In an effort to revive the Digital Competition Bill (DCB), the ministry of corporate affairs is planning to rope in an agency to conduct market study on certain critical aspects of the bill. As per the request for proposal (RFP) floated by the ministry, the market study will look into the qualitative and quantitative thresholds proposed under the DCB, and whether there’s a need to revise the thresholds specified in an earlier draft for the identification of Big Tech firms.
The thresholds proposed in the DCB are used to identify Systemically Significant Digital Enterprises (SSDEs) which will be subjected to ex-ante regulations, a proactive regulatory mechanism that sets rules for companies before the occurrence of potential harm. Under the current draft Bill, a company is considered SSDE if its annual India turnover exceeds Rs 4,000 crore or global annual turnover is above $30 billion or its gross merchandise value (GMV) is over Rs 16,000 crore or market cap is above $75 billion. Further, a company would fall under the purview of DCB if it has 10 million-plus end users or 10,000 business users.
“Report of the Committee on Digital Competition Law (CDCL) along with Draft DCB was placed on MCA website under the e-consultation mode. More than 100 stakeholders submitted responses, ranging from legal professionals, industry associations, civil society organisations, and domestic & foreign digital enterprises providing digital services in India. One of the recommendations was to increase the financial thresholds,” the RFP document said.
Since the Bill was introduced last year, many domestic start-ups have asked for the thresholds to be revised upwards so that they would not inadvertently bring homegrown firms under the DCB net, thereby stifling innovation.
The draft Bill has also envisaged a set of qualitative criteria for SSDE designation, which encompasses metrics such as resources of the enterprise, volumes of data aggregated, direct and indirect network effects at play, and the entity’s bargaining position vis-à-vis its business users and consumers.
“In its present form, the in-principle scope of the DCB is wide but the regulator has the discretion to implement it narrowly. The RFP, in line with the recommendations of the standing committee report, pushes for an evidence based, targeted approach from the get-go,” said Modhulika Bose, partner (competition law) at Chandhiok and Mahajan Advocates and Solicitors.
In addition, the market study would also take into account the core digital services (CDS) – an inclusive and pre-identified list of services that are susceptible to concentration and anti-competitive behaviour. The RFP document has asked to evaluate the current list of nine digital services proposed in the bill, and whether there’s a scope to include more or fewer services. The nine CDS include search engines, social networking services, web browsers, cloud services, operating systems, video-sharing platform services, etc.
Vinod Dhall, former chairman (acting) of the Competition Commission of India (CCI) said that artificial intelligence (AI) has shifted the digital markets landscape where the dominance of existing tech players in the search engine market and productivity suites are being challenged. “Pureplay AI companies like OpenAI and Perplexity are challenging Google and Microsoft in many of these CDS. That could have prompted the government to relook at these nine services, particularly from the AI angle,” he said.
Last year, the government faced widespread criticism of DCB during inter-ministerial consultations and feedback from industry. To address this flak, the state corporate affairs minister Harsh Malhotra said that the government is considering a market study on the proposed DCB to develop an evidence-based foundation for its ex-ante regulations.
“While India would benefit from ex-ante regulation of digital markets, empirical evidence through market studies/impact assessments in the following two areas would give us better understanding on the likely impact of the implementation of ex-ante regulation,” the RFP document said.