10th July 2024 (9 Topics)
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Draft Digital Competition Bill, 2024
Context
In February 2023, the Ministry of Corporate Affairs formed the Committee on Digital Competition Law (CDCL) to explore the need for specific legislation on competition in digital markets. The CDCL recommended supplementing the current Competition Act, 2002 (which focuses on penalizing anti-competitive behavior after it occurs) with a proactive, preventative framework known as an "ex-ante" regulation.
Need of the Bill
- The draft bill aims to address the concerns against anti-competitive practices by Big Tech in digital markets. Over the years, Indian internet companies, as well others globally, have been fighting the alleged monopoly imposed by major US players like Google and Apple.
- Among the significant problems noticed in digital markets were preferential pricing, deep discounting, anti-steering, bundling and tying, accumulation of big data and its usage, network effects, exclusive tie-ups, search and rank preferencing, restricting third-party applications, advertising policies, etc.
- The ex-ante provisions in the draft bill aim to prevent anti-competitive behaviour before it harms the market.
Key-highlights of the Draft Digital Competition Bill:
- The draft Bill, inspired by the EU's Digital Markets Act, targets dominant digital enterprises rather than all digital businesses.
- It identifies specific "core digital services" and sets criteria (such as financial strength and user base) to determine dominance.
- The Bill proposes that for certain “core digital services” like search engines, and social media sites, the Competition Commission of India (CCI) should designate companies as “Systematically Significant Digital Enterprise (SSDE). SSDEs are obligated to operate fairly, transparently, and non-discriminatively.
- Prohibited practices include self-preferencing, restricting third-party applications, anti-steering measures, and leveraging user data unfairly.
- This framework empowers the Competition Commission of India (CCI) to monitor potential misconducts by major enterprises.
- What is an ex-ante framework?
- Unlike the current "ex-post" framework under the Competition Act, an ex-ante framework aims to prevent anti-competitive practices by digital enterprises before they occur.
- This approach is unusual globally, with the European Union being the only jurisdiction currently implementing a comprehensive ex-ante framework under the Digital Markets Act.
- Concerns: Concerns arise about the effectiveness of the ex-ante model, its potential negative impact on startup investments and scalability, and its implications for MSMEs.
Fact Box:
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