Headlines of the Day
India must be cautious with the ex-ante regulatory approach
Big-tech regulation has gathered steam across the globe and India is no exception. While issues around data privacy and intermediary liability have long been a point of contention in this debate, active regulatory intervention in digital markets to ensure fairness, transparency, and competition has become a priority in India. The Competition Commission of India (CCI) has traditionally intervened in digital markets by initiating ex-post investigations under section 3 and 4 of the Competition Act, 2002. Nearly all big-tech players are currently under CCI investigation. For example, CCI is investigating allegation of abuse of dominance against Google, Meta and Apple. However, the focus on competition in digital markets is not limited to CCI’s ex-post jurisdiction.
In January 2020, the CCI published its key findings and observations from its 2019 market study on e-commerce in India, which highlighted anti-competitive concerns arising out of several industry-wide platform practices (e.g., parity clauses and deep discounting). This was followed by investigations against e-commerce players Flipkart and Amazon, food delivery platforms Swiggy and Zomato, as well as MakeMyTrip and OYO in the travel and hospitality sector. Although these investigations were initiated following complaints filed by the local trade associations, the allegations raised were similar to the concerns highlighted in the e-commerce report.
In July 2019, the Competition Law Review Committee also submitted its report to the government, recommending two specific amendments, which intended to address the regulatory gaps in respect of digital markets. First, the introduction of the “transaction value” threshold, under which M&A transactions valued more than INR 20 billion (USD 360 million) would qualify as notifiable transactions, provided transacting parties have substantial business operations in India. The new threshold intended to cover “killer acquisitions” and other IT transactions where, typically, the parties do not meet the asset and turnover thresholds currently prescribed under the Competition Act. Second, the inclusion of the words “other agreements” under section 3(4) of the Competition Act which would enable the CCI to investigate commercial arrangements in digital markets that may not be squarely covered by the specific categories of vertical agreements mentioned in section 3(4). In addition, the report also stated that the CCI had set up “a think tank comprising technologists, economists and lawyers to deliberate on the issues that arise in new-age markets”.
Then, in October 2022, the former CCI chairperson, while speaking at an industry event, also stated that the CCI was in the process of setting up a “dedicated digital markets and data unit”. Subsequently, in December 2022, the Parliamentary Standing Committee on Finance submitted a report titled Anti-Competitive Practices by Big Tech Companies, which called for ex-ante regulation of digital markets. The report identified 10 anti-competitive practices in digital markets that needed to be addressed to ensure market efficiency and fair competitive conduct.
In this regard, the report recommends the introduction of a “Digital Competition Act”. The regulatory solution offered in the report bears many similarities to the EU’s Digital Markets Act (DMA), including: the identification/designation of systemically important digital intermediaries (SIDIs) in India; and the setting up of a specialised digital markets unit within the CCI to monitor the designation and conduct of these SIDIs. In light of these recommendations, the Ministry of Corporate Affairs has set up a Committee on Digital Competition Law to examine the need for an ex-ante regulatory mechanism for digital markets through separate legislation.
If there is consensus to usher in an ex-ante regime, the committee will have to assess and address: (1) the jurisdictional overlaps with sectoral regulators, and overlaps with existing legislation, policies and guidelines; (2) the distribution of regulatory costs between the industry and the government; (3) the use and collection of data, considering the Digital Personal Data Protection Bill is still under review; (4) the nature and scope of procedural safeguards and the redressal mechanism under the new legislation so as to avoid the procedural pitfalls of the ex-post regime; and (5) the potential adverse impact on innovation and foreign direct investment in the digital sector. The DMA is yet to come into effect and ex-ante digital regulation remains an untested regulatory approach. Therefore, India will have to be cautious while experimenting with the ex-ante regulatory approach to digital regulation.
The author Modhulika Bose is a counsel at P&A Law Offices, and it was first published in India Business Law Journal
You must be logged in to post a comment Login