insisted that its search results are based on relevance to customer queries and denied using unfair practices to promote its private-label products.
The Alliance of Digital India Foundation (ADIF), a non-profit representing Indian startups, condemned Amazon’s practices as “highly deplorable” and questioned the company’s credibility as a good faith operator in the Indian startup ecosystem. They called on the Indian government to take action against Amazon’s alleged predatory tactics.
Furthermore, a top official from the economic wing of the Rashtriya Swayamsevak Sangh, the ideological parent of India’s ruling party, urged consumers to boycott Amazon in response to the revelations.
The allegations of malpractices by Amazon in India have ignited a firestorm of controversy and calls for action. With US Senator Elizabeth Warren advocating for a breakup and Indian retailers demanding a government investigation, the outcome of these revelations could have significant implications for Amazon’s operations in India and beyond. The spotlight is now on Amazon as it faces intense scrutiny and public backlash over these alleged actions.
Tech Giant Oracle: Lay-off
The reports have shed light on Oracle, a major player in the IT industry, initiating staff downsizing in various countries, including India. These reports suggest that thousands of employees may face job losses. This trend of layoffs within the tech sector is largely attributed to companies gearing up for a challenging economic landscape by reducing their workforce.
To circumvent these legal procedures and reduce costs, some companies resort to pressuring employees to resign voluntarily, which is illegal. Employees facing such situations are encouraged to refuse to resign and insist on following the legal process, as there is no legal procedure for mass terminations in India.
The Battle for Control in Cloud Computing
Alphabet’s Google, in collaboration with technology trade groups, has lodged complaints with the Federal Trade Commission (FTC), raising concerns about purported unfair business practices within the cloud computing industry. Notably, these complaints encompass prominent industry players, including Microsoft. The FTC had solicited information pertaining to security and competition within the cloud data storage and computing sector, to which these comments were a response.
Global Scrutiny and Antitrust Investigations:
The cloud industry has come under global scrutiny, with Europe’s antitrust authority recently launching an investigation into Microsoft’s licensing agreements. These agreements were suspected of stifling competition within the cloud space, sparking concerns about fairness and equity in the market.
Another point of contention revolves around fees associated with migrating data across different cloud providers. Trade group NetChoice, counting Amazon.com and Google among its members, has accused certain vendors, including Microsoft and Oracle, of deploying anti-competitive tactics to maintain their dominance in the cloud industry. These alleged practices hinder customers from switching providers to access more cost-effective solutions, superior services, and innovative offerings.
Google has voiced these concerns, emphasizing that Microsoft and other legacy software providers employ licensing terms that distort the competitive landscape within the cloud. Google argues that businesses procuring software from Microsoft for their data centers encounter limitations and additional charges when transitioning these licenses to Microsoft’s cloud competitors.
Amazon has previously raised similar criticisms. Up to the time of this report, Microsoft and Oracle have not officially responded to Reuters’ requests for comments. While Microsoft has implemented some updates to its terms in response to criticism, competitors have deemed these changes insufficient.
The cloud computing industry is witnessing intense competition and growing concerns about equitable practices. With Alphabet’s Google, along with other industry stakeholders, raising complaints with the FTC and Europe’s antitrust authority investigating licensing agreements, the cloud landscape is poised for potential transformations. As the battle for control continues, the industry’s future may depend on achieving a balance between fostering innovation and ensuring fair competition for the benefit of all stakeholders.
Role of CCI in Controlling Malpractices in India
The Competition Commission of India (CCI) plays a crucial role in diminishing malpractices by tech giants and promoting fair competition in the Indian market.
Here are some key ways in which CCI contributes:
Antitrust Enforcement: CCI is responsible for enforcing antitrust laws in India. It investigates and takes action against anti-competitive practices, such as abuse of dominant market positions, cartelization, and anti-competitive mergers and acquisitions. Tech giants with significant market power are not exempted from these regulations.
Investigating Monopoly and Abuse of Dominance: CCI investigates cases where tech giants may abuse their dominant positions in the market to stifle competition. For example, if a tech giant uses its market power to impose unfair terms on competitors or customers, CCI can step in to address such practices.
Reviewing Mergers and Acquisitions: CCI reviews mergers and acquisitions involving tech companies to ensure that they do not result in anti-competitive outcomes. The commission assesses whether such transactions would lead to a substantial lessening of competition in the market.
Imposing Penalties: CCI has the authority to impose penalties on tech giants found guilty of anti-competitive practices. These penalties can act as deterrents and encourage compliance with competition laws.
Market Studies and Advocacy: CCI conducts market studies and advocacy efforts to identify and address competition concerns proactively. Through these studies, CCI can gain insights into market dynamics and potential malpractices by tech giants.
Consumer Protection: CCI also plays a role in protecting consumer interests by ensuring that tech companies do not engage in unfair or deceptive trade practices that harm consumers.
Promoting Innovation: CCI’s efforts to maintain a competitive marketplace can encourage innovation by preventing monopolistic behavior that stifles new entrants and disruptive technologies.
Legal Framework Development: CCI continuously works on improving the legal framework governing competition in India. This may involve revising existing regulations or proposing new ones to address emerging challenges in the tech industry.
Cooperation with International Authorities: Given the global nature of tech giants, CCI often cooperates with international competition authorities to address cross-border competition issues and share information regarding malpractices.
Providing a Fair Platform: By ensuring fair competition, CCI helps create a level playing field for both established tech giants and emerging startups, fostering an environment where innovative ideas and businesses can thrive.
Hence, the CCI plays a vital role in regulating tech giants and diminishing malpractices in India’s tech sector. Its enforcement of competition laws, investigation of anti-competitive behavior, and promotion of fair competition contribute to a healthier and more competitive tech ecosystem in the country.
The practices of tech giants have been in a subject of scrutiny and debate, with various allegations and concerns raised over the years. While these companies have played a transformative role in shaping the digital landscape and driving technological innovation, they have not been immune to criticism and controversies.
Tech giants continue to evolve their practices, often in response to regulatory pressures and public scrutiny. The tech industry remains dynamic, and the role of these companies in society continues to be a subject of ongoing discussion and debate. As the digital landscape evolves, it is essential for tech giants to strike a balance between innovation, competition, and responsible corporate behavior to meet the expectations of consumers, regulators, and the broader public.