The market is regulated by invisible forces that influence prices and demands. Now, that the world is digitalisation and the market has its place in the virtual world, its regulation is of utmost importance, Because of this, the Digital Competition Bill, 2024 (hereinafter referred to as the Bill) was introduced in the Lok Sabha on March 12, 2024. The bill aims to address market dominance by big tech companies and the regulatory changes proposed to ensure fair competition. It highlights the controversy and debates surrounding the bill, including potential impacts on digital advertising and the broader tech landscape.
The Bill is in the limelight due to the provisions it has brought along, relating to ex-ante regulations for the stakeholders of the market in India. A lot of criticisms and opposition are faced by the said Bill, especially from the big techs and the market players, because the present Competition Act of 2002[1] is based on the ex-post model of regulation, wherein the Competition Commission of India (CCI) will take action only when the incident of anti-competitive practice has taken place and less compliance burden than the proposed Bill. The big techs claim that this Bill will discourage new entrants and long-term investments, and suggests that such regulations should be imposed only to actually and quickly resolve the market failure.
The Bill is an inspiration by the European Union’s Digital Market Act (DMA), 2022[2], by making big techs “gatekeepers”. As a result of which Apple opened gates for installing apps from external app stores. It was proposed on March 12, 2024, by the Ministry of Corporate Affairs[3] (MCA) to introduce ex-ante regulations against anti-competitive practices, provisions for the prevention of data breaches, associate digital enterprises, and empowering the Competition Commission of India to interfere in matters beforehand, even prior to any wrong or harmful competitive measures practiced. This would discourage the big firms from dominating the marketplace and eliminate monopolies.
The Bill also provides that certain core digital services should be identified as “Systematically Significant Digital Enterprises (SSDEs)” by the Competition Commission of India, on the parameters of turnover, market influence, and user base, where the enterprises would be designates as SSDEs on list of various factors structured under Schedule I of the draft, under the head Core Digital Services. The list includes:
i. Online search engines
ii. Online social networking services
iii. Video-sharing platform services
iv. Operating systems
v. Interpersonal communications services
vi. Cloud services
vii. Web browsers
viii. Online intermediation services, and
ix. Advertising services.
Thus, those services which are not included in the Schedule can be included under online intermediation services, namely, web-hosting service providers, payment websites, auction websites, online application stores, online marketplaces, and aggregators providing services such as mobility aggregation, match-making, food/ meal ordering, and food delivery services.
Above that, the Bill provides for qualitative and quantitative thresholds, also known as User and Financial thresholds, respectively.
i. Quantitative threshold is met when the turnover is Rs. 400 crores or more in India, gross turnover is a minimum of USD 30 billion, gross merchandise value in India is Rs. 16,000 crores or more, or the global market capitalisation is a minimum of USD 75 billion.
ii. Qualitative threshold is reached when the criteria of core digital service having a minimum of one crore end users or a minimum of ten thousand business users is met.
Further, the Bill elaborates on the meaning of anti-competitive practices, under a list of ten in the fifty-third report of the Standing Committee on Finance in 2022, namely:
i. Anti-steering, wherein the consumers are blocked by companies from switching to external services,
ii. Self-preferencing, in which the companies prefer their products or services by excluding other companies from the reach of the consumers,
iii. Bundling and tying, where products are bundled and tied up for the consumers to buy, by the digital firms, that they do not want,
iv. Data usage, the use of personal data of consumers by other companies for advertisements,
v. Deep discounting, bringing down the prices at such a level below their original price to exclude competitors,
vi. Acquisition and Mergers, the acquisition and conglomeration of large start-ups by big firms to prevent small firms,
vii. Exclusive Tie-ups, wherein exclusive agreements are entered into by the companies to prevent the business users, distributors, and sellers from dealing with others.
viii. Search and ranking preferences by preventing other products; visibility due to search bias
ix. Restricting third-party applications by blocking users from the use of external software and applications, and
x. Advertising Policies, wherein unhealthy competition in digital advertising leads to consolidation, concentration, and integration.
The Bill also provides for the objectives, effects, and need for such a regulation in an Indian market, stating that the consumer may face challenges in user experience and user interface. On Mar 15, 2024, the Information Technology and Innovation Foundation reported that ex-ante regulations are not required except for proven market failure, that too until it is justified that such regulation could improve the current circumstances. Alongside, experts have reported that the Competition Commission of India needs to strengthen itself in monitoring and enforcement, making the present process a robust one, rather than following the European Union. This Bill, which was recently proposed by the Ministry of Corporate Affairs, on March 12, 2024, provides for the regulation of anti-competitive practices not only in the physical world but also in the digital platform, with the introduction of an ex-ante model of regulation, by empowering the Competition Commission of India to interface in the matters beforehand to prevent the occurrence of any anti-competitive practices. In addition to this, the Bill proposes that big techs be the “gatekeepers”, allowing healthy and safe competitive practices, and discouraging monopolies, and data breaches, by way of Associate Digital Enterprises, wherein the companies benefit from the collected data by major technology companies.
The Bill also points out the meaning of anti-competitive practices and the role of the Competition Commission of India, by empowering itself through the ex-ante model of regulation, regarding which the present law is silent. Some of the anti-competitive practices mentioned in the Bill are the core areas of dealing under the Act of 2002, such as exclusive tie-ups and deep discounting. These are vital elements of the Competition Act of 2002 under S. 3[4] and expressly provided under its preamble, ensuring healthy competition and growth in the market in India.
The need for the proposal of the Digital Competitive Bill of 2024, alongside the 2002 Act, is because of the rapid growth of technology and its advancements in this digital era. The Bill majorly focuses on the digital aspects of the business and preventing anti-competitive practices in the virtual world. It also encourages the Competition Commission of India to enhance its powers by intervening in cases beforehand and formulating rules for safe business in advance. This proactive approach infers the overcoming of the traditional competition laws. However, such an approach has been subjected to various criticisms and opposition by the big techs in the market, dispiriting the sole purpose of the Bill. Therefore, the Bill intends to provide a broader vision to the present 2002 Act for better and enhanced functioning of healthy and non-harmful competition practices both in the physical and virtual worlds!
[1] The Competition Act, 2002, No. 12, Acts of Parliament, 2002 (India).
[2] The Digital Markets Act, EUROPEAN COMMISSION (Oct. 17, 2024, 05:45 PM).
[3] Ministry of Corporate Affairs, Report of the Committee on Digital Competition Law, (Issued on February 27, 2024), https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open
[4] The Competition Act, 2002, § 3.
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