Self-regulation and agility in the law must be encouraged to adopt best practices to enable companies in the evolving digital markets
The antitrust battleground for big tech is expanding beyond the US and Europe. With multi-million dollar fines and business changing directions imposed by the Competition Commission of India (CCI) on Google and MakeMyTrip, India is set to take centre stage and play a decisive role in determining the course of the Tech Industry. In so doing, the CCI has acknowledged the unique challenges of the digital markets and implemented legal principles that go beyond traditional competition frameworks. India's existing competition law framework, the Competition Act, 2002 (as amended), operates on an 'ex-post' basis, meaning that it only takes action against companies after they have engaged in anti-competitive practices, potentially after the damage has already occurred. With the growing prominence of digital markets in India, doubts have arisen regarding whether such measures lead to effective regulation, prompt market corrections, and the welfare of consumers, all of which are crucial objectives of a robust competition law system. This led to the Parliamentary Standing Committee on Finance (Committee) presenting its Report on ‘Anti-competitive Practices by Big Tech Companies’ (Report) in December 2022. The Report, among other things, recommended the introduction of an ex-ante regime through a new ‘Digital Competition Act’ (DCA), in line with the European Union's Digital Markets Act (DMA), to ensure a “fair, transparent and contestable digital ecosystem” in-sync with the country’s evolving start-up ecosystem and global policies.
The objective of the DCA would be to: (a) identify ‘market winners’ or ‘Systemically Important Digital Intermediaries’ (SIDIs) based on metrics such as revenue, market capitalization, and the number of active businesses and end-users; (b) impose ex-ante obligations on them to deter self-preferencing, deep discounting, anti-steering, exclusive tie-ups, and bundling and tying of services; and (c) allow for scrutiny of their potential mergers and acquisitions, and regulation of their internal advertising, data, and search policies.
Following the recommendations from the Committee, the Government has set up a Committee on Digital Competition Law (CDCL) to examine the need for a separate law on competition in digital markets. The industry is anticipating a significant impact from the forthcoming report. Apart from this, with the Ministry of Electronics and Information Technology (MeitY) coming up with a Digital India Bill and CDCL working on the digital competition law, concerns arose within the industry about potential regulatory redundancies leading to adverse effects on stakeholders. To elevate the concern and to offer greater transparency to stakeholders regarding oversight and control, a consensus was reached between the ministries that the MCA would handle matters related to competition within the digital market, while MeitY would tackle sector-specific and technical concerns.
Critics of the DCA raise valid concerns about its potential implications on innovation and investment in India. The core of their opposition lies in scepticism toward ex-ante regulations, as they argue that the existing competition law adequately addresses competition-related issues in the digital ecosystem, citing CCI’s decision against Google and MakeMytrip. A receptive public consultation process on the proposed law is advisable. Further, self-regulation must be encouraged in tandem with infusing agility in the law to adopt global best practices that enable companies to navigate through the evolving trends in digital markets effectively.
(Sidharrth Shankar is an M&A partner and Vaibhav Chouksi is Partner and Head of Practice - Competition Law at JSA – Advocates & Solicitors. Views expressed are personal)
