Author: Virat Sagar, National Law University, Delhi
Abstract
The Digital Competition Bill of 2024 (DCB) establishes a significant regulatory structure designed to tackle the issues presented by dominant digital platforms within India’s swiftly changing digital economy. In contrast to the conventional ex-post enforcement strategies outlined in the Competition Act of 2002, the DCB adopts a proactive, ex-ante strategy that aims to prevent anti-competitive behaviours from disrupting market dynamics before they occur. The Bill focuses on Systemically Significant Digital Enterprises (SSDEs) to foster competition, promote equity, and protect consumer interests. This article provides a critical analysis of the essential characteristics of the DCB, its conformity with international regulatory developments, and its potential effects on Indian enterprises, fortified by prominent legal precedents and events that underscore its importance.
Key Features of the Digital Competition Bill, 2024
The Digital Competition Bill, 2024 (DCB) addresses challenges to India’s digital economy in a forward-looking ex-ante regulatory framework that addresses Systemically Significant Digital Enterprises (SSDEs). SSDEs are those identified based on specific quantitative and qualitative thresholds, like the size of the user base, revenue, and market influence. With classification under SSDEs, the businesses face higher regulatory oversight that assures that their activities will always be in accordance with equitable competition and consumer protection.
One of the most important components of the DCB is fair dealing obligations imposed on the SSDEs. They must carry out business activities and relations with consumers without any discrimination. This would mean that there would be no bias based on size when accessing the digital ecosystem. Self-preferencing is also outlawed by the DCB, as platforms are prevented from showing preferential treatment to their products or services compared to competitors’. These measures remove systemic barriers established by dominant enterprises in order to maintain control of markets. One fundamental feature of the DCB is the openness and transmissibility of data. SSDEs are ensured to gain explicit user permission about using the data and assist users in transmitting their data allowing personal information from not getting misused anti-competitively. This policy provides increased power to a consumer and generates trust about the digital market. The Bill further includes provisions against tying and bundling practices, which would prevent platforms from forcing consumers into using bundled services or products. This legislation aims at protecting consumer autonomy while also thwarting powerful actors from using their market dominance to gain unfair entry into related markets.
The DCB also targets anti-steering practices. Here, third-party applications and services should be able to compete on a level playing field in digital platforms. A dominant platform cannot restrict a user’s ability to access or promote alternative services. It will encourage innovation and diversification in the market and make the marketplace more balanced and competitive. The DCB establishes a strong regulatory framework through the prevention of monopolistic behaviour and ensuring fair play, aligning it to global best practices, however taking into consideration the India digital landscape.
The Growing Challenges of Digital Market Regulation
Indian economy has taken an explosive step towards being one of the largest digital markets in the world with low-cost data and internet accessibility but has, simultaneously, allowed for a market power concentration of a few significant firms known as gatekeepers. Firms follow practices that are self-preferencing, have exclusive contracts, and use data-driven network effects in ways that prevent new entrants, as well as limit choice for consumers. While being successful in particular situations, current ex-post competition frameworks have found it difficult to accommodate the dynamics characteristic of digital markets. This inherent reactivity of such frameworks results in postponements that allow the dominant entities to consolidate their market positions. The MakeMyTrip India Pvt. Ltd. & Ors. v. Competition Commission of India & Ors. case study demonstrates these constraints. The Competition Commission of India has found MakeMyTrip and GoIbibo liable for anti-competitive conduct, including imposing exclusivity clauses on hotel partners and delisting competing platforms such as Treebo and FabHotels. Though high penalties and remedies were meted out, the actual harm to smaller competitors and market competition had already set in. This case strongly emphasizes the need for some kind of preventive measures so that such practices are controlled in advance.
From Courtrooms to Reforms: Legal Milestones Behind the Digital Competition Bill
The case of Google LLC v. Competition Commission of India and Others, this case typifies the problems in regulating a dominant platform. In this scenario Google was punished for using its dominant position in the market of mobile operating systems in exploiting its applications as mandatory on Android handsets. The practice denied the consumers an effective choice of application and checked the rivalry by alternative developers. The CCI did prescribe remedies, such as allowing OEMs to choose pre-installed apps and enabling users to choose their default search engines. This was, however, damage to market competition that was done. The DCB with its focus on preventing self-preferencing and enforcing fair dealing would have prevented all of this, thereby not having harmed consumers and competitors to the same extent.
Another landmark case in point is Google Play Store Policies v. Competition Commission of India, wherein it was held that Google’s requirement of its proprietary billing system from the app developers foreclosed third-party payment solutions. CCI has imposed huge penalties and directed Google to allow other payment systems also. Therefore, such practices are checked through the provisions of anti-steering.
Events like the COVID-19 pandemic underscore the inherent systemic weaknesses present within India’s digital marketplaces. Throughout the pandemic, e-commerce platforms favoured their own products and associated vendors, thereby sidelining smaller sellers. This conduct not only solidified the supremacy of larger platforms but also restricted consumer options, especially concerning essential goods. The Digital Competition Bill’s focus on fair practices and transparency aims to address these challenges, thereby promoting a competitive and just digital marketplace. Another important case is the one involving Amazon and Cloudtail wherein investigations revealed that Amazon favoured its affiliate, Cloudtail, in terms of rankings and discounts. These were practices that limited competition and had adverse effects on independent sellers, and therefore, it clearly shows that there is an urgent need for effective oversight by the regulatory authority. The DCB would effectively address such behaviour through provisions on self-preferencing and fair dealing, promoting a level playing field between all market participants.
Aligning with Global Regulatory Trends
The DCB is aligned with global regulatory frameworks, such as the Digital Markets Act (DMA) in the European Union and the Digital Markets, Competition, and Consumers Act (DMCC) in the United Kingdom. The DMA specifically deals with gatekeepers and imposes transparency, data portability, and fair competition requirements, while the DMCC focuses on the regulation of strategic platforms in the market. Using specific and unique features for the current conditions of India’s market dynamic, the DCB maintains a balance between supervisory regulation and innovation and overall economic growth. Even drawing inspiration from global models and adding unique features, be it threshold on mergers and acquisitions in terms of deal value. This provision thus ensures that such market-altering transactions as Meta Platforms Inc.’s acquisition in Jio Platforms Ltd. do not slide under the scrutiny of regulations. The fact that it addresses both precautionary measures and corrective action makes the DCB a total framework to regulate digital markets.
Its proactive measures should therefore be able to create a healthy competitive regime that will have room for start-ups as well as smaller players. Through the removal of structural impediments, the Bill enables newcomers to confront established incumbents. Nevertheless, adherence to the DCB’s rigorous requirements may lead to elevated operational expenses for SSDEs, which could affect their competitiveness on a global scale. It is essential for policymakers to find an equilibrium between regulation and innovation, guaranteeing that the DCB promotes growth without hindering entrepreneurial activities.
Conclusion
The Digital Competition Bill, 2024, signifies a pivotal advancement in the regulation of India’s digital economy. Through proactive action against anti-competitive practices, the Bill seeks to set up a digital marketplace with fairness, transparency, and competition. Although it still has teething issues, the DCB is set to transform Indian competition law and provide new global benchmarks for the digital governance of markets. Given this, the future depends on whether the new paradigm of regulation can strike an innovative balance between innovation and regulation to make India a more inclusive yet dynamic digital economy.
References:
Legislation
Digital Competition Bill 2024 (India).
Competition Act 2002 (India).
Cases
MakeMyTrip India Pvt Ltd v Competition Commission of India [2022] CCI.
Google LLC v Competition Commission of India [2022] CCI.
Google Play Store Policies v Competition Commission of India [2022] CCI.
Amazon and Cloudtail Investigation (Competition Commission of India, 2022).
Reports and Books
Competition Commission of India, Market Study on E-Commerce in India (2020) https://www.cci.gov.in
UNCTAD, ‘Competition Issues in the Digital Economy’ (2019) https://unctad.org/system/files/official-document/ciclpd54_en.pdf
Articles
Sumit Jain and Vikrant Singh, ‘Competition in Digital Markets: An Indian Perspective’ (2024) SSRN https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4863926 .
Commentary
Frederic Jenny, ‘Competition Law and Digital Ecosystems: Learning to Walk Before We Run’ (2021) SSRN https://ssrn.com/abstract=3776274.
FAQS
What are the key objectives of the Digital Competition Bill, 2024?
The Digital Competition Bill aims to establish a fair and competitive digital marketplace by proactively addressing anti-competitive practices. It introduces measures for Systemically Significant Digital Enterprises (SSDEs), focusing on fair dealing, self-preferencing, data portability, anti-steering, and transparency. The objective is to foster innovation, promote consumer autonomy, and create a level playing field for smaller competitors.
2. How does the Digital Competition Bill differ from the Competition Act, 2002?
Unlike the ex-post enforcement approach of the Competition Act, 2002, which addresses violations after they occur, the DCB adopts an ex-ante approach to prevent anti-competitive practices before they arise. This forward-looking framework ensures a more proactive and timely response to the challenges unique to digital markets.\
3. How does the Digital Competition Bill align with global regulatory trends?
The DCB aligns with frameworks like the EU’s Digital Markets Act (DMA) and the UK’s Digital Markets, Competition, and Consumers Act (DMCC). While drawing inspiration from these global models, it incorporates provisions tailored to India’s digital economy, such as deal value thresholds for mergers and acquisitions. The DCB seeks to balance innovation and regulation, fostering economic growth while maintaining fair competition.