BL Explainer: What will change for the tech giants with digital competition law?

What was the remit of the Committee on Digital Competition Law (CDCL) formed last year?

The Centre appointed 16-member Committee on Digital Competition Law (CDCL) was tasked to review whether existing provisions in the Competition Act 2002 and the rules and regulations framed under it are sufficient to deal with the challenges that have emerged from the digital economy.

The Panel was also asked to examine the need for an ex-ante regulatory mechanism for digital markets through a separate legislation.

Why was CDCL asked to frame draft Bill/regulations to regulate big tech when CCI is already supervising the digital markets?

Since digital markets are dynamic in nature, timely intervention is necessary to prevent anti-competitive conduct. Given the pace at which such digital markets evolve, it was felt an ex-post regime may not be effective to remedy the irreversible tipping of markets in favour of large digital enterprises.

The current ex-post framework under the Competition Act 2002 was conceived with a view to ensuring contestability and fairness in traditional markets, at a time when it was not possible to imagine the current scale of digitalisation.

Under an ex-post framework, CCI intervenes only after the occurrence of an anti-competitive conduct. It was felt that certain aspects of the ex-post framework, including the time consuming nature of enforcement proceedings, may not be appropriate for digital markets.

Also in recent times there have been widespread stakeholder concerns about potential anti-competitive behaviour of large corporates providing digital services.

What are the key recommendations of CDCL?

The digital panel has recommended that existing ex-post framework under the Competition Act 2002 be supplemented to better address concerns related to alleged anti competitive practices of large digital enterprises. The Panel has recommended that ex-ante measures be introduced to complement the current ex-post framework.

Will the ex-ante framework be applicable for all players/service providers in digital market?

No. It is proposed to be applied only on large digital enterprises that have a “significant presence” in India in select “Core digital services”.

Certain identified enterprises — Systemically Significant Digital Enterprises (SSDEs) — that meet the threshold quantitative criteria as well as qualitative ones would be subjected to regulatory oversight and compliance.

So what is the basis for categorising an enterprise as SSDE?

The Digital Panel has recommended that an enterprise should be deemed as an SSDE when it fulfils any of the several thresholds of the ‘significant financial strength’ test along with fulfilling the end/business users’ thresholds under the ‘significant spread’ test. A dual test is deployed for the quantitative criteria.

What exactly are the quantitative threshold criteria for identifying a SSDE?

The draft Bill on Digital Competition law has said that an entity engaged in “core digital services” will be deemed as a SSDE if it has a turnover in India of at least ₹4,000 crore; or a global turnover of at least $30 billion; or gross merchandise value in India of at least ₹16,000 crore; or a global market capitalisation or fair market value of $75 billion; and if its core digital service had at least 1 crore end users or at least 10,000 business users in India in each of the preceding three financial years.

Why are some global MNCs (Big Tech) opposing these proposed ex ante regulations?

All the Big Tech and e-commerce biggies have given different reasons to the Digital Panel as to why they are not in favour of ex-ante regulation. Those opposed include Amazon, Apple, Google, Uber, Meta and Flipkart.

Some felt that existing ex-post regime in India is well equipped to effectively regulate digital markets in India.

It was also argued that ex-ante regulation, especially for e-commerce sector, may be untimely and excessive and may lead to over-regulation. There is risk of increased compliance costs and regulatory overlap. It was highlighted that ex-ante regulations in the EU remain largely untested. In Japan, broad ex-ante laws for the e-commerce sector are not being pursued.

Apple said that it was not in favour of a regulatory approach modelled after the European Commission’s Digital Markets Act was in favour of light touch regime which promotes innovation.

Google highlighted that there has been no global consensus on a regulatory approach to govern digital markets and favoured ex ante regulation except under certain conditions.

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