Existing Rules In Competition Act, 2002 Are Enough To Address Digital Competition Worries, Says IAMAI

The Indian government on February 6 set up a Committee on Digital Competition Law (CDCL) to examine the need for a separate law on competition in digital markets.

The committee is expected to submit a report to the government including a draft Digital Competition Act (DCA) within 3 months.

What is on the committee’s to-do list?

The committee is tasked with exploring the following:

1. Are existing laws enough: Review whether the Competition Act, 2002, and the rules framed under it are sufficient to deal with challenges posed by the digital economy.
2. Do we need ex-ante regulations:Examine the need for a separate ex-ante regulation for digital markets. Ex-ante rules look at preemptively preventing large platforms from engaging in certain types of conduct that could result in reducing competition, as opposed to (the current) ex-post regulations, which go after companies by investigating allegations of misconduct after they have occurred. The European Union’s Digital Markets Act (DMA) and Digital Services Act (DSA) are examples of ex-ante regulation because they classify certain large companies as gatekeepers and prescribe measures to monitor and restrain their conduct.
3. What are other countries doing:Study the international best practices for regulating digital markets.
4. What are other options to promote competition: Study other regulatory regimes, institutional mechanisms, and government policies that can be used to promote competition in digital markets.
5. Role of gatekeepers: Study the practices of “leading players or Systemically Important Digital Intermediaries (SIDIs) which limit or have the potential to cause harm in digital markets.”
6. Any other competition matter connected to digital markets:“Any other matters related to competition in digital markets as may be considered relevant by the Committee.”

Why does this matter: The 21-year-old Competition Act, 2002, was enacted at a time when digital markets like e-commerce and social media were not that prominent. These new-age markets work in different ways compared to traditional markets, and existing antitrust laws might not be best suited to go after competition concerns in digital markes. For example, traditional competition laws might deem something as anti-competitive if it unfairly raises prices for consumers. If we go by this logic, Amazon’s alleged unfair and discriminatory treatment of sellers on the platform might go unchecked because consumers still get the best prices.

The Internet and Mobile Association of India (IAMAI) in its official submission to the Committee on Digital Competition Law (CDCL) flagged concerns over proposed ex-ante regulations for India’s digital market saying that the move may affect the growth potential of domestic startups.

According to IAMAI, size or scale-based applicability of regulations under an ex-ante digital competition policy will impact larger players in the market in their growth trajectory, while also limiting the growth potential of start-ups.

Ex-ante regulations aim to prescribe what businesses should do beforehand, based on anticipated changes or activity, whereas the norm is ex-post regulations where regulators lay out what is not to be done. IAMAI has submitted that ex-ante regulations in the digital competition bill will “burden India’s most promising sector and inhibit its ability to scale, innovate and attract investments.”

Several Indian startup founders have recently criticized IAMAI for allegedly promoting “pro-foreign” big tech views on government regulations and other contentious matters. The industry body aims to represent the digital services industry with over 500 Indian and multinational corporations as its members.

Currently, Sanjay Gupta, Google India’s Country Head & Vice President and Shivnath Thukral, Public Policy Director, India, WhatsApp Inc, Vice-Chairman lead the industry body as its chairperson and vice chairperson respectively. 

The CDCL was formed by the Ministry of corporate affairs in February 2023, after the parliamentary standing committee on Finance suggested tighter regulations for Systemically Important Digital Intermediaries (SIDIs). The move was aimed at preventing anti-competitive practices by dominant platforms – especially big techs – in the digital market with revenues, market capitalization and number of active users above a certain threshold.

“Regulations that kick in as soon as certain financial/size-based thresholds are met, will disincentivize Indian tech companies from scaling so as to avoid additional regulations. It is pertinent to note that ex-ante regulations may affect Indian companies even before they can achieve scale to compete globally or achieve profitability,” IAMAI said. It added that the provision may in turn reduce value creation and valuations.

The industry body also highlights issues with the previously enacted ex-ante regulations under the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969. “MRTP Act limited the growth and scaling up of Indian companies. Notably, as part of various economic reform measures, India consciously moved away from an ex-ante regime under the MRTP Act,” IAMAI said. 

IAMAI further said that its members appreciate that antitrust enforcement has a vital role to play in keeping markets competitive, but they believe the extant rules and regulations sufficiently address competition concerns arising from the digital sector while keeping the digital industry on a level playing field with other industries.

“The Competition Commission of India (CCI) has been promptly looking into various digital competition issues and has passed orders imposing penalties and requiring changes in the conduct of digital markets. Furthermore, the recent Competition (Amendment) Act, 2023 bolsters the existing regulatory framework for addressing competition issues in India,” the industry body said.

Source: Business Standard, Medianama