[Smriti Shukla is an associate with Desai and Diwanji and Mohd. Fahad Ansari is a fourth year student at National University of Study and Research in Law (NUSRL)]
Introduction
The generally unnoticeable global dominance of the gaming industry has evaded widespread acknowledgement. Previously being seen as a mere juvenile pastime, online gaming has transformed into a colossal economic entity, which has a valuation of USD 232.02 billion in 2022, with projections anticipated to cross USD 500 billion milestone by 2030. As far as India is concerned, the industry has secured a substantial sum of USD 2.8 billion, and exhibited a substantial growth trajectory of 30%. Beyond its economic prowess, gaming has emerged as a hub of innovations, which captivated numerous conglomerates and esteemed entities who seek to harness its potential. Being sophistically connected with domains like artificial intelligence, metaverse, and virtual reality, gaming transmits a magnetic attraction. The arrival of noteworthy contenders in nascent industries invariably sounds the clarion call of competition, and the gaming sphere is no exception. Therefore, it becomes imperative to preempt unbridled competition within the relevant markets. This article meticulously delineates the trajectory of gaming's expansion and fervently advocates for a proactive framework of competition oversight within this industry.
Level Up: Enhancing Competition in the Gaming Industry
The gaming industry has evolved into an arena where titans of the market, namely Microsoft and Sony, engage in fierce competition. These industry giants, which are renowned for their Xbox and PlayStation consoles respectively, completely dominate the gaming console market. Recently, Microsoft acquired Activision Blizzard for a mammoth USD 68.7 billion, a move which has bestowed upon it substantial market control over cloud gaming. Additionally, this acquisition has granted Microsoft a substantial advantage over its competitors, namely Sony and Nintendo, since it conferred dominance to Microsoft over immensely popular gaming titles such as Call of Duty.
The crux of the concerns around this agreement is related to Microsoft's existing dominance in the realm of cloud gaming and the potential repercussions on competition in the realm of PC and console game distribution. Besides these, apprehensions also exist that the acquisition will probably curtail the innovation and limit the choices available to gamers. Sony, which is a direct competitor of Microsoft, has voiced anxieties that the acquisition grants Microsoft the freedom to substantially increase the price of Call of Duty and restrict its accessibility solely to its Xbox Game Pass subscription service. One more repercussion following the deal is that Microsoft may undermine the quality and performance of Call of Duty on the PlayStation platform, and consequently erode the trust of the gaming community in PlayStation as the preferred conduit to experience the game.
Instances of competition concerns are not confined solely to this scenario. Serious allegations have been put on Sony that it has abused its dominant position since it has imposed excessive prices and inequitable terms and conditions on app developers who seek to sell games on its PlayStation store, encompassing a uniform 30% charge. Similarly, the European Commission has levied a penalty on Valve for engaging in geo-blocking practices, whereby cross-border sales of games were restricted based on the geographic location of users. Another case study unfolded in the form of Epic v. Apple, where Apple compelled app developers to utilize its payment service for transactions on the App Store, and subsequently imposed a commission fee of up to 30%. These instances show the vulnerability of the gaming industry to anti-competitive conduct, a trend which appears to be escalating over time.
Breaking the Chains: Promoting Competition in Exclusive Gaming Franchises
Given the gaming industry's notable evasion of scrutiny by regulators, particularly competition law, an atmosphere has emerged where excessively priced video games prevail, which exploit consumers. Within this realm, fierce competitions exist among rivals, who vie for licenses, many of which bear an exclusive nature. Getting licenses to incorporate widely recognized characters, franchises, teams, or universes empowers the developers to fashion games that captivate both existing and prospective players, which confer a formidable competitive advantage over their counterparts. As a result, these contests have resulted in the withdrawal of franchises from the market, thereby responsible for a dip in competition. For instance, after the departure of Pro Evolution Soccer, EA FIFA has achieved immense dominance in the domain of football video games. Such monopolistic standings are typically accompanied by maltreatment of consumers, as the dominant enterprise becomes nonchalant towards their needs while continuing to amass substantial profits. This pattern is evident across various video game sectors encompassing basketball, Formula 1, and WWE games.
Intense rivalries between gaming franchises engender a responsive and innovative market, amplifying the interests and aspirations of the public. Furthermore, the realm of gaming is subject to the phenomena of network effects, wherein nascent consumers exhibit an inherent proclivity to integrate themselves within the preexisting fabric of the well-established gaming community. Furthermore, the demarcation of relevant markets tends to accord unparalleled preeminence to the most favored game within a given genre. Consequently, in cases wherein access to a specific gaming series is foreclosed or discriminatory conditions are imposed upon platforms facilitating game purchases, the precise delineation of the relevant market necessitates meticulous definition. In light of the fact that a football series cannot be substituted by a non-football game, particularly considering the existence of an entire gaming community dedicated to that specific genre, viable substitutes are conspicuously absent. Exclusionary conduct invariably leads to elevated concentration levels and dominant positions for popular franchises, thereby it places them in super-dominant positions within their respective relevant markets. Consequently, these practices within the gaming industry warrant the attention of the Competition Commission of India (CCI) to engender augmented competition throughout the industry.
Unleashing Potential: Promoting Competition for Indian Gaming Start-Ups
The gaming industry has a pivotal role as it contributes significantly to the economy, and the amicable presence of robust and spirited competition undoubtedly ensures innumerable benefits for the market. As far as the Indian market is concerned, considerable emphasis is placed to promote the indigenous gaming start-ups, thereby it necessitates a concerted effort to forestall any possible anti-competitive repercussions. The OECD, in its report, has duly recognized the effectiveness of competition law as an instrument to advance public policy objectives. Therefore, the existence of a proactive competition law framework is sin qua non to facilitate the entry of small, independent developers into the gaming industry, and to effectively curb any pernicious barriers to market access that may be orchestrated by dominant industries. Competition law is an effective tool to eliminate these deleterious anti-competitive practices, by ensuring that new developers get equal opportunity to unveil their creative works to the market, thereby enabling competition based on the merits of their ingenuity and the quality of their offerings. Notably, the CCI possesses the prerogative to independently scrutinize any anti-competitive conduct, as provided under Section 19(1) of the Competition Act, 2002 (Act).
The purview of the CCI extends to the examination of agreements within the gaming industry, as delineated under Section 3 of the Act. For instance, the CCI may meticulously evaluate vertical agreements forged between game development studios and console manufacturers through the lens of a rule of reason analysis. Such an evaluative approach will enable the CCI to comprehensively assess the holistic impact of said agreements, as mandated by Section 19(3) of the Act, duly accounting for both the pro-competitive advantages and the potential anti-competitive repercussions. This ardent assessment serves as a litmus test to ascertain whether such agreements bear an appreciable adverse effect on competition or not. Additionally, the activities of dominant market players fall within the purview of the CCI's investigative powers, should there exist reasonable suspicion of their abuse of a dominant position. Of noteworthy mention is the fact that Section 4 of the Act eschews differentiation between exploitative and exclusionary conduct, thereby encompassing both categories of actions if they can be ascribed to a dominant enterprise. Ergo, the CCI is bestowed with the authority to thoroughly scrutinize cases wherein exclusionary behavior or the curtailment of market access, exemplified by the earlier elucidation concerning football games, or the imposition of exorbitant pricing by Sony, manifest. Furthermore, the CCI retains the prerogative to examine combinations within the gaming industry, congruent with the evaluations undertaken by esteemed entities such as the Competition and Markets Authority (CMA) and the European Commission, as exemplified by the consequential appraisal of Microsoft's acquisition of Activision Blizzard. The factors considered by the CMA and the European Commission evince a close alignment with the analyses encapsulated within Section 20(4) of the Act, consequently intimating that any scrutiny undertaken by the CCI vis-à-vis the gaming market is poised to adopt a commensurate approach.
Conclusion
The fundamental objective of this discourse lies in illuminating the inherent susceptibility of the expeditiously burgeoning gaming industry to potentially anti-competitive maneuvers. Moreover, the article ardently advocates for the efficacious establishment of active competition oversight mechanisms, engendering a judicious curtailment of market impediments while zealously safeguarding consumers from exploitation. By duly acknowledging the remarkable trajectory of growth and the boundless prospects permeating the gaming sector, it becomes patently clear that proactive measures assume indispensability in fortifying the marketplace against any semblance of anti-competitive conduct, thereby fostering an equitable and just commercial milieu.
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