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No rush for Digital Competition Act, let EU’s DMA play out

Industry experts worry about potential unintended consequences of the Digital Competition Bill, which could hinder efficiency, innovation, and user experience.

Indian policymakers do not need to rush through this legislation. The proposed Digital Competition Bill has heavily borrowed from the DMA. We can observe what’s happening with EU’s DMA, which came into force in March. Particularly when there is existing legislation where the Competition Commission of India can continue to pursue any anti-competitive conduct that it observes in the market.

The draft bill, which seeks to prevent anti-competitive behaviour, proposes prohibiting the intermixing and cross-use of personal or business user data across different products or services without user consent.

Google and other search engines might also have to stop surfacing sponsored links to products and services in its search results, as the bill proposes prohibiting what’s called ‘self-preferencing’.

This is broadly defined as giving preference to a digital platform’s own products or service, to those of related parties, or to third parties with whom it has an arrangement, an industry executive said on condition of anonymity.

“The idea of the digital competition law is to ensure competitiveness in digital markets, which will ultimately benefit users and consumers. However, many of the big tech companies and Indian digital entities are concerned that in the pursuit of ensuring competitiveness in the market, the law should not lose sight of the end goal, i.e., better products and services,” said Pranjal Prateek, partner at law firm Khaitan & Co.

“Some of the widely worded prohibitions under the draft bill could potentially diminish user experience and product usefulness.”

Google and the ministry of corporate affairs, which introduced the draft bill in March, did not reply to emails sent on Wednesday.

Good intentions, unintended consequences
Users unwilling to allow Google to use their personal or business data might find their experience on the tech giant’s platforms highly diminished, said one of the industry experts mentioned earlier.

Finding an address on Google Search and hopping to the location on Google Maps could involve multiple steps if the proposed legislation takes effect in its current form. A user would have to copy the address from the results page and paste it on Google Maps for the route, explained a technology expert.

The proposed digital competition bill has good intentions and seeks to protect competition in the market, preventing network effects and entry barriers that reinforce the incumbent player.

Network effect allows a product or service—a search engine, an e-commerce platform, or a digital navigation tool—to gradually become more accurate and predictable as more users engage with it, attracting even more users to it. This, however, could potentially shift the market dynamics in its favour.

Industry experts worry about potential unintended consequences of the digital competition bill, which could hinder efficiency, innovation, and user experience.

Consent fatigue
According to Navneet Sharma, director general of CUTS Institute for Regulation and Competition, a nonprofit research body, digital platforms seeking user consent for different individual services within their ecosystem—say, an online travel company seeking consent separately for booking air tickets, hotels and cabs—will lead to consent fatigue.

“Besides, the proposed ex-ante (forward-looking) regulations are a double-edged sword, which would apply to not only multinational big tech firms but also to Indian digital economy firms, which are showing tremendous promise now,” Sharma said.

Regulations entail a cost and should be adopted only if market solutions do not address market problems, he said, adding that India does not face compulsions for “ex-ante” competition regulation such as that introduced by the European Union.

The European influence
In Europe, Google had to implement at least 20 changes to its search results, including in the areas of shopping and flight and hotel bookings, after the EU’s Digital Markets Act (DMA) came into force in March. It also had to introduce consent banners for linking different Google products.

Google also removed some features from its results page that were meant to help consumers find businesses, such as the Google Flights unit, an online flight booking search service.

India’s proposed digital competition bill has heavily borrowed from the DMA.

Google also had to make other changes to its search results in Europe, having the effect of sending more traffic to large intermediaries and aggregators, and less traffic to direct suppliers such as hotels, airlines, merchants and restaurants, Google said in its blog.

FIRST India (Forum for Internet, Retailers, Sellers and Traders), a division of India SME Forum, and the US India Partnership forum, an independent body, have written to Indian authorities expressing their concerns about the draft bill. Mint has seen copies of their representations.

The technology expert mentioned earlier said the changes to Google Search in Europe have had “a chilling effect” on business users who rely on the search results for internet traffic to their business.

“This really highlights that there isn’t any need for Indian policymakers to rush through this legislation,” said this expert.

“They have the opportunity to observe what’s happening with the DMA, which came into force in March, and give that some time, particularly when there is existing legislation in place where the Competition Commission of India can continue to pursue any anti-competitive conduct that it observes in the market.” Livemint

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