Author name: CBCL

[By Aastha Gupta] The author is a student of National Law University Jodhpur.   INTRODUCTION The 21st century has witnessed a boom in digital markets powered by Information and Communication Technology. It has transformed market dynamics and spawned phenomena inexplicable by the traditional theories of harm in competition law. Consequently, The Competition Act, 2002 (Act) is deemed outmoded since it was drafted considering traditional brick-and-mortar markets. Pursuant to the Report of the Standing Committee on Finance (Report) titled ‘Anti-competitive practices by Big-Tech companies,’ the Ministry of Corporate Affairs set up a Committee on Digital Competition Law (Committee) to draft a Digital Competition Act (DCA) regulating competition in digital markets. Presently, the European Union (EU) and Germany have introduced such ex-ante laws to rein in the Big-Tech. However, the author argues that a separate DCA modelled on EU’s Digital Markets Act (DMA) is premature for a rapidly growing economy like India. The extant regime bolstered by certain amendments is well-equipped to deal with the challenges. This article will firstly, asses the challenges posed by digital markets; secondly, analyse the disadvantages of the proposed ex-ante framework; thirdly, suggest amendments to the extant regime in the backdrop of its overall suitability. CHALLENGES POSED BY DIGITAL MARKETS Defining the relevant market (RM) is the first step in antitrust scrutiny. Over the years, the Competition Commission of India’s (CCI) approach has evolved from Ashish Ahuja v. Snapdeal where it considered online and offline markets as merely separate distribution channels in the same RM; to Federation of Hotel & Other Restaurant Associations of India v. MakeMyTrip India Pvt. Ltd. (FHRAI) where the it segregated online and offline markets as different RM. However, the traditional touchstone of product substitutability is of limited assistance in digital markets. Digital ecosystems often involve two-sided and multi-sided platforms like Google, Uber, Swiggy characterised by zero-price services, network effects, positive-feedback loops etc. The interdependence of consumers on different ‘sides’ of the platform, warrant both sides to constitute the same RM as in Ohio v. Amex. However, in the Facebook/Whatsapp merger, the European Commission delineated separate RMs in a two-sided platform comprising platform users on one side and online advertising activity on the other. Thus, there is no uniform approach and novel approaches of delineation based on ecosystems, secondary-markets, cluster-markets are being explored. Additionally, these markets are prone to concentration of market share in a few dominant players due to low marginal costs, increasing returns to scale, monopoly leveraging through acquisition of complimentary assets which leads to a winner-takes-all situation. This,  is viewed as a perfect recipe for monopolistic outcomes and anti-competitive practices like self-preferencing, deep discounting, anti-steering provisions etc.; hence the call for an ex-ante regulation. CRITICISMS OF AN EX-ANTE FRAMEWORK Presently, Sections 3 and 4 are governed by an ex-post regime wherein firms may be penalized only after they have been adjudged guilty of contravening the Act. The Report recommended designating certain firms as ‘Systematically Important Digital Intermediaries’ (SIDI) and prescribed mandatory obligations for them. However, introducing objective quantitative thresholds to identify SIDIs is dubious since it paints disparate digital platforms like Uber and Amazon with the same brush. This is  undesirable in a dynamic market governed by multitudinous factors that require case-based analysis. It will increase false-positives that will further complicate enforcement, increase compliance costs and time for firms through a system of notices, approvals, disclosures, thus marking a step back in the government’s efforts to ensure ease-of-doing-business. Additionally, consider that presently, proving a charge of ‘abuse of dominance’ requires the enterprise firstly, to be dominant in the RM, i.e., be able act independently of market participants like suppliers, competitors, customers etc. which is a high threshold given the inherently inter-connected nature of the market system. Secondly, dominance must be abused. However, in the new framework, SIDIs will have to follow a list of obligations that limit their freedom of operation, which amounts to a regression to the outdated principle of the Monopolistic and Restrictive Trade Practices Act where dominance itself is bad. In CCI v. SAIL, it was held that the main objective of competition law is to promote creation of market responsive to consumer preferences. It is well-recognized that the innovations helmed by Big-Tech firms are responsible for the comfort and convenience we enjoy today, be it e-commerce, social-networking, or food-delivery. Contrarily, it is often argued that this innovation would have reached new heights absent Big-Tech. However, this is mere speculation. Consider for instance, the denunciation of acquisition of smaller firms by large firms as stifling competition. These acquisitions fuel the investment cycle since venture-capital firms often invest in startups hoping that these would be acquired by a large firm. Prohibiting these acquisitions might curb venture-capital investment. Moreover, small firms may not have the wherewithal to make their product successful, depriving consumers of its benefit. An over-intrusive regulation would be surprising considering CCI’s decisional practice of favouring innovative and fast-developing markets. In RKG Hospitalities Pvt. Ltd. v. Oravel Stays Pvt. Ltd., CCI viewed Oyo’s single largest market share  only as ‘significant’ noting that the market of franchising for budget hotels is still untapped. In Re: Bharti Airtel Limited and Reliance Industries Limited & Reliance Jio Infocomm Limited, CCI effectively allowed Reliance Jio to offer free services and gain share in the broadly-defined market for wireless communication services. PROPOSED AMENDMENTS Interestingly, the Report cited the need for a global harmonisation of the competition law regime. However, out of over 120 competition law jurisdictions across the globe, only the EU  and Germany have enforced ex-ante regulation; others are still considering the same. The DMA came into effect only on 2 May 2023 and has not been fully implemented. Thus, its actual effect is speculative. Further, India is still in the growth phase of its digital and technology industry as opposed to EU that has seen its heyday. Varied market conditions and consumer needs warrant broad-based market studies and consumer surveys before implementation. Thus, CCI must not jump the gun by introducing a DCA which would amount to choosing ‘fair’ over

[By Shivangi Paliwal] The author is a student of National Law University, Jodhpur.   I.          Introduction Blockchain technology has gained significant attention in recent years due to its potential to revolutionize various industries. India, currently, does not have any cryptocurrency legislation in place, although the parliament has proposed various bills to address the regulatory concerns associated with them. In January 2021, it was reported that the Indian Parliament was considering the “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.” The Competition Act, 2002 prohibits any practice which leads to adverse appreciable effect on competition. Cryptocurrency and blockchain technology can be used in an anti-competitive manner, thus it is pertinent to address concerns surrounding blockchain technology within the framework of the Competition Act, 2002, This article delves into key questions regarding blockchain technology, such as its classification as an enterprise, the treatment of agreements within the blockchain ecosystem, the jurisdiction of the Competition Commission of India (CCI) over blockchain enterprises, competitive concerns raised by blockchain, and the impact of algorithmically determined prices. Additionally, relevant case laws from USA too, are analyzed to provide a comprehensive understanding of the legal landscape surrounding blockchain technology. II.          Classification of Blockchain Applications as an Enterprise Section 2(h) of the Competition Act defines an enterprise as “a person or a department of the government engaged in any activity.” In the case of Re: Dilip Modwil and Insurance Regulatory and Development Authority, the CCI adopted an expansive interpretation of the term “enterprise,” encompassing entities engaged in economic and commercial activities. Accordingly, based on the joint discussion paper released by the CCI, blockchain applications providing distributed ledger technology (DLT) services can be regarded as enterprises governed by the Competition Act. III.          Agreements within the Blockchain Ecosystem The Competition Act’s Section 2(b) defines an agreement as any arrangement, understanding, or action in concert, regardless of its form or enforceability. Section 3 encompasses the prohibition of anti-competitive agreements among enterprises, individuals, or groups of enterprises or individuals, pertaining to various aspects such as production, supply, distribution, storage, sale, pricing, and trade of goods, as well as the provision of services. More specifically, the Act imposes restrictions on firms, or associations of firms, from engaging in collusion with other firms or associations of firms, regardless of whether they operate within the same or different levels of the production chain. In the context of competitors engaged in the same economic activity, these anti-competitive agreements commonly manifest as collusion, encompassing practices such as cartelization or bid rigging. The CCI’s joint guidance paper acknowledges that when two firms or individuals participate in a blockchain application with pre-defined rules, they have effectively entered into an “agreement.” Consequently, any anti-competitive conduct arising from participation in a blockchain application may be deemed a contravention of the Competition Act. IV.          Jurisdiction of the CCI over Blo. ckchain Enterprises Blockchain technology transcends geographical boundaries, and participants often remain anonymous. While this poses challenges, the CCI retains jurisdiction over global blockchains if it can demonstrate that significant adverse effects on competition in the relevant Indian market have occurred, as stipulated in Section 32 of the Competition Act. V.          Competitive Concerns Raised by Blockchains Opacity Effect of Permissionless Blockchains Permissionless blockchains, characterized by data encryption and pseudonymous nodes, pose challenges for competition authorities in analyzing blockchain application data. This opacity effect makes it difficult to identify economic evidence of anti-competitive conduct. However, the CCI has acknowledged this challenge in Re: XYZ Corporation, emphasizing the need for innovative approaches to address anti-competitive concerns within permissionless blockchains. Enforceability of Permissioned Blockchains In contrast to permissionless blockchains, permissioned blockchains are governed by centralized entities that scrutinize and list participants. As a result, concerns regarding enforcement and anti-competitive behavior are minimized within permissioned blockchains. Exchange of Sensitive Information Blockchains often contain sensitive information, including pricing, discounts, production, sales, costs, and strategies. The CCI has established, in various orders, that the exchange of commercially sensitive information can lead to an appreciable adverse effect on competition, contravening Section 3 of the Competition Act. For instance, in Re: Cartelization in Industrial and Automotive Bearings, the CCI held that the exchange of commercially sensitive information is an anti-competitive practice. Therefore, if a blockchain application involves the exchange of such information, the CCI has the jurisdiction to investigate the matter. Smart Contracts and Anti-competitive Behavior Smart contracts, integral to the functioning of blockchains, are self-executed digital contracts that automatically execute based on predetermined conditions without human intervention. In the case of Hyundai Motor Company and Kia Motors Corporation, the CCI ruled that the mere use of algorithms in smart contracts is not inherently discriminatory. However, it emphasized that such algorithmic means should not be utilized to promote anti-competitive behavior in the relevant market. Given that algorithms are an essential component of blockchain technology, the CCI will closely scrutinize any instances where algorithms are employed to facilitate anti-competitive conduct, raising concerns for blockchain applications. Impact of Algorithmically Determined Prices on Collusion The Competition Act stipulates that human involvement is necessary to provide relief in cases of collusion. The CCI’s decision in Samir Agarwal v. ANI Technologies affirmed that algorithmically determined prices do not automatically lead to collusion or cartelization within the scope of competition law. However, it is worth noting that every process involved in the functioning of a blockchain is algorithm-based, presenting a quandary for the CCI in assessing the potential for collusion or anti-competitive behavior within blockchain ecosystems. VI.          Position in USA Under the U.S. antitrust regime, the following are the major cases which shed light on competition concerns associated with Bitcoin technology. In the case of Gallagher v. Bitcointalk.org, a Bitcoin enthusiast filed a claim against the Bitcoin Foundation and the forum owners, alleging that they conspired to exclude him from the website, thereby stifling competition in the Bitcoin space. The plaintiff argued that this conduct violated Section 1 of the Sherman Act, which prohibits anti-competitive agreements and conspiracies. The court considered whether denying access to a blockchain facility, in this case, Bitcointalk.org, could constitute an

[By Himanshi Srivastava] The author is a student of Dharmashastra National Law University.   Introduction With the Competition (Amendment) Bill of 2023, receiving the President’s assent, the market is abuzz with questions revolving around the major amendment which has empowered the Competition Commission of India (CCI) to levy penalties on global turnover. In Section 27(b) of the Competition Act, the definition of turnover has been now enhanced to mean ‘global turnover’ derived from all the products and services by a person or an enterprise. This contrasts the earlier meaning of turnover, which was restricted to ‘relevant turnover’, as interpreted by the Supreme Court in the landmark judgement in the Excel Crop Care Ltd. case. In this case, the Apex Court determined that the penalty under Section 27(b) must be on the relevant turnover, i.e., relating to the specific product(s) in relation to the breaches. Until now, the definition of ‘turnover’ in Section 2(y) did not specify anything, it is for the first time that the words of the statute explicitly provide for the nature of the turnover to be global, extinguishing any possible ambiguities and room for judicial discretion. Thus, it will be quite crucial to see the development which will follow this unprecedented change in the Indian economy and the stakeholders. The amendment brings into discourse, the aspects of proportionate penalties, determining turnover, and the nuances of the constitutionality of the amendment. To understand the potential impact of this change in a global paradigm, a comparative assessment of jurisdictions like- the European Union (EU), the United Kingdom (UK), and Germany would be immensely fruitful. Analysing the penalty on turnover in a global paradigm For the purpose of contextualising the analysis, a parallel comparison could be drawn in the global paradigm, to ascertain the practical nuances of this amendment from a broader perspective. The EU, CMA guidelines, and the German Competition Act are relevant to this discourse. Article 30 of the EU’s Digital Markets Act penalises the gatekeepers with a fine of up to 10-20% of the total worldwide turnover in the preceding financial year, on breaches of the Act. However, as a precaution, this provision is followed by the ‘right to be heard and access to the file’ in Article 34 of the Act. By virtue of this provision, the gatekeepers have the right to the defence which includes the right to access the file of the Commission and submit their observations regarding the preliminary findings of the Commission. Similarly, the Competition and Markets Authority (CMA) of the UK has permitted a maximum penalty of 10% of the worldwide turnover of the entity in the last business year for engaging in anti-competitive conduct.      The guidance also provides for mitigating factors, assessing whether the undertaking is operating under duress, if the infringement is halted upon CMA’s intervention and cooperation with the process. Section 36 of the Competition Act, 1998, provides for a mandatory requirement of a notice in writing, while also directing the CMA to consider the seriousness of the breach and the deterrence for ascertaining the penalty. A like provision is present in Section 81(c) of the Competition Act of Germany, which has fixed the upper limit of the fine amount from an undertaking to 10% of the total turnover generated in the business year preceding the authority’s decision. Various factors like- the nature and gravity of the infringement, its duration and manner, the economic condition of the undertaking, its efforts to redress the consequential harm, etc. are also required to be considered to determine the fine. Hence, we see a likeness in all these legislations, which provide for penalties on global turnover, while equally ensuring the rights of the defaulters. However, one fails to see similar provisions in both the Indian legislation as well as the current amendment bill. It is thus vital for the lawmakers to provide for certain leniency reductions or settlement reductions in fines imposed, lest the defaulting enterprise may suffer due to the unbridled powers bestowed upon the CCI. Since the antitrust regime in India is still nascent, unlike the mature and highly volatile market structures of economies like the EU, UK, Germany, etc., it is reasonable to say that the novel change in India’s Competition law necessitates including various precautionary measures, to maintain an equilibrium in the CCI’s approach to a case of a breach. A lack of such measures may pose a possible threat to the regime against the anti-competitive conduct of corporations. Possible implications in the Indian scenario The meaning of turnover in the Indian context can be traced from the Excel Crop Care Ltd. case. In this case, the CCI imposed a penalty of 9% on the average ‘total turnover’ for the last three years on establishments accused of entering into an anti-competitive agreement. The Court concurred with the decision of the Competition Appellate Tribunal (COMPAT) in its interpretation of turnover in Section 27(b) as relevant instead of total. To arrive at this conclusion, the Court considered factors, the first being the possibility of any inequitable and discriminatory outcomes of the penalty imposed on multi-product and single-product companies alike. Further, an analysis in light of the principle of strict interpretation of statutes and the doctrine of proportionality also suggested that the usage of relevant turnover would be proportionate and not antithetical to the entities. The novel provision of penalties on global turnover will undoubtedly have far-reaching consequences for businesses operating in India. Penalty for anti-competitive practices on global turnover will not only increase corporations’ pecuniary liability manifolds but may also have adverse impacts on the competition in the market. The expansion in the scope of the powers of the CCI will certainly increase regulatory oversight and scrutiny of multinational companies in India. The enormous amount of penalties resulting from this amendment could potentially sabotage business operations, draining their balances, eventually leading to unnecessary compliance burden and discrimination against multi-product corporations. Big enterprises could be denied potential investments if there is a lack of transparency and uncertainty in the market.

[By Vanshika Agarwal] The author is a student of the West Bengal University of Juridical Sciences.   Abstract The burgeoning growth of the gaming industry has necessitated its need for regulation. The Central Government by proposing amendments to the already contentious IT Rules, 2021, has sought to bring online gaming platforms within its ambit of regulation through a template for self-regulation. Self-regulation of industries are steps taken to supplement the rules and regulations provided by government that oversee their activities. Self-regulation of any industry can pose various challenges relating to accountability, fair competition, market integrity and privacy which may render such schemes unfeasible. The paper analyses the ambiguities and complexities in the proposed amendment for the self-regulation of gaming platforms. It examines the regulatory-proportionality theories to demonstrate the issues associated with the powers and discretion provided to self-regulatory bodies in classification of online games and online gaming intermediaries. Finally, the paper shows that by an application of these regulatory theories, the present mechanism for self-regulation is not feasible. I.          Introduction The Ministry of Electronics and Information Technology [‘MeitY’] introduced further amendments to the IT Rules, 2021 on 2nd January, 2023,[1] post its appointment as the nodal ministry for online gaming.[2] These draft amendments introduce provisions for the regulation of online gaming platforms by expanding the purview of Part II of the IT Rules, 2021.[3] These rules provide for the establishment of self-regulatory bodies (‘SRB’), which would be responsible for registering and approving games as well as providing a grievance redressal mechanism.[4] The proposed laws mandate, among other things, that gaming companies adhere to SRBs,[5] only publish games recognised by such bodies, adhere to know-your-customer (KYC) standards,[6] establish a grievance resolution system,[7] and define online gaming platforms as intermediaries.[8] The ambiguities and wide discretionary powers afforded to SRBs under this regulation must be assessed to determine the feasibility of the proposed mechanism. Part II of the paper explores the shortcomings in the proposed regulation for online gaming, specifically in relation to self-regulatory bodies. It discusses how the membership of the SRBs as envisioned in the regulation can lead to regulatory capture, allowing for competitive distortions by larger gaming firms. Part III examines the ambiguity surrounding the classification of online games by SRBs. By briefly explaining the theories of regulatory-proportionality to assess fintech regulations, the paper analyses how this ambiguity is not in conformity with regulatory principles and its potential effects on innovation and growth. Part IV concludes the discussion on this topic by holding the present self-regulation mechanism to be not feasible. II.          The risk of regulatory capture There are several concerns with the proposed mechanism relating to definitional ambiguity for ‘online game,’ the role of SRBs and the excessive powers conferred to the government for the governing of online gaming platforms.[9] In this section, the risk of regulatory capture is explored in light of the roles of the SRBs. According to the guidelines, membership in multiple SRBs is possible for online gaming intermediaries.[10] SRBs must ensure due diligence,[11] in addition to making sure that the game does not prejudice national security and public order.[12] These wide reasons of public order can be interpreted differently by each SRB.  Liberal or biased interpretation can result from conflict in interest which would be detriment to the consumers. It affords online gaming intermediaries the opportunity to forum-shop for an SRB that interprets these provisions in a manner favourable to their interests, or to construct a separate SRB in a race to the bottom.[13] Evidently, this would be deleterious, by permitting discriminatory conduct and enlarging the scope for regulatory arbitrage.[14] When a self-regulatory body is “closely” connected with the business that it oversees there exists a risk of regulatory capture.[15] Regulatory capture is the consequence or process whereby regulation, in statute or application, is steered continuously or repeatedly away from the public interest and towards the interest of the regulated industry, by the intent and activity of the industry itself.[16] Dominance by industry specialists and insiders can result in regulatory capture by well-organized groups with specialised but powerful interests.[17] SRBs with diverse stakeholders, as is likely in the gaming industry, have an even higher probability of regulatory capture. This is because the differential size and influence of gaming firms can concomitantly affect their influence in the SRB, precluding the SRB’s ability to be unbiased.[18] Due to the regulatory bodies being highly specialized and compartmentalized there can be absence of transparency in the rules followed.[19] The online gaming platform is a nascent market whereby having online gaming intermediaries approach membership in SRBs can potentially harm the common standards of the industry. As the governing body of the SRBs are constituted by comprising of individuals that are specialists,[20] lack of transparency as to their decisions poses a high risk of regulatory capture. Further, as the online gaming intermediaries themselves can become part of these SRBs, there is an extreme “close” connection. Online gaming intermediaries that are dominant can submit to SRBs whose interpretations are beneficial to them,[21] leading to questionable abilities of such bodies to ensure equal treatment for all intermediaries. SRBs have charged exponentially large registration fees offering large corporations an unfair competitive edge because startups and small businesses cannot pay such exorbitant costs.[22] Furthermore, the decision of the SRB in case of a grievance redressal is final and there is no appellate body to safeguard game publishers if SRB chooses not to register a game.[23] Without measures for transparency,[24] to show the reasons for the assessment of online gaming intermediaries for membership, not only conflict but regulatory capture can also exist. III.          AMBIGUITY IN DEFINING ‘ONLINE GAME’ Under the proposed amendments, SRBs can register an online game following conformity to certain rules which includes ensuring that an online game complies with Indian laws, including state laws on betting and gambling.[25] This can be seen as a step towards getting SRBs to certify whether the online game is one of skill or chance and what constitutes as an ‘online game. [26] In this part, the