By Shruti Hiremath and Bhoomika Agarwal

With a panel backing an ex-ante framework, India can glean insights from the UK’s journey with the DMCC Bill while contextualising it to our market

Fair competition is essential to drive innovation in India’s digital sector. One approach to ensuring a competitive digital sector that policymakers globally are considering is ex-ante regulations. The UK government is debating the draft Digital Markets, Competition and Consumers (DMCC) Bill, which the Digital Markets Unit (DMU) of the Competition and Markets Authority (CMA) will enforce.

Similarly, the Committee on Digital Competition Law (CDCL) in India recently released its report recommending an ex-ante framework and a draft Digital Competition Bill (DCB). Reportedly, a Digital Markets & Data Unit (DMDU) has also been established within the Competition Commission of India (CCI) to facilitate engagement in the digital sector. As India shapes its digital competition regime, it can glean insights from the UK’s journey with the DMCC Bill while contextualising these lessons to India’s unique market dynamics and policy landscape.

Balancing flexibility and accountability

Under the DMCC Bill, strategic market status (SMS) companies will have to comply with bespoke conduct requirements based on the legislative objectives of ensuring fair dealing, open choices, trust, and transparency. This approach allows for a tailored regulatory regime that accounts for the company’s activities and business model. However, it gives the DMU broad discretion, considering that the principles and objectives are not narrowly defined and the DMU’s decisions can generally be appealed only on the basis of irrationality, illegality, and procedural impropriety and not on merits (barring in relation to fines). Thus, the DMCC framework highlights the need to balance flexibility against regulator accountability.

The CDCL report recommends a framework on similar lines with separate conduct requirements for each core digital service (CDS), to be determined through regulations while also empowering the CCI to subject different systemically significant digital enterprises (SSDEs) offering the same type of CDS to distinct conduct requirements. Implementing a DMCC-like model in India would require substantial resources and expertise, potentially exceeding the CCI’s current capacity. Further, it may lead to divergent regulatory mechanisms for different firms offering the same CDS, which could create uncertainty for the technology ecosystem. To ensure that this mechanism leads to effective compliance, enhancing the capacity of the CCI must be prioritised.

Scope of ex-ante legislation

Under the DMCC, companies will be designated as having SMS in respect of a digital activity linked to the UK if they have “substantial and entrenched market power”, “a position of strategic significance”, and if certain turnover requirements are met. The term “digital activity” includes (a) providing services via the Internet, (b) providing digital content, and (c) any other activity conducted for the purposes of (a) or (b). While such a broad and vague definition of “digital activity” could ensure that the regime stays relevant as technology advances, it could lead to markets without competition issues being brought under the purview.

The CDCL seeks to address this issue by establishing an initial list of CDSs to which it will apply, akin to the approach of the DMA, with the authority granted to the central government to adjust the list in consultation with the CCI. The report emphasises the importance of applying the draft DCB to an inclusive and pre-identified list of CDSs “vulnerable to concentration and anti-competitive practices”. While the relationship between certain CDSs and structural competition law issues is clear through the CCI’s enforcement history, the basis for including certain services like video-sharing platform in the CDS list is unclear. It would also be prudent to establish guardrails to ensure that any additional service included in the list of CDS warrants regulatory intervention based on an evidence-based assessment.

Capacity-building

The DMU’s responsibilities include advising the UK government, engaging stakeholders, gathering evidence on digital markets, assisting the CMA in ongoing digital sector investigations, and enforcing the DMCC. The UK government has been actively working towards strengthening the DMU by allocating substantial financial and personnel resources. In 2021, the CMA allocated £4.80 million to establish the DMU, followed by £6.26 million in 2022 to develop the DMU further. The CMA also increased its personnel from 786 individuals in 2021-22 to 813 in 2022-23, partly owing to the growth of the DMU.

Enacting the DCB will undoubtedly increase the CCI’s workload, especially if India opts for a principles-based, service, and potentially firm-specific approach akin to the DMCC Bill. The CCI’s strength was 120 in 2021-22. To ensure that the DCB’s impact is not undermined due to inadequate enforcement, the CCI will need to invest in additional human and financial resources, especially with regard to training DMDU personnel on complex technologies and dynamics of the digital sector.

As India navigates the complexities of framing its digital competition regime, it would be prudent to leverage insights from the DMCC while also being cognisant that relying on its framework could result in shortcomings in the Indian context. By striking a delicate balance between flexibility and accountability, India can establish a robust regulatory framework, driving fair competition and innovation in its thriving digital sector.

The authors are senior associate, Clifford Chance, London, and senior research associate, The Dialogue, New Delhi, respectively

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