IAMAI Warns Draft Digital Competition Bill Will ‘Dry Up’ VC Funding In Tech Startups

The Internet and Mobile Association of India (IAMAI) has written to the Corporate Affairs Ministry, expressing apprehensions that the draft Digital Competition Bill will have adverse effects on Indian startups and other digital enterprises.

The association warned that the ex-ante regulations proposed under the Draft Digital Competition Bill will make businesses “untenable” and can “dry up venture investments in tech startups,” ET reported.

The IAMAI dubbed the draft provisions “an unfair imposition on digital companies.” 

Further, the IAMAI highlighted that the criteria for classifying companies as “systemically significant digital enterprises” (SSDEs) is “subjective, all-encompassing and self-contradictory.”

Inc42 has reached out to the IAMAI for comments. The story will be updated based on the response.

Under India’s existing ex-post competition regime, the Competition Commission of India keeps a check on anti-competitive practices in digital markets. 

The IAMAI argued that an overlapping ex-ante regime would not only increase their compliance burden but also lead to a significant increase in operational costs.

“Therefore, an additional competition regulatory regime, which departs from the well-tested foundation of competition law, is unnecessary and could lead to significant harm,” the report quoted IAMAI as saying.

The comments came two months after the Ministry of Corporate Affairs sought feedback on the draft Digital Competition Bill submitted by the Committee On Digital Competition Law.

The committee said under the ex-post competition regime, the CCI can only intervene after the occurrence of an anti-competitive conduct. An ex-ante approach would better equip the CCI to rule on competition matters for tech firms, it added.

The recommendations, if implemented, would enable the CCI to “selectively” regulate large digital entities on an ex-ante basis.

For context, the system of ex-ante regulation envisages the government intervening in anti-competitive behaviour of digital companies before such an issue occurs. 

The draft bill aims to curb the potential abuse of dominance and other antitrust practices, especially by big tech firms like Google and Meta.

It requires digital companies to self-designate themselves as SSDEs based on the criteria set in the bill and notify the CCI about the same.

Such enterprises will be under the obligation to institute a transparent grievance redressal mechanism and report and operate in a fair, non-discriminatory and transparent manner with end users and business users.

To be sure, the draft provisions prohibit SSDEs from favouring their own products and services, directly or indirectly.

The discussions around the digital competition law come at a time when tech giants like Google, Apple, Meta and Amazon are facing international pushback for abusing their dominant position in multiple markets to limit competition.

Amid the recent feud between Indian startups and Google, the CCI ordered an investigation into the search giant’s contentious choice billing system.

In 2022, the CCI slapped Google India with a fine of INR 1,337 Cr for engaging in unfair business practices in the Indian market.

Over the last decade or so, the CCI has launched probes into 30 companies, including Google, Matrimony.com, UrbanClap, Meru Travel, Gmail, WhatsApp, Meta, Facebook, Flipkart, Zomato and MakeMyTrip.