Introduction Of A Digital Competition Act With Ex-Ante Measures: Key Features Of DCB

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S.S. Rana & Co. Advocates

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In an era which is dominated by digital innovation and technological advancement, the dynamics of competition in the market place have undergone huge transformation.
India Antitrust/Competition Law
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In an era which is dominated by digital innovation and technological advancement, the dynamics of competition in the market place have undergone huge transformation. As digital platforms continue to shape our economy and society, concerns over unfair practices, competition, and consumer protection have come to the forefront. In response to these challenges the Ministry of Corporate Affairs, established a Committee on Digital Competition Law. The committee has proposed the new digital competition law1 and prescribed ex-ante regulations to pre-emptively regulate potential abuse of dominance and other antitrust issues involving large digital companies.2 It showcases a radical change in the government's approach to govern the digital economy. Unlike the traditional competition law, which primarily relies on ex post framework (approach of punishing behavior after the act) to address the anti-competitive steps after it has taken place, ex-ante measures (proactive step; one that step clear rules of the road upfront) seeks to preemptively tackle potential anti-competitive conduct. This article delves into the key features of the new proposed Digital Competition Bill, 2024.

Key Features of the Digital Competition Bill:

1. Classification of Digital Enterprises: As per the proposed bill, the Competition Commission of India (CCI) shall designate enterprises which have significant presence in "Core Digital Services" (CDS) as "Systemically Significant Digital Enterprises" (SSDEs).

However, there may be cases where various companies within a group are providing CDS, in such a scenario, the committee recommended the following scenario for determination of SSDE's:3

  • In the first scenario, the main enterprise will be designated as SSDE, while the other enterprises providing similar services within the group will be designated as Associate Digital Enterprises (ADEs),
  • In the second scenario, a different company within the group involved in providing these services is designated as SSDE. Its holding company and other entities within the group should be designated as ADEs.

2. Illustration: Let's assume a company called ABC Ltd., which owns 2 more companies which are providing CDS (i.e.) ABC Digital Services and ABC Connect, each offering various digital services.

  • First Scenario:
  • In this scenario, the main company, ABC Ltd., is primarily engaged in providing CDS. Therefore, it would be designated as the SSDE. The other enterprises within the group (i.e.) ABC Digital Services and ABC Connect, which provide similar digital services will be designated as ADEs.
  • Second Scenario:
  • Alternatively, if the ABC Digital Services is identified as the primary entity providing CDS within the group, then it would be designated as SSDE. In this case, the holding company, ABC Ltd. and ABC Connect will be designated as ADEs.

These illustrations shows how the proposed framework can be applied to designate SSDEs and ADEs within a group of companies based on their role in providing CDS, ensuring that the obligations and designations are appropriately assigned.

3. No self-preferencing: A SSDE is prohibited from self-preferencing either directly, or indirectly, towards its own product or services, those of its affiliated entities, or those of third parties with whom it has agreements for manufacturing and selling products or providing services, over the products and services offered by third party business users on its platform.

4. No restriction on third-party applications: A SSDE is not permitted to hinder or obstruct its users' capability to download, install or operate third party applications or other software on its platform. Additionally, it must enable users to freely choose, configure and modify default settings.

5. No anti-steering: A SSDE must not limit business users from communicating or advertising offers to their end users, or directing them to their own or third-party services, unless such restrictions are integral for providing the SSDE's Core Digital Service. The CCI will define what qualifies as "integral" to the SSDE.

6. No tying and bundling: A SSDE must not compel or offer incentives for business users or end users to utilize any of the SSDE's additional products or services, those of its affiliates, or those of third parties with whom the SSDE has agreements, unless the use of such products or services is integral for delivering the CDS. The CCI will define what qualifies as "integral" to the SSDE.

7. No use of non-public data: A SSDE must refrain from using or depending on non-public data from business users operating on its platform to compete with them.

8. No cross use of public data: A SSDE cannot mix or share personal data of end users or business users collected from various SSDE services without their consent or allow third party access to such data.

9. Data portability: A SSDE must enable the business users and end users on its platform to easily port their data, in a format and manner as may be specified.

10. Penalty for violating the Act: The CCI can levy a penalty for non-compliance of the act, which can be extended up to 10% of the enterprise's global turnover from the previous financial year. For certain violations such as failure to self-report SSDE status, not submitting compliance reports, or providing inaccurate information during an inquiry, fines may be up to 1% of the enterprise's global turnover.

Key Considerations

  1. Balancing Innovation and Regulation: Ex-ante rules should not stifle innovation or unduly burden smaller players.
  2. Defining Criteria: The criteria for designating companies for ex-ante regulation needs to be clear, objective and adaptable to a dynamic digital landscape.
  3. Global Coordination: Since digital platforms operate across borders, effective enforcement requires international co-operation.

Conclusion

In conclusion, the Digital Competition Bill is a crucial step towards regulating the digital economy, addressing concerns of unfair competition and practices and consumer protection. By shifting the focus from reacting to anti-competitive behavior to proactively preventing it, the legislations has the potential to create a more dynamic and equitable digital ecosystem. By preventing unfair practices like self-preferencing and data discrimination, the bills fosters a level playing field where smaller businesses can compete on merit and innovation can flourish. Having said that, undoubtedly striking the balance between promoting innovation and preventing harmful practices will be crucial. It is evident that overall, the digital competition bill aims to foster a competitive and fair digital marketplace, promoting innovation, protecting the consumer's interest and ensuing a fair playing field for all the businesses. As the digital landscape continues to evolve, the ability to adapt and refine this framework will be essential to ensure a fair and thriving digital future.

Ritvik Kashyap, Intern at S.S. Rana & Co. has assisted in the research of this article.

Footnotes

1. See Annexure IV – https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open

2. https://economictimes.indiatimes.com/tech/technology/ettech-explainer-what-the-proposed-digital-competition-law-looks-to-regulate/articleshow/108466099.cms

3. https://economictimes.indiatimes.com/tech/technology/ettech-explainer-what-the-proposed-digital-competition-law-looks-to-regulate/articleshow/108466099.cms

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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