Key Provisions of India’s Digital Competition Bill, 2024
Kartavya Desk Staff
#### GS Paper 2
Syllabus: Government Policies and Interventions
Source: IE
Context: India’s proposed Digital Competition Bill, 2024, draws inspiration from European regulations to address concerns regarding big tech companies like Google, Facebook, and Amazon
What is Digital Competition?
Digital competition refers to the competitive landscape within the digital sector, encompassing industries such as technology, internet services, e-commerce, and digital platforms. It involves the rivalry among companies offering digital products, services, or platforms, as well as the dynamics of market entry, innovation, pricing, and consumer choice within these sectors.
What is Digital Competition Bill (DCB) 2024?
The Digital Competition Bill (DCB) is a proposed bill which aims to regulate Systemically Significant Digital Enterprises (SSDE) and their Associate Digital Enterprises (ADEs) to prevent Anti-Competitive Practices (ACPs). It draws inspiration from the Digital Markets Act (DMA) of the European Union, which was introduced to address ACPs of tech giants such as Google, Facebook, and Amazon. The Ministry of Corporate Affairs (MCA) is handling the draft.
Need for the Digital Competition Bill (DCB) arises from several factors:
• Ineffectiveness of Current Framework: The existing ex-post framework under the Competition Act, 2002, lacks the ability to promptly address anti-competitive behaviour by digital enterprises.
• Market dominance Concerns: The current framework may not adequately tackle the dominance of markets in favor of large digital enterprises, leading to their permanent dominance.
• Arbitrary Pricing:Big Tech’s influence on pricing rules in the digital space, leads to concerns about fairness and competition.
• Anti-Competitive Practices: Big tech giants have been observed engaging in practices such as data collection and self-preferencing (which can stifle competition and innovation) and Google’s tweaking of its Android ecosystem to favour itself.
• Ensuring Orderly Expansion: DCB aims to support the orderly expansion of the digital ecosystem by promoting fair competition and preventing monopolistic tendencies.
• Remove barriers for new players: The dominance of a few companies creates barriers for new entrants, limiting innovation within the sector.
Key provision of the DCB Bill:
Provisions | Description
Ex-Ante Regulation | The bill proposes a preventive (ex ante) approach instead of the current post-incident (ex post) regulation. It aims to anticipate and prevent potential anti-competitive practices. It allows the Competition Commission of India (CCI) to intervene preemptively
Core Digital Services (CDS) | The list of core digital services (susceptible to market concentration) has been mentioned under Schedule I of the bill.
It covers various digital services like search engines, social networks, video-sharing platforms, communication services, operating systems, web browsers, cloud services, advertising platforms, and online marketplaces.
SSDE (Systematically Significant Digital Enterprises) | The Bill proposes to designate certain enterprises as SSDEs. CCI designates SSDEs based on quantitative (turnover, market cap) and qualitative (user base) parameters
SSDEs are those enterprises that provide core digital services in India and have a significant presence and significant financial strength in the country.
Parameters to determine whether the enterprise may be designated as SSDE | To determine SSDE designation, the Bill proposes financial strength and spread tests.
Qualifying parameters include India turnover, global turnover, gross merchandise value, and market capitalization.
Additionally, a core digital service must have at least 1 crore end users or 10,000 business users. Entities falling short may still be designated based on their significant presence in a core digital service.
Obligations of SSDEs | SSDEs are barred from self-preferencing, anti-steering, and limiting third-party apps. Violations could lead to fines of up to 10% of their global turnover.
Coverage of Enterprises Outside India | CCI is empowered to inquire into non-compliant enterprises.
Associate Digital Enterprises (ADEs) | Entities benefiting from data shared by major tech groups. They are subject to the same obligations as SSDEs.
Issues with the Bill:
• Compliance Burden: Big tech firms argue that strict regulations may shift focus from innovation to compliance, citing the EU’s DMA increasing search time on Google by 4,000%.
• Broad Definitions: Concerns exist about overbroad criteria for designating significant platforms, with India’s law leaving decisions to the CCI’s discretion.
• Impact on Smaller Businesses: Changes and reduced data sharing could negatively affect smaller businesses reliant on tech giants’ services.
• Potential Arbitrary Decisions: CCI discretion could lead to arbitrary rulings, affecting startups and smaller firms.
Regulation of tech companies in other countries:
Country | Mechanism | Description
Europe | Digital Markets Act (DMA) and Digital Services Act (DSA) | The Digital Markets Act (DMA) aims to ban harmful business practices by large digital players, creating a fairer and more competitive economic space. The Digital Services Act (DSA) targets various online services, including websites, internet infrastructure services, and online platforms.
USA | Anti-trust legislation | The United States has adopted anti-trust legislation to address the dominance of Big Tech companies. These measures include giving states greater power in competition cases and increasing funding for federal regulators.
Australia | Competition watchdog recommendations | The competition watchdog in Australia has recommended tighter regulations for Facebook and Google to improve media competition.
Additionally, the Online Safety Act grants the power to force social media companies to delete posts constituting online bullying and imposes fines on companies and hosts involved in the alleged abuse.
The Standing Committee on Finance submitted its report on ‘Anti-Competitive Practices by Big Tech Companies’ in December 2022.
Key observations and recommendations include:
• Regulating Digital Markets: Evaluate competitive behaviour in digital markets before monopolization occurs, suggesting the identification of Systemically Important Digital Intermediaries (SIDIs) and yearly reporting to the Competition Commission of India (CCI).
• Digital Competition Act: Introduce legislation to ensure a fair digital ecosystem.
• Self-Preferencing: SIDIs must not favour their own services over competitors’ on their platforms.
• Data Usage: SIDIs should handle user data responsibly, avoiding merging data from core services without consent and restricting data access to third-party services.
• Revamping CCI: Strengthen the CCI with a specialized digital markets unit to monitor SIDIs and address anti-competitive behaviour.
• Third-Party Applications: SIDIs should allow and technically enable the use of third-party applications without transferring data to foreign governments.
• Bundling and Tying: SIDIs should not force users to subscribe to additional services to use their core platform.
• Anti-Steering: SIDIs should not restrict business users from steering customers to offers outside the platform.
To read more about regulatin of Big Tech firms: Click Here (Regulating Big Tech Companies in India and the world)
Conclusion
Collaborative efforts can help address the challenges posed by emerging technologies, promote ethical and responsible technology use, and ensure a globally inclusive and sustainable digital future.
Insta Link:
RBI to regulate bigtech and fintech
Mains Link:
There is growing support for regulating big tech companies such as Facebook and Google. Discuss the reasons. (15M)
Prelims Link:
With reference to ‘consumers’ rights/privileges under the provisions of law in India, which of the following statements is/are correct? (UPSC 2012)
• Consumers are empowered to take samples for food testing.
• When a consumer files a complaint in any consumer forum, no fee is required to be paid.
• In case of death of consumer, his/her legal heir can file a complaint in the consumer forum on his/her behalf.
Select the correct answer using the codes given below:
(a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3
Ans: C