Govt-appointed panel proposes bill to curb anti-competitive practices by tech giants
After the Committee on Digital Competition Law submitted its comprehensive report and a draft legislation, the ministry of corporate affairs sought public comments on the same until April 15
New Delhi: The Committee on Digital Competition Law, constituted by the Union ministry of corporate affairs, has proposed a legislation to curb anti-competitive business practices used by tech giants such as Amazon, Google and Facebook. After the panel submitted its comprehensive report and a draft legislation on Tuesday night, the ministry sought public comments on the same until April 15.
In the draft bill, the committee proposed that for certain “core digital services” such as search engines, web browsers and social networking sites, the Competition Commission of India (CCI) should designate companies as “Systematically Significant Digital Enterprise (SSDE)” depending on either quantitative or qualitative factors such as turnover, size, user base, and market power.
The designated SSDEs will be prohibited from engaging in practices such as self-preferencing, anti-steering, and restricting third party applications, among others, for the identified services and if they do, they can attract a penalty of up to 10% of their global turnover.
The panel recommendations come amidst greater scrutiny of business practices of tech giants in India and abroad. Few days ago, Google and a clutch of Indian app developers had a public spat over what the latter called were anticompetitive practices used by Google on its Google Play Store.
The DCL panel was born out of a recommendation by the Parliamentary Committee on Finance led by Bharatiya Janata Party (BJP) lawmaker Jayant Sinha that recommended that competitive behaviour of internet based/digital companies needs to be assessed before the markets are monopolised by a handful of players. This is called ex-ante regulation where the law defines what conduct is illegal versus the regulator adjudicating whether certain acts are illegal after they have been committed (ex-post regulation).
Following the recommendations of the parliamentary panel, the ministry of corporate affairs constituted the CDL committee in February last year, headed by corporate affairs secretary Dr Manoj Govil, which was tasked with examining the need for an ex-ante regulatory mechanism for digital markets through a separate legislation, and to submit a draft Digital Competition Bill within three months.
At least three people aware of the committee proceedings told HT that many members felt that a separate competition law is not required for digital economy but were constrained by the remit of the committee’s constitution that mandated a bill. HT has learnt that within the first few months of the committee’s constitution, all members decided that a separate ex-ante regulatory regime was indeed required.
In the report, the CDL panel mentioned the Digital India Act, “a legislation which is purported to be the successor to the Information Technology Act, 2000”. “The Committee observed that since the draft of the proposed legislation is currently unavailable, the exact contours of its applicability cannot be delineated yet,” the report said.
In his two presentations on the principles of the DIA in March and May 2023, minister of state for electronics and information technology Rajeev Chandrasekhar had said that an open internet should have “fair trade practices” that prevent “concentration of market power and gatekeeping”, amongst other things, but gave no details of how that would be done through the DIA.
Vidhi Centre for Legal Policy assisted the MCA in drafting the final version of the bill.
To designate a company as an SSDE, the bill proposes a self-reporting regime wherein an entity engaged in “core digital services” will be deemed as an SSDE if it has a turnover in India of at least ₹4,000 crore, or a global turnover of at least US$30 billion, or gross merchandise value in India of at least ₹16,000 crore, or a global market capitalisation or fair market value of US$75 billion; and if its core digital service had at least 10 million end users or at least 10,000 business users in India in each of the preceding three financial years. If the entity fails to report this to the CCI, it can attract a penalty of up to 1% of its global turnover.
The Union government, in consultation with the CCI, must reassess these thresholds every three years from the date of the commencement of the act, the bill proposes.
Even if these quantitative thresholds are not met, the CCI can designate an enterprise as an SSDE if it thinks that the company has a “significant presence” with respect to a CDS along multiple factors which include the company’s size and resources, volume and commerce, number of end or business users, economic power, monopoly position, network effects and data driven advantages, market structure and size of the market, etc.
The bill proposes that the CCI can impose different set of regulations for different CDS, and different obligations for different SSDEs depending on the nature of the market, number of users in India, and any other factors that the CCI deems fit. It can also specify different regulations to the group entities of the SSDEs that offer CDS, designated as “Associate Digital Enterprises”.
The SSDEs and ADEs are forbidden from engaging in any behaviour (such as dividing up their business, etc.) that will allow them to escape the regulations. Amongst other obligations, they are forbidden from using any non-public data of their business users (Amazon was accused of this in the US), or cross use personal data of end users collected from different CDS (WhatsApp was accused of doing this through its 2016 and 2021 privacy policies). SSDEs must also allow users to access third-party applications, and change default settings.
The bill empowers the Centre to exempt enterprises from any provisions or rules or regulations for three reasons: state security or public interest; India’s obligations under bilateral or global treaties; or if the enterprise performs a sovereign function on behalf of the central or state government.
The Jayant Sinha-led committee had listed nine anti-competitive practices in digital markets but the MCA committee opined that only nine of them were relevant to the report on digital competition. “[A]nti-competitive mergers and acquisitions do not need to be dealt with extensively in this Report since the Competition (Amendment) Act, 2023 sufficiently addressed the same by introducing a deal value threshold for notification of transactions to the CCI,” the report said.
