{"id":289696,"date":"2024-04-06T19:00:11","date_gmt":"2024-04-06T13:30:11","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=289696"},"modified":"2024-04-06T18:51:21","modified_gmt":"2024-04-06T13:21:21","slug":"committee-report-on-digital-competition-law-explained-pointwise","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/committee-report-on-digital-competition-law-explained-pointwise\/","title":{"rendered":"Committee Report on Digital Competition Law- Explained Pointwise"},"content":{"rendered":"

The Committee Report on Digital Competition Law, has recommended an ex-ante<\/span> (intervention before an event occurs<\/span>) regulation<\/span> for digital markets in India. Presently<\/span>, the Competition Commission of India (CCI<\/span>), takes ex-post measures<\/span> (intervention after an event<\/span> occurs<\/span>) for anticompetitive practices<\/span> in the digital sector. In its report, the Committee also published a draft Digital Competition Bill to give effect to its recommendations.<\/p>\n

\"Digital
Created By Forum IAS<\/figcaption><\/figure>\n\n\n\n\n
Table of Content<\/strong><\/td>\n<\/tr>\n
What are the recommendations of the Committee?<\/a>
\nWhat is the need for Digital competition Law?<\/a>
\nWhat will be the purported advantages of Digital Competition Law?<\/a>
\nWhat are the prevailing Concerns?<\/a>
\nWhat Should be the way Forward?<\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

<\/a>What are the recommendations of the Committee?<\/strong><\/span><\/h2>\n

Digital Competition Law for ex-ante regulation of digital competition<\/strong><\/span><\/p>\n

a. The current ex-post framework<\/span> (intervening after an event occurs) under the Competition Act, 2002<\/span>, does not facilitate timely redressal of anti-competitive conduct by digital enterprises. It is ineffective to address the irreversible tipping of markets<\/span> in favour of large digital enterprises (permanent dominance of a firm in relevant market).<\/p>\n

b. The Committee has recommended enacting the Digital Competition Act<\/span> to enable the Competition Commission of India (CCI) to selectively regulate large digital enterprises in an ex-ante manner<\/span> (intervening before an event occurs).<\/span><\/p>\n

Systemically Significant Digital Enterprises (SSDEs) and Associate Digital Enterprises (ADEs)<\/strong><\/p>\n

The Committee has recommended designating entities offering certain core digital services<\/span> like search engines, social networking services, operating systems, and web browsers, as Systemically Significant Digital Enterprises (SSDEs).<\/p>\n

The business enterprises within the SSDE group that are directly or indirectly involved in providing core digital services<\/span> are required to be notified by the CCI as Associate Digital Enterprises (ADEs).<\/p>\n

Thresholds for classification of SSDEs<\/strong><\/p>\n

a. The Committee has recommended using both quantitative thresholds<\/span> and qualitative criteria<\/span> to designate enterprises as SSDEs.<\/p>\n

b. Quantitative Criteria- Dual test for gauging significant financial strength and spread<\/span>–
\n(i) Parameters for significant financial strength- Turnover<\/span> (at least \u20b94,000 crore in India and global turnover of at least $30 billion), Gross merchandise value<\/span> (\u20b916,000 crore in India), and market capitalisation<\/span> (global market capitalisation of $75 billion in the immediately preceding three financial years)
\n(ii) Parameter for significant spread- Number of business users<\/span> and end users of the core digital service in India<\/span> (either 10,000 business users<\/span> or one crore end users<\/span>)<\/p>\n

c. Qualitative criteria- Since the quantitative criteria may not cover all digital enterprises that may have a significant presence in Indian digital markets, the committee has recommended qualitative criteria. This includes resources of the enterprise<\/span> and volume of data aggregated by them<\/span>.<\/p>\n

Obligations of SSDEs<\/strong><\/p>\n

The SSDEs are prohibited<\/span> from<\/span> carrying out certain practices. These include:
\n(i) favouring their own products<\/span> and services or those of related parties
\n(ii) use non-public data<\/span> of business users operating on their core digital service
\n(iii) restriction of users<\/span> from using third-party applications on their core digital services
\n(iv) Incentivising the users<\/span> of an identified core digital service to use other products or services offered by the SSDE.<\/p>\n

Enforcement of provisions<\/strong><\/p>\n

a. The Director General<\/span>, appointed under the Competition Act 2002 is required to investigate any contraventions when directed by the CCI.<\/p>\n

b. A separate bench of the National Company Law Appellate Tribunal<\/span> must be constituted for timely disposal of appeals.<\/p>\n

Penalties<\/strong><\/p>\n

CCI has the powers of imposing civil penalties on the SSDEs found to be indulged in anti-competitive practices. CCI has the powers to impose monetary penalties for non-compliance with ex-ante obligations and with its orders. The monetary penalties have been capped at 10% of the global turnover of the SSDE<\/span>.<\/span><\/span><\/p>\n

<\/a>What is the need for Digital competition Law?<\/strong><\/span><\/h2>\n

1. Abuse of Dominant market position-<\/strong> Core digital service providers have been found to be involved in abuse of their dominant market position. For ex-<\/strong>\u00a0Google abusing its dominant position in the Android and Play Store ecosystem\u00a0<\/span>by pressurising app developers to use Google\u2019s proprietary billing system or face a fee if they opt for a competitor\u2019s service.<\/p>\n

2. Self-preferencing and platform bias-<\/strong> Core digital companies have been competing with other third party service by promoting their services or subsidiaries on their own platform. For ex-<\/strong>\u00a0Amazon\u2019s e-commerce service<\/span>\u00a0has been\u00a0under scrutiny in India<\/span>\u00a0due to its\u00a0dual role of being a marketplace operator<\/span>, as well as retailer\u00a0on its own platform<\/span>.<\/p>\n

3. Restrictions on Third-Party Applications-<\/strong> There are instances where big digital entities have restricted the installation or operation of third-party applications. For ex-<\/strong>\u00a0Apple\u2019s restriction on installing third-party applications on the iPhone<\/span>.<\/p>\n

4. Bundling and Tying-<\/strong> Big Digital tech firms have been compelling consumers to purchase related services by linking their main products or services to other complementary offerings. For ex-<\/strong>\u00a0Operating system providers like Microsoft<\/span>,\u00a0bundling the use of its search engine and products like Office<\/span>, which\u00a0generates pricing asymmetry\u00a0and results in the elimination of competition from the market.<\/p>\n

5. Anti-Steering-<\/strong>\u00a0Anti-steering provisions are employed by big tech entities to hinder business users from migrating away from the platform and utilizing alternative options<\/span>. This results in restriction of customer choices.\u00a0For ex-<\/strong>\u00a0Apple\u2019s anti-steering practices<\/span>\u00a0prevents users from truly exercising their choice of services\u00a0with the Apple ecosystem.<\/p>\n

6. Network effect and Economies of Scale-<\/strong> The core digital services companies demonstrate \u2018network effects<\/span>\u2019, which enable rapid growth of their user base and fixation of arbitrary prices, which creates challenges for new competitors to overcome<\/span>. For ex-<\/strong>\u00a0Meta\u2019s subscription model\u00a0offering<\/span> people in EU, European Economic Area (EEA) and Switzerland\u00a0the choice to use Facebook and Instagram without any ads.<\/p>\n

7. Concerns Over Data Privacy-<\/strong> Core digital companies gather vast amounts of user data through their platforms and services. This has raised concerns about data privacy<\/span>, digital surveillance<\/span>, and data security<\/span>.\u00a0For ex-<\/strong>\u00a0CCI\u2019s probe into WhatsApp\u2019s privacy policy<\/span>, on allegations that the messaging platform shares user data with its parent Facebook.<\/p>\n

8. Killer Acquisitions and Mergers leading to monopoly-<\/strong>\u00a0Killer acquisitions, where big techs purchase valuable start-ups without being subject to merger control rules based on turnover<\/span>, create an unfair playing field in the digital market.\u00a0For ex-<\/strong>\u00a0Facebook\u2019s killer acquisition of Instagram and WhatsApp<\/span>, led to the monopolisation of social media communication domain.<\/p>\n

<\/a>What will be the purported advantages of Digital Competition Law?<\/strong><\/span><\/h2>\n

1. Reduction in time for anti-competitive case redressal<\/strong>–<\/strong> Ex-post measures for redressal of anti-competitive practices were time-consuming. For ex-<\/strong> CCI adjudicating in 2018 on a complaint of abuse of dominant position filed in 2012<\/span>. However, the ex-ante measures introduced with the digital competition law will reduce the redressal time.<\/p>\n

2. Create Level Playing Field-<\/strong> The new Digital Competition law will create a level playing field for all digital service providers<\/span> operating in India.<\/p>\n

3. Further catalyse the startup growth-<\/strong> The new law will further catalyse the growth of digital startups in India. They will not be in a disadvantageous position<\/span> due to the ‘network effect<\/span>‘ and ‘economies of scale<\/span>‘ of core digital service providers.<\/p>\n

4. Address Data privacy Concerns-<\/strong> The incorporation of penalties<\/span> for violation of data privacy<\/span> will further strengthen data privacy regime in India.<\/p>\n

5. Boost to Digital Economy-\u00a0<\/strong>It is expected that India’s digital markets will reach $800 billion by 2030 by effective regulation through this digital competition law.<\/p>\n\n\n\n
Read more- Digital Competition Bill in India<\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

<\/a>What are the prevailing Concerns?<\/strong><\/span><\/h2>\n

1. Stifling\u00a0 of Innovation-<\/strong> There are concerns that strict regulations could limit creativity and growth<\/span> in the digital sector.<\/p>\n

2. Potential for Misuse- <\/strong>Critics point that the draft Bill\u2019s ex-ante approach gives excessive discretionary power to the regulators<\/span>. This raises concerns about its potential misuse.<\/p>\n

3. Duplication with Existing Laws-<\/strong> The proposed new law might overlap with provisions in the current Competition Act, leading to regulatory complexity and potential confusion.<\/p>\n

4. Potential for Conflicting Decisions:<\/strong> The overlap between current competition law and proposed digital competition law could result in parallel inquiries<\/span> and divergent rulings for the same issue.<\/span><\/span><\/p>\n

<\/a>What Should be the way Forward?<\/strong><\/span><\/h2>\n

1. Revamping of CCI-<\/strong> The institutional structure of CCI must be revamped by creating separate cell\/division, beefing up the technical manpower <\/span>for dealing with digital anti-competitive practices.<\/p>\n

2. Early establishment of separate bench of NCLAT-<\/strong> The government must constitute a separate bench in the NCLAT at the earliest for early adjudication of anti-competitive cases<\/span>.<\/p>\n

3. Effective Checks and balances-<\/strong> A mechanism of ensuring effective checks and balances must be instituted to curb any abuse of discretionary powers by the authorities<\/span>.<\/p>\n\n\n\n
Read More- PRS<\/a>
\nUPSC Syllabus- GS Paper 2- governance-Government policies and interventions for development in various sectors and issues arising out of their design and implementation.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

The Committee Report on Digital Competition Law, has recommended an ex-ante (intervention before an event occurs) regulation for digital markets in India. Presently, the Competition Commission of India (CCI), takes ex-post measures (intervention after an event occurs) for anticompetitive practices in the digital sector. In its report, the Committee also published a draft Digital Competition… Continue reading Committee Report on Digital Competition Law- Explained Pointwise<\/span><\/a><\/p>\n","protected":false},"author":10357,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130,1],"tags":[],"class_list":["post-289696","post","type-post","status-publish","format-standard","hentry","category-7-pm","category-uncategorized","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/289696","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10357"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=289696"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/289696\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=289696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=289696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=289696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}