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By Simone Avinash Vaidya, 1st Year student at MNLU Mumbai
- Introduction-
The adage often goes, “customer is king”. In the modern digital world of thriving e-commerce businesses and complex algorithms, it has been firmly established that a data advantage is the real mover and shaker of the market. Access to data enables a firm to attract and retain consumers by catering to their specific needs and preferences. For the supply chain, strategizing on the basis of data and information could drive down costs while simultaneously improving efficiency. Companies are recognizing the immense value of data in their respective industries. In the food-delivery sector, effective data processing is the secret ingredient in the recipe for success, as a network effect benefits the restaurant partners, the consumers, and especially the platform itself. In the context of anti-trust proceedings, it is important to first look into the existing regime, and how it operated as the larger framework, causing the issues flagged by several companies regarding confidentiality.
- The Existing Regime-
The Supreme Court (‘SC’) has ruled that strict and complete confidentiality is to be maintained in the context of CCI provisions regarding the same. The Competition Act of 2002 delineates the confidentiality obligations of the CCI and the Appellate Tribunal. Section 57 asserts that information can be disclosed when the enterprise has given its permission for the same in writing, or when it is to be done in compliance with or purpose of the Act, or any other law.
Regulation 35 of the 2009 CCI General Regulations prescribes the procedure to be followed while handling confidential information, specifying that trade secrets categorically come within this ambit. The caveat to the confidentiality obligation is, that in cases of expediency of disclosure of information, the CCI can proceed with the same, and merely affording the informant an opportunity to be heard is sufficient for the due process requirements to be fulfilled. Parties are empowered to apply for a certain piece of information to be treated as confidential, in accordance with the various sub-regulations under Reg. 35. A reading of the General Regulations of 2009 clearly indicates that the Director-General (‘DG’) or the Commission, as the case may be, have to be satisfied with the claims made by the party in their application for confidentiality under Sub. Reg. 2. Once granted, the CCI is bound by the two aforementioned provisions, to maintain confidentiality to the maximum extent possible.
Inspired by the European Competition Commission, the CCI introduced the “Confidentiality Ring” mechanism by inserting sub-regulation 6 under Regulation 35. This established a regime through which certain authorized representatives of the parties could have access to the confidential information acquired and disclosed during the investigation and proceedings. This would be conditional on an undertaking of non-disclosure by the representatives, and Rule 7A states that the inclusion of an Informant in the Confidentiality Ring will solely take place in circumstances where it is “necessary or expedient for effective inquiry”.
Therefore, it is unsurprising for Swiggy Pvt. Ltd. to challenge the Competition Commission of India’s (‘CCI’) April 2024 order granting the National Restaurant Association of India (‘NRAI’) the right to enter the confidentiality ring and access its confidential information and data.
- The Swiggy Conundrum-
The NRAI (“Informant”) filed a complaint with the CCI in 2022, alleging anti-competitive behavior on the part of Swiggy and Zomato (“Opposite Parties”). The NRAI pointed out the unfair practices in their vertical agreements with restaurant partners, and the CCI directed its Director-General to launch an investigation into the allegations of enforced price parity and exclusivity. The DG collected confidential information from the Opposite Parties over the course of the investigation. In 2024, Zomato, Swiggy and the NRAI submitted applications seeking access to the DG’s findings. The CCI allowed Swiggy’s request for the creation of the confidentiality ring and NRAI’s application to be included in the same. Aggrieved by the NRAI’s access to confidential data amounting to a trade secret, Swiggy challenged this order before the High Court of Karnataka at Bengaluru (‘HC’). The Honorable Single Judge ruled in favor of Swiggy, setting aside the CCI’s order and remanded the matter back to the Commission.
There are several layers of analysis required to ascertain the validity of the CCI’s actions, and the following considerations must be taken into account: due process compliance, risk to consumer privacy, and prejudice to Swiggy’s market advantage.
- Due Process Compliance-
In CCI v. SAIL, the SC classified the principles of natural justice into three categories:
- Where the application of these principles would be excluded by specific legislation
- Where the law contemplates strict compliance to these principles, and default could result in the vitiation of both the order, as well as the proceedings against the delinquent
- Where the law requires compliance to these principles, but no prejudice is caused to the delinquent by the default of the same, and the non-compliance is with regard to an action of directory nature.
This particular case falls under the second category. Section 36 of the Competition Act ensures that the CCI shall be guided by the principles of natural justice in the discharge of its functions. Swiggy argued that there were no reasons supporting the CCI Order, and that it was not afforded the right to be heard before the order granting the NRAI entry into the confidentiality ring was passed. Sub-regulation 35(7A) clarifies that the inclusion of the informant in the confidentiality ring is not the norm, but the exception. In the light of these three considerations, it is evident that the procedural safeguards envisioned with respect to regulating the entry of parties into the confidentiality rings, are inadequate and prejudicial to Swiggy’s rights and commercial interests.
- Risk To Consumer Privacy:
Swiggy has collected and analyzed the data of millions of consumers, ranging from their cuisine preferences, purchase history, listed addresses, as well as contact details. Concerns over consumer rights come into the foray here, since the disclosure of the same to a third party such as the NRAI would amount to a significant breach of privacy. Although the provisions of the Digital Personal Data Protection Act, 2023 (‘DPDP Act’) have not been made operational yet, it is pertinent to look into them since they create a comprehensive rubric and provide a test for breach of privacy.
Swiggy’s Privacy Policy ensures clear compliance with the provisions of the DPDP Act. As per Section 6, the user has consented to the processing of their personal data, and the specific purposes have been elaborately described. The definition of “processing”, as under Section 2(x), includes disclosure. It is important to note that a Swiggy user consents to the disclosure and distribution of data to the following entities: service providers, advertiser and advertising networks, for crime prevention and investigation, and partner restaurants/ merchants.
Section 17(1)(c) of the DPDP Act lays down the founding principle for the validity of disclosure of data for the reasons of crime prevention and investigation. Even if it is reasonably inferred that CCI investigations fall under this exemption, it is evident that this applies exclusively to the extent of Swiggy disclosing information to the CCI. The CCI’s unsubstantiated order allowing the NRAI to access such information does not fall under this exemption.
Further, the final category of entities, partner restaurants/ merchants, solely covers the particular restaurant or merchant the user places an order with, and not the NRAI as a whole. Additionally, the purpose of such disclosure is restricted to the fulfilment of the order. The NRAI has no right to access such information, especially when it is prejudices the privacy of millions of users of the Swiggy application.
- Prejudice To Swiggy’s Commercial Interests and Trade Secrets-
It is crucial for a firm to guard its trade secrets, which comprise information of commercial value because of its secrecy, granting a competitive edge to a firm or entity. The importance of this was asserted in Sterlite Industries (India) Ltd. v. Designated Authority, where the SC held that the maintenance of confidentiality was necessary for firms to retain their commercial advantage.
In terms of the procedure, the creation of a confidentiality ring indicates that the CCI has already recognized certain information submitted by Swiggy as confidential. The Commission was satisfied that it met the requirements prescribed under Sub-regulation 35(2), wherein the risk of non-confidentiality of the impugned information “will result in disclosure of trade secrets or destruction or appreciable diminution of the commercial value of any information or can be reasonably expected to cause serious injury.” Since the CCI had already recognised the immense commercial value of the information, it is conspicuous that it allowed the NRAI access to the very same document.
Further, the Commission noted that the NRAI raised several objections to Swiggy and Zomato’s practices of data-masking, as well as their inability to avail delivery services independently. In this context, it can be inferred that the NRAI would aim to compete directly with Swiggy and Zomato in the food-delivery sphere. With this additional consideration coming to light, the CCI’s action is understood to be increasingly problematic, since it has disclosed recognised confidential information to a potential competitor.
Conclusion:
The investigation of Swiggy and Zomato’s actions is ongoing, and the intervention of the HC set it back on the correct course. The CCI’s order was exceedingly bereft of reasoning, and the HC order remanding the matter back to the CCI offers a fresh opportunity to the Commission, to comply with due process obligations, while also weighing the risks associated with disclosure of information. It must be established that the regulatory watchdog’s objective is to prevent unfair trade practices and ensure an even playing field. The purpose of anti-trust has never been to skew the existing competitive advantage against a particular firm, it is meant to regulate anti-competitive activities. Market regulation and data privacy must be reconciled, and the Digital Competition Bill of 2024, if enacted and implemented and after sufficient public consultation, might form a framework for the same.
