Draft Digital Competition Bill, 2024
Introduction
On March 12, the Ministry of Corporate Affairs (MCA) proposed the Bill to curb anti-competitive practices of tech giants through ex-ante regulation. The Draft Digital Competition Bill is to apply to ‘Core Digital Services,’ with the Central Government having the authority to update the list periodically. The proposed list in the Bill encompasses online search engines, online social networking services, video-sharing platforms, interpersonal communications services, operating systems, web browsers, cloud services, advertising services, and online intermediation services.
The primary highlight of the Digital Competition Law Report created by the Committee on Digital Competition Law presented to the Parliament in the 2nd week of March 2024 involves a recommendation to introduce new legislation called the ‘Digital Competition Act,’ intended to strike a balance between certainty and flexibility. The report identified ten anti-competitive practices relevant to digital enterprises in India. These are anti-steering, platform neutrality/self-preferencing, bundling and tying, data usage (use of non-public data), pricing/ deep discounting, exclusive tie-ups, search and ranking preferencing, restricting third-party applications and finally advertising Policies.
Key Take-Aways: Digital Competition Bill, 2024
- Qualitative and quantitative criteria for identifying Systematically Significant Digital Enterprises, if it meets any of the specified thresholds.
- Financial thresholds in each of the immediately preceding three financial years like turnover in India, global turnover, gross merchandise value in India, or global market capitalization.
- User thresholds in each of the immediately preceding 3 financial years in India like the core digital service provided by the enterprise has at least 1 crore end users, or it has at least 10,000 business users.
- The Commission may make the designation based on other factors such as the size and resources of an enterprise, number of business or end users, market structure and size, scale and scope of activities of an enterprise and any other relevant factor.
- A period of 90 days is provided to notify the CCI of qualification as an SSDE. Additionally, the enterprise must also notify the Commission of other enterprises within the group that are directly or indirectly involved in the provision of Core Digital Services, as Associate Digital Enterprises (ADE) and the qualification shall be for 3 years.
- It prescribes obligations for SSDEs and their ADEs upon designation. The enterprise must comply with certain obligations regarding Core Digital Services, and non-compliance with the same shall result in penalties. Enterprises must not directly or indirectly prevent or restrict business users or end users from raising any issue of non-compliance with the enterprise’s obligations under the Act.
- Avoidance of favouritism in product offerings by SSDE, its related parties, or third parties for the manufacture and sale of products or provision of services over those offered by third-party business users on the Core Digital Service in any manner.
- The Commission will be having the same powers as vested to a civil court under the Code of Civil Procedure, 1908 when trying a suit.
- Penalty for non-compliance without reasonable cause may extend to Rs 1 lakh for each day during which such non-compliance occurs (max. of Rs 10 crore). It may extend to 3 years or with a fine, which may extend to Rs 25 crore or with both. The Commission may also pass an order imposing a penalty on an enterprise (not exceeding 1% of the global turnover) in case it provides incorrect, incomplete, misleading information or fails to provide information.
Suggestions and Recommendations
- The ex-ante model of regulation needs to be examined for the Indian scenario and studies need to be conducted on it has worked previously in different jurisdictions like the EU.
- The Bill should be aimed at prioritising the fostering of fair competition by preventing monopolistic practices in digital markets exclusively. A clear distinction from the already existing Competition Act, 2002 in its functioning needs to be created so that there is no overlap in the regulations and double jeopardy is not created for enterprises.
- Restrictions on tying and bundling and data usage have been shown to negatively impact MSMEs that rely significantly on big tech to reduce operational costs and enhance customer outreach.
- Clear definitions of "dominant position" and "anti-competitive behaviour" are essential for effective enforcement in terms of digital competition need to be defined.
- Encouraging innovation while safeguarding consumer data privacy in consonance with the DPDP Act should be the aim. Promoting interoperability and transparency in algorithms can prevent discriminatory practices.
- Regular reviews and stakeholder consultations will ensure the law adapts to rapidly evolving technologies.
- Collaboration with global antitrust bodies which is aimed at enhancing cross-border regulatory coherence and effectiveness.
Conclusion
The need for a competition law that is focused exclusively on Digital Enterprises is the need of the hour and hence the Committee recommended enacting the Digital Competition Act to enable CCI to selectively regulate large digital enterprises. The proposed legislation should be restricted to regulate only those enterprises that have a significant presence and ability to influence the Indian digital market. The impact of the law needs to be restrictive to digital enterprises and it should not encroach upon matters not influenced by the digital arena. India's proposed Digital Competition Bill aims to promote competition and fairness in the digital market by addressing anti-competitive practices and dominant position abuses prevalent in the digital business space. The Ministry of Corporate Affairs has received 41-page public feedback on the draft which is expected to be tabled next year in front of the Parliament.
References
- https://www.medianama.com/wp-content/uploads/2024/03/DRAFT-DIGITAL-COMPETITION-BILL-2024.pdf
- https://prsindia.org/files/policy/policy_committee_reports/Report_Summary-Digital_Competition_Law.pdf
- https://economictimes.indiatimes.com/tech/startups/meity-meets-india-inc-to-hear-out-digital-competition-law-concerns/articleshow/111091837.cms?from=mdr
- https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open
- https://www.barandbench.com/law-firms/view-point/digital-competition-laws-beginning-of-a-new-era
- https://www.linkedin.com/pulse/policy-explainer-digital-competition-bill-nimisha-srivastava-lhltc/
- https://www.lexology.com/library/detail.aspx?g=5722a078-1839-4ece-aec9-49336ff53b6c