India’s Digital Evolution Has Led To New Competition-Related Challenges: FM

Finance Minister (FM) Nirmala Sitharaman on Thursday (October 6) said that India’s digital evolution has brought forth challenges related to competition. 

Noting that these issues cannot be ignored, Sitharaman said that the Competition Commission of India (CCI) should keep one eye on the evolving Indian laws pertaining to fair trade and competition and another on best practices across the globe. 

“As we evolve to be a digital economy, the challenges that digitisation brings are also very important for us to address, we can’t ignore them. They are very important issues particularly related to competition authorities…and they also have to be benchmarked against best practices across the globe. This is a rapidly evolving area,” said Sitharaman.

She made the comments while virtually addressing an event to mark the inauguration of CCI’s western regional office. 

Sitharaman also called on the competition watchdog to fairly address issues related to global mergers and acquisitions (M&As).

“There are mergers and acquisitions happening…across the globe and not in just one geographical territory. As a result of which issues of competition too arise and, if they arise, they have to be fairly and squarely addressed as per the law of the land,” said Sitharaman.

In her address, the FM also directed the CCI to proactively use its powers in areas that pose questions related to fair competition. 

Her comments come a couple of months after it was widely reported that the government was mulling making it mandatory for companies to seek antitrust approval for overseas M&As. The comments have ignited debate over the issue which was seen as a bid to reign in big tech players.

Set up under the Competition Act, 2002 , the CCI is a statutory body that is primarily tasked with regulating competition and protecting interests of the customers. 

It has emerged as the de-facto tribunal to address issues related to competition especially in the highly contested domains such as ecommerce and foodtech which are populated by foreign players and market duopolies. 

In the past, it has pulled up a host of tech giants such as instant messaging platform WhatsApp, ecommerce major Amazon and smartphone manufacturer Apple for a slew of reasons ranging from abuse of dominant position to anti-competitive practices. 

Earlier this year, the government said that the competition watchdog has dealt with 846 cases of abuse of dominant position till June 2022.

While local norms dictate that certain M&As are required to obtain regulatory approval from the CCI, the government has also been looking at cross-country mergers that affect the prospects of these entities in India. 

The purported move to mandate regulatory approvals for tech M&As over a certain size was likely modelled after countries such as China, Germany and Austria. The move was seen as India leveraging its position as one of the biggest markets for new-age tech companies. 

The FM’s comments also come at a time when the Indian startup ecosystem has been looking at M&As to salvage their operations amid the purported funding winter. 

With funding scarce and markets volatile, Indian startups witnessed 203 mergers and acquisitions in 2022 till the end of the third quarter. In contrast, the entirety of 2021 saw 210 M&As.