The Committee on Digital Competition Law (CDCL) came to the conclusion that there was a need to supplement the current ex-post framework under the Competition Act, 2002 with an ex-ante framework
Draft Digital Competition Bill (DCB) 2024
- Digital markets: Digital markets, also known as online markets, are commercial spaces where businesses and consumers interact through digital technologies.
- About: DCB seeks to regulate Systemically Significant Digital Enterprises (SSDE) and their Associate Digital Enterprises (ADEs) to prevent Anti-Competitive Practices (ACPs).
- Global Examples: DCB draws inspiration from the European Union’s Digital Markets Act (DMA), which was introduced to prevent anti-competitive practices by tech giants such as Google, Facebook, and Amazon.
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Key Provisions
- Ex-Ante Regulation: Empowers the Competition Commission of India (CCI) to intervene and prevent potential anti-competitive practices.
- Forward-Looking Regulation: The Digital Competition Bill introduces a forward-looking, preventive, and presumptive law (an ex-ante framework) that anticipates potential antitrust harms and establishes predefined no-go areas.
- For example, it sets clear rules to avoid conflicts in advance, similar to how GDPR regulates data privacy.
- Presently, India adheres to an ex-post antitrust framework under the Competition Act, 2002, which involves delays and disadvantages smaller competitors.
- Listing Core Digital Services: The bill enumerates “core digital services” under Schedule I, which includes:
- Online search engines
- Video-sharing platform services
- Online social networking services
- Interpersonal communications services
- Operating systems
- Web browsers
- Cloud services
- Advertising services
- Online intermediation services (such as web hosting, service providers, payment sites, etc.)
- Designation of Significant Entities: The digital competition bill suggests designating specific enterprises as Systemically Significant Digital Enterprises (SSDEs).
Systemically Significant Digital Enterprises (SSDEs):
- About: SSDEs are companies that offer “core digital services” in India and are identified based on various quantitative and qualitative criteria such as turnover, user base, market influence, etc.
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- The bill empowers the CCI to designate an enterprise as an SSDE based on its significant market presence in Core Digital Services (CDS).
- Obligations of SSDEs: SSDEs must report to the CCI regarding their Associate Digital Enterprises (ADEs) directly or indirectly involved in providing Core Digital Services (CDS). Additionally, SSDEs are prohibited from:
- Favoring their products/services
- Using non-public data of business users on their CDS
- Restricting end users’ ability to download, install, operate, or use third-party applications
- Coverage : The CCI is empowered to initiate an inquiry against such enterprises for non-compliance with this Act or the rules and regulations formulated under it.
- Recognition of Associate Digital Enterprises: Acknowledging the impact of data shared within a tech group that benefits other group companies, the Bill proposes to designate associate digital enterprises (ADEs).
- If an entity within a group is classified as an associate entity, they would bear similar obligations as SSDEs, contingent upon their involvement with the core digital service provided by the principal company.
Reasons for an Ex-Ante Digital Competition Law
- Lengthy process of ex-post measures: Ex-post measures include stages like the Competition Commission of India (CCI) forming a prima facie view, investigations conducted by the Director General, and the final order being issued, all of which are time-consuming.
- Lengthy Adjudication of Competition Cases: Some cases involving anti-competitive practices by digital enterprises before the CCI have taken more than four years to be resolved.
- For example, the CCI adjudicated on a complaint of abuse of dominant position filed in 2012, with a final resolution still pending after 11 years and currently under review by the appellate tribunal.
- Therefore, parties would endure irreparable harm by the time ex-post measures are ordered to address anti-competitive practices.
- Efficiency: In this context, it is believed that the ex-ante framework will be more effective in preventing anti-competitive behavior by large digital enterprises that wield substantial influence in the Indian digital market.
- Market Tipping Challenges: The current framework may struggle to effectively address the permanent dominance of large digital enterprises in markets, known as market tipping.
- Big Tech practices: Common practices among big tech giants include the collection of user data and self-preferencing, where platforms prioritize their own services.
- Promoting Innovation and New Entrants: The current structure of the digital market overly favors big tech, dissuading potential new competitors. The DCB aims to diminish these obstacles, fostering innovation and enhancing marketplace diversity.
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Difference between ex-post law and ex-ante law:
- Ex-Post Law: An ex-post law is reactive, addressing violations or wrongs after they have occurred. For example, the Competition Commission Act, 2002.
- Ex-Ante law: An ex-ante law prevents issues by identifying them beforehand and applying regulatory intervention before they occur, as seen in the Draft Digital Competition Bill.
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July 10, 2024
