NEWS – India (Ministry of Corporate Affairs) proposed digital competition framework

KEY HIGHLIGHTS

1. Predictive Regulation

• Rationale: Addressing the complexity of digital markets, the bill advocates for a forward-looking approach to regulation.
• Ex Ante Framework: Proposes a preventive and presumptive law to anticipate antitrust issues and define pre-determined no-go areas.
• Critique of Current Framework: Highlights delays and inefficiencies in the existing ex post antitrust framework under the Competition Act, 2002.

2. Significant Entities

• SSDE Designation Criteria: Outlines quantitative and qualitative parameters for Systematically Significant Digital Enterprises (SSDEs).
  • Turnover Thresholds: Rs 4,000 crore in India or $30 billion globally.
  • Market Value: Rs 16,000 crore in India or $75 billion globally.
  • User Base: At least 1 crore end users or 10,000 business users.
• Prohibited Practices: SSDEs are barred from self-preferencing, anti-steering, and restricting third-party applications.
• Enforcement: Violations may lead to fines of up to 10% of global turnover.

3. Associate Digital Enterprises (ADEs)

• Data Sharing Impact: Recognizes the significance of data sharing within major technology groups.
• ADE Designation: Entities within a group deemed associate entities have similar obligations as SSDEs based on their involvement with core digital services.
• Illustrative Example: Considers scenarios like Google Search directing data to Google Maps, leading to potential ADE classification for Google Maps or YouTube based on data sharing practices.

CRITICISM OF THE DRAFT DIGITAL COMPETITION BILL

1. Industry Resistance

• Big tech companies foresee a significant compliance burden under the proposed ex ante framework, diverting focus from innovation.
• Concerns that the strict prescriptive norms may shift focus from innovation and research to ensuring regulatory compliance.

2. Impact on Big Tech Companies

• Ex ante framework’s strictness may hinder tech giants’ ability to innovate and engage in competitive practices.
• Effect on User Experience: Fear of increased search time, as seen with EU’s DMA, could negatively impact user experience and business efficiency.

3. Platform Changes and App Stores

• Third-Party App Store Access: Potential requirement for companies like Apple to allow app downloads from third-party stores could disrupt their business models.
• Tech giants like Google argue against app sideloading, citing potential security risks associated with apps downloaded outside their stores.

4. Definition of Significant Platforms

• Broad Definition Concerns: Lack of specificity in defining significant platforms could lead to arbitrary decision-making by the Competition Commission of India (CCI).
• Impact on Start-ups: Arbitrary decisions may impact start-ups negatively, hindering their growth and competitiveness.
• Data Sharing Impact: Reduction in data sharing, as mandated by the bill, could affect smaller businesses relying on platforms for audience reach.

FOSTERING DIGITAL COMPETITION: GOVERNMENT PERSPECTIVE

1. History of Anti-Competitive Practices

• Government Concerns: Officials highlight a history of anti-competitive behavior among big tech companies, necessitating a presumptive regulatory framework for better oversight.
• Enforcement Example: CCI’s fine on Google for anti-competitive conduct in the Android ecosystem underscores the need for regulatory intervention.

2. Market Innovation and Barriers

• Innovation Confinement: Concerns over innovation being limited to a few big tech companies, predominantly from the US, due to high market barriers.
• Default Market Access: Dominant companies create default access points, making it challenging for new entrants to challenge their market dominance.
• Impact on Rivals: Rivals like Spotify face challenges due to policies of dominant players like Apple and Google, hindering market competitiveness.

3. Niche Products and Surveillance

• Niche Product Accessibility: Niche online products, like Signal and DuckDuckGo, cater to specific user needs but struggle to become mainstream due to dominance by larger platforms.
• Advertising Dynamics: Smaller companies benefit from cheaper advertising rates on big platforms but face challenges in a surveillance-heavy digital advertising industry.