Digital Competition Bill: Here's how it can affect the Big Tech companies

Big Tech firms including Google, Amazon and Apple are likely to come under greater scrutiny with regard to their market practices with the firming up of the draft Bill on the Digital Competition Bill. The ministry of corporate affairs has sought public comments on the proposed legislation that has called for ex-ante measures specifically applicable to large digital enterprises, to supplement the Competition Act. Companies that are found to be in breach of competition laws can be fined as much as 10% of their global turnover and face imprisonment of three years.

The draft Bill, that was released on March 12, along with the report of the Report of Committee on Digital Competition Law, has called for specifically regulating “Systemically Significant Digital Enterprises”  (SSDEs) that provide core digital services in India and have a significant presence and significant financial strength in the country.

Not surprisingly, a number of Big Tech firms including Amazon, Apple, Bundl Technologies Private Limited and Swiggy, Flipkart and Google have said they are not in favour of ex-ante regulations.

Experts have welcomed the draft bill and noted that it is on the lines of the EU’s Digital Markets Act and would bring more due diligence into the operations of large tech firms in India. They have however, underlined the need to strike a fine balance between customer interest and regulations for firms to ensure that the market continues to develop.

“With emerging cases of big tech companies bullying the small companies, the very need of DMA in India which shall be in line with the EU’s DMA, will only promote fair competition by preventing from anti competition practices. It shall set the rules right from the beginning itself, making it easier for smaller companies and start ups to enter the digital market, innovate and compete. However, one of the concerns would be whether it would be prospective or retrospective and the impact it would cause in both the cases,” said  Alay Razvi, Partner, Accord Juris LLP.

Unnati Agrawal, Partner, IndusLaw said that given that the enactment of this law will have significant impact on development of Indian digital markets and economy, it is hoped that a balance is struck between the need for regulation and the unique realities of the Indian economy to avoid unintended consequences so that the Indian consumers do not end up with a medicine that is worse than the disease.

The ex-ante approach aims to proactively monitor large digital enterprises, with the CCI intervening before anticompetitive conduct occurs.  “The panel suggests a ₹4,000 crore Indian turnover and $30 billion global turnover threshold, allowing government exemptions,” said Gautam Busi, Partner - Technology and Privacy, King Stubb & Kasiva, Advocates and Attorneys.

The roots of the committee and the draft bill lie in the report by the Parliamentary Standing Committee on Finance on Anti-Competitive Practices by Big Tech Companies in December 2022. It had identified 10 predominant anti-competitive practices (ACPs) by large digital enterprises and examined the need for strengthening India’s competition framework to address such practices. It recommended that the behaviour of large digital enterprises should be monitored ex-ante and had also called for a Digital Competition Act.

Akshayy S Nanda, Partner at Saraf and Partners said that once a digital enterprise is designated as a SSDE, it is prohibited from carrying out certain specified activities such as self-preferencing, usage of data of business users, restriction on third-party applications, anti-steering, tying and bundling.

“Striking a delicate equilibrium between fostering innovation and safeguarding consumer welfare is paramount… Only time will tell whether these measures will increase consumer welfare or prove to be counter-intuitive by inadvertently chilling innovation and competition in the digital economy,” Nanda said.

Astha Sharma, Partner, Aquilaw said the regular monitoring of SSDEs by CCI will immensely benefit consumers by aiding markets to function effectively and efficiently.

The last date for submitting comments on the Bill is April 15. It is expected that the Bill will be taken up post the General Elections by the next government.