Why India Should Opt For A Pragmatic Approach To Digital Competition Law

The competition law in India has been in effect since 2002 and was enacted at a time when digital markets were less prominent. However, over the past few years, business models have changed with the evolution of online consumers. As a result, the Competition Commission of India (CCI) has been forced to deal with challenging situations involving anti-competitive behaviour in various businesses, including the tech market. 

In June 2022, the Parliamentary Standing Committee on Commerce presented a report suggesting an ex-ante regulatory model. They also stressed that amendments were needed to the Competition Act 2002, something the Competition Law Review Committee recommended in their report in July 2019. Furthermore, in December 2022, India’s Parliamentary Standing Committee on Finance presented an extensive report on Big Tech’s anti-competitive practices and strongly recommended ex-ante regulation to ensure fair and transparent digital markets in India. 

But this was strongly opposed by the Asia Internet Coalition (AIC), which consists of companies like Amazon, Google, and Meta, in a statement terming the report “prescriptive, absolutist and regressive in nature”. AIC also claimed that such regulations are not best suited for Indian markets and could dampen India’s digital innovation. 

Somewhere we might be missing the point that India is a unique country, and rushing into ‘plug-and-play’ solutions imported from the West, especially from developed countries. This could be detrimental to India’s digital growth. What we need is a pragmatic approach that will help sustain innovation and growth in digital markets.

The Government of India has now set up a Committee on Digital Competition Law (CDCL) to examine and review the existing provisions in the Competition Act and the need for an ex-ante regulation for the digital markets through special legislation. This committee is expected to submit a report along with a draft of the Digital Competition Act within three months. 

Enactment In Developed Countries 

In developed countries, the enactment of digital competition laws is driven by the growth of the digital economy, the need to protect consumers, and the need to mitigate monopolistic practices in digital markets. However, each country is taking different approaches toward digital competition law; while some opt to amend existing laws, others opt to examine the current regulations and thoroughly introduce a new framework. 

Unsurprisingly, the European Union is driving the digital competition law by enacting the General Data Protection Regulation (GDPR) and imposing antitrust fines against tech giants like Google and Facebook. They have also proposed the Digital Markets Act and the Digital Services Act, which entered into force on 1st November 2022 and 16th November 2022, respectively. Both provisions seek to create a level playing field for businesses operating in the digital space. On the other hand, the progress towards digital competition law in countries like the United States, Japan, and South Korea, among others, has been slower, but they have started taking steps towards it. 

Meanwhile, in India, tech companies believe that ex-ante regulations are not suitable for Indian markets, and transplanting regulations from other countries could lead to harmful disruptions and impact innovation and investment by businesses in India. 

Dissecting The Ex-Ante Regulation 

In the report titled ‘Anti-Competitive Practices by big-tech Companies’, the Parliamentary Standing Committee on Finance proposed a new classification, ‘Systemically Important Digital Intermediaries’ (SIDIs), similar to the concept of ‘gatekeepers’ or large platforms in the EU’s Digital Markets Act. SIDIs will compromise leading entities, which can negatively influence competition in digital markets based on their revenue, market capitalisation and the number of active businesses and end users. 

Firstly, this indicates that only those who fall under SIDIs should be subject to greater compliance. And if this gets implemented, it will mark a significant exit from the current sector-agnostic regulatory framework, which covers all market players. However, maintaining this approach could do more harm than good, as legislators will then need to create laws to accommodate different market tiers.

Secondly, where the new Act is considered an enabler for a level-playing field, ensuring transparency and fairness to all stakeholders, it also stands as a testament that the current regulatory framework is inadequate to address issues in digital markets. If that is the case, why has the Competition Commission of India (CCI) been investigating and passing orders against various tech firms?

And thirdly, with the ex-ante frameworks, regulators will also need to ensure that this is distinct from the existing or new policies. In terms of regulating digital markets, there is already a lot of work going on, for instance, with the proposed Digital Personal Data Protection Bill, 2022 and the Digital India Act. Now, this will not only increase regulatory fragmentation but also overregulate the market, impacting innovation and investments. 

Indian Regulators Need To Strike The Right Balance Between Regulation And Growth

There is no denying that big tech being early adopters of disruptive technology, has ushered in a new way of life among customers with high-quality products and services. This has also led to supporting MSMEs and small players, helping them to emerge as brands on the world stage, some of whom today dominate most global online and digital activities. 

India has fast emerged as an innovation powerhouse of the world and has basked in this glory on various world stages. Therefore, there is a need for the regulators to be cautious, as one wrong policy manoeuvre could dent the overall image, stifle innovation itself and undermine India’s own vision to reach a $5 Tn digital economy by 2026.