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Draft Digital Competition bill

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May 16, 2024

Why in news?

India proposes a new law to prevent anti-competitive practices by tech giants like Google, Facebook, and Amazon.

What are the key proposals of draft digital competition bill?

  • Aim- To curb market dominance by tech companies and prevent anti-competitive practices before they occur, drawing inspiration from European Union’s Digital Market Act.
  • Predictive regulation- The bill introduces a forward-looking, preventive, and presumptive law (an ex ante framework) to foresee potential harms that can arise from antitrust issues and prescribes pre-determined no-go areas.
  • Associate Digital Enterprises (ADEs)- The bill aims to regulate not just the primary tech giants but also their associated companies within a conglomerate.
  • Criteria for ADE designation- If a subsidiary or related entity benefits from data collected by a core service of the conglomerate, it could be designated as an ADE.
  • Obligation-Once designated, ADEs would be subjected to the same regulatory obligations as SSDEs.
    • Example: Google Maps could be designated as an ADE if it benefits from data gathered by Google Search.
  • Systematically Significant Digital Enterprise (SSDE)-  The bill proposed that the Competition Commission of India (CCI) should designate companies as SSDE based on various quantitative and qualitative parameters.

Criteria for SSDEs

Key aspects

About

Turnover

A company must have a turnover in India of at least Rs 4,000 crore or a global turnover of 30 billion dollars in the last three financial years.

Global market capitalization

It should be at least 75 billion dollars.

User base

It should be at least 1 crore end users or 10,000 business users for their core digital services.

Prohibited activities for SSDEs

Self preferencing

Giving their own services preferential treatment over those of competitors

Anti-steering

Preventing or discouraging users from using or switching to competing services

Restricted third party applications

Limiting the ability of third-party applications to interact with their platform

     
  • Penalty- If the provisions are violated it could result in fines of up to 10% of the company’s global turnover.

Competition Commission of India would designate the firms as SSDE and ADE

What are the concerns raised by tech companies regarding the bill?

  • Compliance burdens- The ex ante requirements might impose significant compliance burdens, diverting resources from innovation and research to regulatory compliance.
  • Operational efficiency- Industry executives are worried about the operational impact of such regulations.
  • Concerns with EU’s Digital Markets Act- It has led to a significant increase in the time required for basic operations, such as finding information via Google search.
  • Arbitrary definitions- There is concern over the broad definitions of significant platforms and the discretionary power given to the Competition Commission of India (CCI) in designating SSDEs and ADEs.
  • Impact on startups- Critics fear this could lead to arbitrary decision-making and potentially impact startups.
  • Impact global competitiveness- As firms navigate complex regulatory landscapes, they might struggle to compete with counterparts in regions with more flexible regulatory frameworks.
  • Regulatory uncertainty- Companies may be unsure about their status and obligations under the new law, leading to hesitancy in business expansion and investment.
  • Impact on venture investments- Internet and Mobile Association of India (IAMAI) argues that the ex ate regulatory framework proposed by the bill could deter venture investments in tech startups.
  • Impact scalability- IAMAI argues that the stringent thresholds and pre-emptive regulations might limit the scalability of businesses, as these rules could act as a ceiling on growth potential.

What is the stand of the government?

  • Historical anti-competitive practices- Government argue that tech giants have a history of engaging in anti-competitive practices.
  • Fine on Google- The fine imposed on Google (Rupees 1.337 crore) by the Competition Commission of India (CCI) for its anti-competitive behavior in the android ecosystem serve as evidence of ongoing issues.
  • Foster digital competition- Innovation is largely confined to a few major tech companies, primarily from the US.
  • High market barriers- It is created by dominant players which make it difficult for new entrants to challenge their supremacy.

 

References

  1. Indian Express- Big tech opposed draft digital competition bill
  2. MCA- Report of the committee on digital competition law
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