The government is likely to substantially raise the thresholds for firms and enterprises to be brought under the ambit of the proposed digital competition law from the levels mentioned in the draft Bill.
The proposed separate ex-ante regulations for the digital market could be limited to the likes of Amazon, Meta, Apple, Google, Facebook and Microsoft. Start-ups and other relatively smaller firms would be kept outside its ambit.
The move, according to sources, is aimed at ensuring that the proposed regulations do not stifle innovation and dilute consumer benefits. The review of the thresholds specified in the draft Digital Competition Bill (DCB) is also in acknowledgment of the fact that other than the European Union (EU) and the UK, a few jurisdictions have ventured into introducing separate anti-trust law for the digital sector.
Several experts reckon that the EU law is an overreach as the regular ex-post anti-trust regulations might suffice to deal with the digital sector as well.
The EU may have a reason to have a separate law for ex-ante regulation of competition in the digital sector, given the dominance of US-based firms in the global marketplace. However, experts believe India would do well to not expand the ex-ante controls to the smaller firms, given that benefits of digitilisation are still unfolding in the country and are expected to spur startups and the innovation ecosystem.
According to Aditya Bhattacharjea, who was part of the 10-member committee that formulated the draft Bill, there’s a strong case of raising the thresholds mentioned in the Bill because “the current ones might affect a lot of companies that are not large enough to affect the competition landscape”.
“The objective of the Bill is to catch very big enterprises. For instance, in the case of the EU, it has identified (only) seven enterprises to come under the purview of its Digital Markets Act,” he said.
CUTS International, a think tank that is often part of deliberations on competition regulation, has estimated that about 40 domestic and international enterprises would meet the thresholds prescribed in the DCB and would be impacted by the proposed ex-ante regulations.
In the current form, the draft DCB has two kinds of thresholds: quantitative and qualitative. Under the quantitative threshold, companies with India gross merchandise value of over `16,000 crore or India turnover of over `4,000 crore or global turnover of above $30 billion or global market capitalisation of over $75 billion will be subjected to the DCB regulations.
Firms meeting any of these criteria will be designated as systemically significant digital enterprises (SSDEs), and will have to operate in a fair, non-discriminatory, and transparent manner with end users and business users.
As per the draft DCB, they will not, directly or indirectly, favour their own products, services, or lines of business. They won’t also restrict end users and business users from downloading, operating or using third-party apps or other software on their core digital services.
“These thresholds were decided more than a year ago.
The first meeting of the committee took place in early 2023, and the meetings concluded in June 2023. By the time the Bill is passed, it will be well over two years. As such, these thresholds will be revised every 2-3 years as prescribed,” Bhattacharjea said.
Experts say it may be a long road ahead before the DCB comes into force. The Winter session of Parliament is the possible window to introduce the Bill. Given the different opinions on the Bill, it may be referred to a standing committee, which typically takes six months to a year to deliberate and give its recommendations on a draft legislation.
“It seems that the government is not in a hurry because there’s a push back from the industry. In addition, the ministry of electronics and information technology (MeitY) has got its own set of issues with the Bill. The delay will necessarily require a change in the threshold values,” said a competition lawyer, requesting anonymity.
Meanwhile, Bhattacharjea said that the delay would be a blessing in disguise for Indian authorities as they could use the interim period to learn from the experiences of the EU and the UK which are early movers in the matter. For instance, the EU law requires “designated platforms” to file compliance reports with the authorities.
Even though the “designated platforms” have submitted their reports in March this year, the EU has rejected most of their arguments.
“The same enterprises (covered by EU law) are likely to be covered under the Indian law as well. The EU instance would give a preview to the Indian authorities of the contentions these ‘designated platforms’ will likely raise in India. Also, if there are genuine problems being faced by these large enterprises, the government can take that into account and fine-tune the Act,” Bhattacharjea said.