India’s digital economy and the draft Digital Competition bill: Some global questions loom large

India's Draft Digital Competition Bill 2024 (DCB) proposes to identify systemically significant digital enterprises and their associate digital enterprises, and to regulate their practices in relation to their core digital services. Its stated objectives are “to foster innovation, promote competition, protect the interest of users”. It is still in the making, yet to go to Parliament.

Its key features, scope and coverage is as follows:

1.    Definition and Scope:

Services covered: Virtually all forms of digital services including search engines, online social networking services, video-sharing platform services, interpersonal communication services, operating systems, web browsers, cloud services, and advertising services. Additionally, also  “online intermediation services” which is defined broadly as any other digital service, not expressly covered above.

Entities covered: Entities which meet the “financial strength test” (eg. Indian Turnover of more than Rs 4000 crore) and “spread test” (eg. 10 million end users in India) and their respective group companies involved in core digital services in India. 

2.    Obligations:

•     An obligation to be fair and transparent
•     Prohibition on self-preferencing
•     Prohibition on restricting third-party apps
•     Prohibition on anti-steering
•     Prohibition on tying and bundling including incentivizing bundled deals

3.    Data Governance and Privacy provisions:

•     Restrictions of data usage (eg. Prohibition of data intermixing across different core digital services). 
•     A broad obligation to allow data portability.
•     This is in addition to the obligations that “significant data fiduciaries” would have under the Digital Personal Data Protection Act 2023. 

4.    Enforcement and Compliance:

Regulatory Authority: Empowers CCI to draft specific rules of conduct (based on above mentioned obligations) and also empowers CCI to ensure compliance with conduct requirements through inquiries and investigations, dawn raids, depositions on oath, request for information, impose penalties on companies and concerned executives, etc.

Importantly, besides Big Tech, some of the bigger Indian digital companies, public sector companies and large unicorns, filtered by definition, may also be covered by DCB. 

Considering the wide sweep and impact of DCB on India’s growing digital economy, it may be worthwhile to review the functioning of other similar ex ante legislations globally where enacted.

EU’s DMA

The Digital Markets Act (DMA) entered into force on 1st November 2022 and became applicable on 2nd May 2023. However, the obligations started to apply to gatekeepers only from March 2024. Early evidence emerging from Europe on the implementation of the DMA raises some concerns for Small and Medium sized businesses and it may be relevant to keep them in view.

According to D-edge, a European hotel distribution technology provider, because of the DMA compliance, the dependency of local hotels in Europe on Online Travel Aggregators (OTA) increased. Prior to the DMA, Google’s placement of its hotel comparison service and Maps at the top of search screens was a source of organic traffic for hotel websites but the same dropped by 20% compared to pre-DMA levels, and bookings through OTA increased by 36%.

We need to find out how our smaller hotels and other small and medium sized businesses are leveraging Big Tech companies, other large platforms, online advertisements, social media platforms, etc., which would all be covered by the DCB and be careful in the regulatory design, so that there is no unintended impact on them like in Europe. 

UK’s DMCC

We do not have any evidence yet from the United Kingdom as the Digital Markets, Competition and Consumers (DMCC) Act 2024 received Royal Assent only on 24 May 2024 and is not yet in force. Reportedly, in the first year, there will be three to four investigations.

A few countries like Japan, Canada, South Korea, Germany, and France have also introduced legislation to enhance transparency, fairness, and competition in their digital markets, however, their experiences are still awaited.

Altogether, it may be worthwhile to look at the global experiences before finalizing the contours of our own digital law.

Dhanendra Kumar, founding Chairman CCI, & Ex-ED World Bank