While the rising market power of Big Tech and other large digital platforms, are a cause of concern, experts are divided on the government’s move to intervene with ex ante regulation of the digital marketplace. People familiar with the evolution of anti-trust regulations in India feel the government’s move could amount to a throwback to the old “MRTPC regime”, where firms above defined thresholds were accorded “monopoly firm” tag and regulated intrusively, leading to stifling of growth, entrepreneurship and innovation.
They also expressed the apprehension that the provisions in the draft law, released by the ministry of corporate affairs recently, could make MNC tech companies wary of technology transfer to the India market. The proposed rules could also have an unintended adverse impact on the country’s thriving start-up ecosystem.
They recalled that India’s extremely guarded approach to Foreign Direct Investment (FDI) had long deprived the country of foreign technology support to India’s manufacturing industry. Countries like Japan and Singapore that had planned ex ante regulation of the digital markets, are having second thoughts, they pointed out.
Experts also cited the need to wait and watch as ex ante regulation in the competition space has few precedents globally, as yet. The jury is still out on the nature of the relationship between regulation and competition enforcement in digital markets.
Experts also feel the MCA draft covers a lot of sectors within the digital space where there are no evidences of anti-competitive practices. “Some of the core digital services mentioned in the proposed bill can be traced to Competition Commission of India’s enforcement history and market studies. However, various services mentioned in the draft have seen little to no evidence of structural competition concerns,” said Saksham Malik, senior programme manager (competition law and policy), The Dialogue. According to him, the inclusion of certain services in the list is inspired by international frameworks like the EU’s new Digital Markets Act.
“It may be prudent that before subjecting certain sectors to an ex-ante framework, evidence of structural competition bottlenecks in Indian markets is collected and shared with the ecosystem,” Malik said.
Former head of CCI Vinod Dhall said while the government’s enthusiasm in bringing Big Tech under a separate digital competition law is understandable, it must actually move with great caution in this regard. The only other example is that of the EU that unveiled a similar law with ex ante provision unveiled as recently as March 5 (the law was initially mooted two years ago), he noted.
According to Dhall, such a legislation could have potential adverse effect on consumer interest and technological innovation. He also pointed out even the US is still to bring such a law an continues to regulate digital sector under the general competition law, although a Senate Committee had recommended an exclusive law for the sector. The UK and Australia have digital competition laws of sort, but these contain very liberal provisions.
Dhall cited the reported move of Google to work with the Election Commission of India to make available election-related information instantly, as a case where the Big Tech could help buttress a public cause. “Such innovations and initiatives could get killed if the government seeks to employ ex ante provisions, although the intention to check anti-competitive practices is valid. he said.
Competition laws have ex post application, and provides ample opportunity for the individual parties to defend themselves. “Under the proposed law, the Big Tech would never get a chance to explain themselves and put up a defence,” said an expert. Also, these regulations could end up hurting only the tech giants, while letting others free, and having adverse implications for India’s vibrant start-up ecosystem, the expert warned.
Core digital services, a pre-determined list of services that are susceptible to anti-competitive behaviour, form the basis of the proposed bill. Experts said that while there are sufficient examples of anti-competitive practices in areas such as operating systems (Google’s Android case) and web browsers, it’s not the case with cloud services, interpersonal communications services, video-sharing platform services and online intermediation services which have also been included in the proposed law.
The questions are being raised on the CCI’s capacity as well. In fact, the draft also recommends that the capacity of the regulator, including that of the director general’s office and digital markets and data unit, needs to be strengthened. “For the draft bill to be implemented effectively, there is a need to ensure that the CCI’s capacity is enhanced. The recommendations in the report is timely considering that the CCI is already overburdened with mandates on anti-profiteering, merger review, advocacy and antitrust enforcement. The commission requires more people, financial resources, and technical expertise to implement the proposed law,” said a competition lawyer.
Some experts said that instead of focusssing on areas such as turnover, market cap and gross merchandise value (GMV) to determine systemically significant digital enterprises (SSDE), the law must look at the dominance in the core technology where a particular company controls the production and consumption of digital services. For instance, through Android, Google controls the apps ecosystem whereas it controls the browser space through Google Chrome.