India is considering implementing pre-emptive regulations for big tech companies through a standalone digital competition law, signaling a proactive approach to governing the digital economy. This move aims to address the increasing concentration of power in the hands of a few large digital enterprises and ensure fair practices in the market.
Background and Motivation
The Ministry of Corporate Affairs (MCA) established the Committee on Digital Competition Law (CDCL) in February 2023 to assess the necessity of a separate law for competition in India's digital markets, including the implementation of an ex-ante regulatory framework. The CDCL submitted its recommendations, along with a draft bill on digital competition law, advocating for pre-emptive measures to regulate large digital enterprises selectively.
The government panel observed that the digital market is becoming increasingly concentrated, with a few large companies wielding significant control. This concentration can lead to smaller digital firms and startups becoming overly dependent on these larger entities, creating an imbalance in bargaining power. The proposed law intends to level the playing field and foster a more competitive environment.
Key Provisions and Scope
The draft bill defines a 'Systemically Significant Digital Enterprise' (SSDE) based on criteria such as turnover, gross merchandise value, market capitalization, and the number of end-users or business users. To be considered an SSDE, an enterprise must have a turnover of at least Rs 4,000 crore in India or a global turnover of at least $30 billion, or a gross merchandise value of at least Rs 16,000 crore in India, or a global market capitalization or fair market value of $75 billion. Additionally, its core digital service must have at least one crore end-users or at least 10,000 business users in India in each of the preceding three financial years.
Under the proposed bill, digital companies would be required to notify the Competition Commission of India (CCI) of their eligibility as Systemically Significant Digital Enterprises (SSDE) based on predefined criteria. Similar to the EU's Digital Markets Act (DMA), these enterprises would face stringent prohibitions against self-preferencing, third-party app restrictions, anti-steering policies, data misuse, and product bundling. They would also be mandated to establish transparent complaint handling and compliance mechanisms, ensuring fair, non-discriminatory, and transparent operations with both end-users and business users.
Some obligations listed for SSDEs include establishing transparent and effective complaint handling and compliance mechanisms, operating in a fair, non-discriminatory, and transparent manner with the end and business users, not favoring its products or services, and not restricting user ability to access third-party applications, among others.
Enforcement and Penalties
The Draft Digital Competition Bill (DCB) largely borrows its procedural framework from the Competition Act. The appellate authority under the Draft DCB is the NCLAT. Penalties for contravention of the obligations under the Draft DCB, harmonized with the Competition Act, are capped at a maximum of 10% of the global turnover of the SSDE.
Stakeholder Perspectives
The proposal has faced opposition from big tech companies like Apple, Google, Meta, Flipkart, Zomato and Amazon. These companies argue that pre-emptive regulations could curb innovation and inhibit market growth. Apple, for instance, has stated its preference for a regulatory framework that fosters innovation rather than imposing stringent pre-emptive measures.
Current Status and Way Forward
The CDCL report and the draft bill are open for public consultations, inviting opinions and critiques from various stakeholders. The Ministry of Corporate Affairs will review the law proposal and feedback received. A market study is being commissioned to inform the new law. The new law seeks to protect competition and ensure fair practices in the digital economy.
