The first draft of the Digital Competition law is expected to be ready soon
Competition and anti-trust issues in India, including those in the digital market, are primarily governed by the Competition Act, 2002 (“Competition Act”). With the aim to regulate competition related issues specific to the digital market in a better and efficient manner, the Parliamentary Standing Committee on Finance (“Committee”) was entrusted to prepare and submit a report on the competition issues pertaining to the digital market. The Committee prepared the ‘Report on Anti-competitive Practices by Big Tech Companies’ (“Report”) and submitted it on 22nd December 2022 to both the lower and upper houses of the Parliament of India highlighting the need of a law specifically governing competition and anti-trust issues in the digital market.
Based on the issues identified in the Report and the existing and proposed enactments of the European Union and other jurisdictions, the first draft of the Bill on Digital Competition (“Bill”) is being prepared by the Government of India. The Bill, inter-alia, is expected to address the following major competition issues, amongst others:
- Systemically Important Digital Intermediaries (SIDls)/Digital Gatekeepers: SIDIs/ digital Gatekeepers are entities in the digital businesses that hold such a position in the market that they may impact the entry of new players, and hinder the growth of existing smaller players. The Bill would likely prescribe factors such as revenue, market capitalization, number of end users, etc. for the purposes of identification of leading digital businesses as ‘SIDIs’ or ‘Digital Gatekeepers’ that may adversely affect competition in the digital market;
- Ex-ante: Digital businesses tend to grow rapidly in a very short period of time. Big digital businesses emerge as winners and Digital Gatekeepers before anti-competitive behavior can be adjudicated and relevant policies can be formulated. The Bill would therefore make provisions for ex-ante evaluation instead of the ex-post evaluation;
- Anti-steering measures: The Bill may contain provisions to avert SIDI platforms from preventing the business users from ‘steering’ or migrating to alternate platforms offering cheaper or otherwise better and attractive terms;
- Platform neutrality: Provisions are expected to be incorporated in the Bill that will prevent SIDI platforms to advantage their own products and services over that of their competitors thereby preventing self-preferencing and assuring platform neutrality;
- Bundling and Tying: Bundling and Tying related provisions are expected to be incorporated in the Bill whereby SIDI platforms will not be allowed to force the end user to sign up for additional / tie-in services as a condition for being able to access and sign up for platform’s core services;
- User Data: The Bill is expected make provisions for fairplay and level playing field to new entrants in the digital business by regulating processing, combining, cross-using of user data by SIDIs who have a huge database of user data;
- Mergers and Acquisitions: The Indian Parliament had recently enacted the Competition (Amendment) Act, 2023, inter-alia, to amend the Competition Act to introduce a new deal value based thresholds aimed to catch mergers and acquisition especially those in digital market which may not necessarily have high turnovers or assets but are valued for their databases and innovations. It is expected that the Bill may further provide for reporting obligations on SIDIs before they acquire or merges with another digital business;
- Exclusive Tie-ups: With a view to promoting fair market conditions, provisions may be incorporated in the Bill which would enable business users to offer their products which are listed on SIDI platforms through their own platform or a third-party platform and at a different price and different terms and conditions than those on the SIDI platforms;
- Search and ranking preferences: Provisions may be introduced in the Bill to promote unbiased search results. At present most of the searches show and prioritise ranking based on sponsorship or orders fulfilled by the platform itself.
- Third party applications: Provisions requiring SIDIs to allow installation and use of third party software applications on their platform and to allow end user to choose the default software application may be introduced in the Bill.
- Advertising related services: It is expected that the Bill may require SIDIs and other digital platforms to provide access to the performance measuring tools and data necessary for advertisers to carry out independent verification of advertisement related data.
The first draft of the bill is expected to be completed soon and put up for public comments and it remains to be seen how the Bill would address the competition issues in the digital market and how it would strengthen the regulator for the task.
By: Competition Team at Chitale & Chitale Partners
For any queries, contact suchitra@chitales.com
