What is draft Digital Competition Bill proposes? Why big Tech Giant opposes it?

What is draft Digital Competition Bill proposes? Why big Tech Giant opposes it? - Why in recent news?

Recently the committee on Digital Competition Law released its report recommending a New Digital Competition Law for India alongside the Draft Digital Competition Bill (DCB). The genesis of the report can be traced back to the 53rd report of the Parliamentary Standing Committee (PSC) released in Dec-2022. The Parliamentary Standing Committee (PSC) Report recognised the unique dynamics of digital markets which it stated are charecterised by strong network effects and concentration. It stated that due to the swift evolution of digital markets the current Competition Law framework may not timely address the anti co9mpetitive conduct by large digital enterprises.

Consequently the report emphasised the necessity for a new Law restructing certain leading players from engaging in specific anti competitive activities that could distort competition. The draft law called the Draft Digital Competition Bill (DCB) 2024 could stop tech giants like Google, Facebook, and Amazon from self-preferencing their own services, or using data gathered from 1 company to benefit another group company. The report highlighted activities such as bundling and tying and deep discounting among others, as areas of concern. The Draft Digital Competition Bill (DCB) also has provisions to set presumptive norms to curb anti competitive practices before they actually take place and promises to impose heavy penalties, which could amount to billing of dollars for violations. If this were to go in force, it could require by tech companies to make fundamental changes to their various platforms.

Key proposals of the draft Draft Digital Competition Bill (DCB) 2024

1) Predictive regulations - Due to the complex world of digital markets, whic h are ever growing with the increasing interlinkages between various offering made by a single company regulating for market abuse after it takes place as in an expost framework is not optimal. Instead a forward looking preventive and presumptive law (an ex-ante framework), which forsees the potential harms that can arise out of anti-trust issues and prescribes pre-determined no go areas is perhaps the way forward. This is one of the formost proposals in the Draft Digital Competition Bill (DCB) 2024. Currently India following an expost antitrust framework under the Competition Act 2002. One of the biggesgt criticism of the law has been that regulating after the incidence of market abuse involves delays - by the time the offending company has been penalised market dynamics change to rule out smaller competition.

2) Significant entities - The Draft Digital Competition Bill (DCB) proposes that for certain core digital services like search engines and social media sites, the Competition Commission of India (CCI) should designate companies as Systematically Significant Digital Enterprise (SSDE) depending on various quantitative & qualitative parameters such as turnover, user base, market influence etc. The quantitative parameters for a company to be designated a Systematically Significant Digital Enterprise (SSDE) are 

i) It in the last 3 financial years its turnover in India is not less than Rs.4,000 crores or its global turnover is not less than USD$30 Billion.

ii) Its gross merchandise value in India is not less than Rs.16,000 crores.

iii) Its globall market capitalisation is not less than USD$75 Billion.

iv) The core digital service provided by these companies should also have atleast 1 crore end users or 10000 business users. Entities that dont fall under these parameters can still be designated as SSDs, if the CCI believes that they have a significant presence in any core digital service. Entities which are designated as Systematically Significant Digital Enterprise (SSDFs) have been prohibited from engaging in practices, such as self preferencing, anti-steering, and restricting third party applications. If they violate these requirements they can be fined upto 10% of their global turnover.  

3) Associate Digital Enterprises - Understanding the role that data collected by one company of a major technology group can play in benefiting other group companies, the Draft Digital Competition Bill (DCB) proposes to designated Associate Digital Enterprises (ADEs). If an entity of a group is determined to be an associate entity, they would have the same obligations as Systematically Significant Digital Enterprise (SSDEs) depending on the level of their involvement with the core digital service offered by the main company. Illustratively if one were to look at Google, search and how it steers direction data to Google maps, the latter can theoretically be deemed an Associate Digital Enterprises (ADE) same would apply to YouTube too, depending on the level of data sharing that happens between the core Google search and law that plays out in the recommendations that YouTube makes to users.

Big Tech opposes it.

Naturally there has been resistance to this Draft Digital Competition Bill (DCB) from companies industryt bodies funded by tech companies and boutique consultancies hoping to onboard tech clients - in its current form. For big tech companies, an ex-ante-framework with it strict prescriptive norms could lead to significant compliance burden and shift focus from innovation and research ensuring that companies do nnot presumptively engage in an anti-competitive practice. As a result, the tech giants are calling for the current competition law to be strengthened rather than moving towards an ex-ante-framework. If the law were to go into effect as it would mean that a company like Apple will have to allow iPhone users to be able to download apps from a third party store, over Apple's own store. Something that the company has lobbied against vehemently, while Android's relatively open nature over its allows sucg side-loading of apps, Google too has advocated against its primarily climbing claiming that apps that are downloaded from outside their stores can have potential security ramifications.

Draft Digital Competition Bill (DCB) 2024, may hinder investments in tech startups - Internet And Mobile Association of India (IAMAI) was established in 2004, counts global companies Google, Amazon, Apple and Meta and the Indian companies such as Airtel, Dream11, Paytm, Swiggy and Cred as its members.

Why it matters?

Government officials believe that the big tech companies have shown a history of engaging in anti-competitive practices and a presumptive framework better to address this. Last year, Google was fined as Rs.1.337 crore by the CCI for its anti-competitive conduct in the Android Ecosystem. There isalso concern within official quarters that in the last decade or so, a majority of the innovation has been confined to within the stables of a handful of big tech companies mostly from USA. The proposal is similar to the European Union (EUs) Digital Markets Act (DMA) which went into complete effect earlier this year. And requires large tech firms like, Alphabet, Amazon & Apple to open their services, and not favour their own at the expense of rivals.