Draft Digital Competition bill

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.

• 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