ADIF Bats For Digital Competition Law To Save Startups From Big Techs

Reiterating the need for a digital competition law in the country, Alliance of Digital India Foundation (ADIF) has said that big techs would be the biggest beneficiaries at the cost of Indian digital startups in case of the absence of such a law.

“The Indian startups are seeking very basic rights, including the absence of conflict of interest, bigtechs not resorting to self-preferencing, non-bundling of particular services by bigtechs as announced by CCI in its latest order, thus leading to a fair, transparent and democratic internet ecosystem, to create a level playing field for Indian startups and to promote fair competition in the digital economy,” an ADIF spokesperson said.

The policy think-tank also added that the need to have a law for digital companies has been recognised globally. Citing the example of the European Union’s Digital Markets Act that has defined the big techs as gatekeeper firms, it added that other nations have also initiated steps in that regard.

It also noted that India has initiated the groundwork to understand the nuances of Digital markets and reflect on the need for such a law. A parliamentary standing committee on finance, headed by Jayant Sinha, too, has recommended the need for a ‘Digital Competition Law’ for big techs.

ADIF also pointed out that the cost to serve each additional customer in case of a digital platform decreases, with an increase in the number of users on the platform, in sharp contrast to traditional platforms.

“Thus large platforms would keep on decreasing their marginal costs with increase in the number of users, implying new players would never be able to compete with them,” it stated.

The Need To Protect The Startup Ecosystem

The present system does not give Indian startups the power to negotiate, as it allows the rules of the game for the digital internet ecosystem to be defined by big techs unilaterally, ADIF added.

These practices include restrictions on the use of third-party payment mechanisms, communicating with consumers using a particular app via email, and charging exorbitantly high service fees on app purchases, in-app sales and subscriptions, among others.

“The present statutory structure calls for the aggrieved parties to go to CCI (Competition Commission of India), legally an ex-post regime. Under a solely ex-post regime, attempts are made to resolve the issues after the damage is already done,” ADIF said.

“While regulatory intervention in an ex-post regime can, to some extent, minimise some of this damage, the market will never revert to the position that prevailed prior to the commencement of the BigTech’s anti-competitive conduct and policies. So, timely intervention is needed to not only correct but also, more significantly, prevent the anti-competitive conduct of Big Tech firms,” it added.

Big Techs Remain Under Scrutiny

It is pertinent to note that the Ministry of Corporate Affairs (MCA) reportedly invited representatives of big tech firms, including Google, Meta, Apple, Amazon, Twitter, and Netflix for discussions on the proposed digital competition law, earlier this year.

In February, the MCA also constituted a 10-member panel to review the existing competition norms in the space and the need for new legislation.

Recently, ADIF also requested CCI to look into Google’s new app billing systems. The 11-26% service fee for in-app purchases will be a death knell for the Indian startup ecosystem, it said.

While developers are currently charged a 15-30% commission for using Google’s platform and payment, app developers who opt to use an alternate payment method or third-party payment services for subscriptions and paid apps will get a 4% discount commission under the new billing policy.

The big tech players remain under scrutiny in India. In December last year, a parliamentary standing committee on finance urged the Union government to introduce a new digital competition law to reign in big tech players. The recommendation was part of a report, which suggested setting up specialised digital markets units within the CCI to closely monitor big tech players and adjudicate digital market cases.

India continues to see greater digital adoption, owing to increasing smartphone and internet penetration. The country’s digital economy has grown 2.4X faster than the overall economy of the country between 2014 and 2019, rising from $107.7 Bn in 2014 to $222.5 Bn in 2019, the Reserve Bank of India (RBI) said in its monthly bulletin for December 2022.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.