Author name: CBCL

[By Nandita Karan Yadav] The author is a student of National Law Institute University, Bhopal.   Introduction  The rise of Big Tech giants has positively transformed the digital landscape. However, this revolution comes with a darker side: concerns about market dominance and privacy violations that the existing ex-post laws do not address effectively. In response, several countries have already implemented digital sector regulations. Now, India is in the midst of discussions with stakeholders about its own Digital Competition Bill. This paper intends to analyse the Digital Competition Bill and the author through this blog compares the legislation with international laws on the subject and substantiates that the current Digital Competition Bill is inadequate for India in its current state.   Big Tech and Need for Regulation   “Big Tech” refers to major United States-based technological corporations such as Google, Meta, Apple, Microsoft, and Amazon. These behemoths offer a plethora of services and boast an immense consumer base. Their substantial market capitalisation and influence enable them to leverage their dominant positions to the detriment of competitors and the privacy rights of their consumers. Google was fined €4.34 billion for imposing three types of illegal restrictions on Android, cementing its search engine’s dominance and denying rivals the opportunity to innovate and compete on the merits. Through aggressive profit-maximising strategies, they undermine the democratic rights afforded to both competitors and consumers.  The digital markets present unique challenges, primarily because these Big Tech companies utilise data as a resource, contrasting with the reliance on capital in other sectors. In traditional sectors, success often depends on access to and capital investment—like machinery, infrastructure, or financial resources.  A company’s success in the tech sector hinges on the volume of data it amasses. This data is exploited to expand their consumer base by tailoring services to consumer preferences and through targeted advertising. An increased consumer base leads to a “network effect,” where the utility derived by each consumer escalates as the user base grows. Moreover, these corporations benefit from economies of scale.  The digital market frequently encounters the “tipping effect,” wherein market power becomes concentrated in the hands of one or two corporations rather than being distributed evenly among multiple competitors. Dominant entities often engage in anti-competitive practices such as self-preferencing, tying and bundling, third-party steering, etc.  The infamous Google Shopping case exemplifies how these tech giants fail to provide an equitable platform for all businesses on their search engines. When market power is concentrated, consumers face higher prices, fewer choices, stifled innovation, and potential privacy risks due to reduced competition. In response, various jurisdictions, including the European Union, the UK, Japan, and Germany, have initiated sector-specific regulation of the tech industry.  How international jurisdictions addressed these problems  The existing ex-post laws have proven inadequate in addressing the concerns of the rapidly evolving tech sector. Remedies applied after the abuse of dominance fail to effectively undo the anti-competitive conduct. The ex-post procedure is also time-consuming; by the time the relevant authority rules against a Big Tech entity, irreversible market damage may have already occurred. Therefore, it became imperative to ensure compliance at every step in digital markets, not merely reactively when anti-competitive conduct has already transpired. It is argued that ex ante enforcement, which involves proactive regulation, is likely to complement ex-post enforcement. The report also argues that together, these approaches can secure the digital markets comprehensively.  The European Union, a pioneer in the antitrust regime, was the first jurisdiction to introduce digital market regulations through the Digital Markets Act, which came into force in 2022. This Act identifies core platform services that will be regulated and designates large tech entities as ‘Gatekeepers.’ It imposes both mandatory and prohibitory obligations on these entities. A company qualifies as a ‘Gatekeeper’ based on quantitative and qualitative thresholds. The European Commission holds the enforcement power for this legislation. The Indian Digital Competition Bill is substantially inspired by the EU law.  The UK’s Digital Markets, Competition and Consumers Bill (DMCC) of 2023 is currently awaiting approval in the UK parliament. Similar to the EU, the UK law proposes to grant corporate entities a ‘Strategic Market Status’ by the Competition and Markets Authority (CMA), and it also enforces prohibitory and mandatory obligations. The US has proposed twelve bills that are pending approval which substantially adopt a similar stance. Unlike the aforementioned jurisdictions, Japan adopts a digital platform-specific approach. It targets certain dominant entities and imposes compliance obligations regardless of the services they provide. Recently, Japan approved a law requiring Apple and Google to open their app stores to smaller app developers, aiming to promote innovation. Germany has opted for a similar approach, without specifying which services will be covered under the law which has been into force since 2023.  India’s Digital Competition Bill   India’s Digital Competition Bill was introduced in March 2024 by Competition Commission of India (CCI). A report on the bill by the Committee for Digital Competition Law (CDCL) was also propounded. The bill is a spitting image of the DMA applicable in the EU jurisdictions. The bill is based on the underlying principles of fairness, transparency and contestability advocated by the CCI. The bill, when applicable, will only take under its purview nine core services identified by the CDCL report which are online search engines, online social networking services, video-sharing platform services, interpersonal communications services, operating systems, web browsers, cloud services, advertising services, and online intermediation services. This approach is in adherence to the service specific approach adopted by EU and Australia as opposed to the platform specific approach. These include online search engines, video sharing platforms, web browsers etc. The Bill identifies Systematically Significant Digital Enterprises (SSDE), and the act will be applicable to these entities specifically. Categorisation of an entity as SSDE depends on the quantitative and qualitative thresholds. If an entity does not qualify quantitative thresholds, CCI can categorise it as SSDE based on qualitative thresholds for three years. The committee also identified ‘Associate Digital Enterprise’ (ADE); entities responsible for provision of core digital services of the

[By Jainam Shah & Ayush Raj] The authors are students of Gujarat National Law University.   Introduction In the rapidly evolving market of India’s digital economy, the Digital Competition Bill of 2024 has emerged as a contentious piece of legislation. It aims to regulate Systemically Significant Digital Enterprises (‘SSDEs’) in India through ex-ante regulations and seeks to ensure fair competition while preventing anti-competitive practices in digital markets. However, the bill’s criteria for identifying SSDEs and its enforcement mechanisms have raised several concerns among legal experts and jurists. With the announcement of the Digital Competition Bill, India finds itself mirroring global debates unfolding in the EU, US, and UK. The legislative efforts of these jurisdictions, like the EU’s Digital Markets Act, have faced significant criticism for potentially stifling innovation while attempting to address competition in digital markets. This blog delves into a critical examination of the Digital Competition Bill, scrutinizing its quantitative and qualitative thresholds, enforcement mechanisms, and the broader implications for innovation and competition in India’s digital economy. It is argued that the quantitative thresholds used to identify SSDEs are overly restrictive, failing to capture the nuanced realities of digital markets. On the other hand, the qualitative criteria grant the Competition Commission of India (‘CCI’) broad discretionary powers, leading to uncertainty and ambiguity among digital businesses. The analysis aims to highlight the bill’s shortcomings and propose more nuanced approaches to fostering a competitive yet innovation-friendly digital landscape.  Critique of the criteria for identifying SSDEs As per the provisions of the Digital Competition Bill (‘DCB’), it aims to regulate companies and enterprises classified as ‘Systematically Significant Digital Enterprises’ – those having a significant presence in a ‘Core Digital Service’. The DCB employs a dual-pronged strategy to classify a business as an SSDE – Quantitative and Qualitative. On the surface, it may seem a very comprehensive approach, however, a closer examination reveals a lot of major fundamental issues. 1. Restrictive nature of quantitative thresholds. The quantitative thresholds used to identify SSDEs are – turnover, market capitalisation, and number of users. These thresholds bear a striking resemblance to those in the now-replaced ‘Monopolies and Restrictive Trade Practices Act 1969 (‘MRTP Act’)’. One of the major criticisms of the MRTP Act was its strictly mathematical criterion to determine whether a company had a dominant role or not in the market. Consider a scenario where a company with 23% or 24% market share escapes regulations, while another with 25% falls under scrutiny. The same issue lies with the one-size-fits-all quantitative thresholds that have been incorporated into the bill upon the recommendation of the Standing Committee report. The bill aims to identify companies with a significant presence in their particular digital markets, but only through a fixed figure of revenue and the number of users of that company. Instead of providing a universal figure or threshold, the Bill shall provide specific figures with respect to each digital market that it aims to cover, considering metrics such as innovations, perceived value, brand loyalty, etc. This would ensure a more nuanced and comprehensive assessment of a company’s significance within its respective digital domain. Further, another problem with the financial thresholds of DCB is that it inadvertently favours multinational companies over smaller Indian startups. As per the current scenario, an Indian startup with a turnover of 5000 crores could be classified as an SSDE, whereas, an Indian subsidiary of a global giant having a turnover of 20 million USD turnover might escape regulation if its local turnover falls below 3500 crores. This disparity contradicts the spirit of recent initiatives, such as ‘Make in India’ taken by the Government. 2.     Ambiguity and uncertainty in qualitative thresholds. While the quantitative thresholds are problematically restrictive, the qualitative criteria swing to the opposite extreme by granting the CCI sweeping discretionary powers to designate any given company or enterprise as an SSDE, regardless of whether it meets the quantitative thresholds. The CCI holds the power to label an enterprise as an SSDE on the basis of qualitative factors such as “volume of commerce”, “size and resources”, “monopoly position”, and “economic powers”, among others. While this discretion might seem to address the problem of rigidity caused by quantitative thresholds, it introduces a new problem: uncertainty. Imagine being a company that just falls short of quantitative thresholds. You are now in a continuous limbo, unable to predict whether you will be classified as an SSDE or not. This would only paralyze decision-making and stifle innovation – the very antithesis of what a thriving digital economy needs. Further, the qualitative criteria listed in the bill seem to be of an open-ended nature, which are purely subjective. The bill mentions not only 15 broad factors but also a 16th catch-all factor: “any other relevant factor not mentioned above may be considered”. Thus, CCI, in a way, has complete discretion and authority over the designation of a company as an SSDE. The Bill has tried to solve this issue half-heartedly wherein it provides for an opportunity to appeal or rebut to any company designated as an SSDE based on qualitative criteria. Recommendations Along with an expanded appeals process, in order to mitigate this issue, the DCB must incorporate a transparent and structured process of designating an SSDE. This should include: A formal, step-by-step designation procedure. A clear and strict timeline for CCI’s decision-making process, thus, it would provide much more clarity to a company on what to expect further. A mandate for the CCI to provide detailed explanations of its reasoning. This would not only help the companies in appealing against the said designation process but also act as an obstruction to otherwise discretionary powers of CCI. These measures would help alleviate the uncertainty and fear that the current subjective approach possesses. By refining the quantitative thresholds to account for market-specific nuances and implementing a more transparent qualitative assessment process, the DCB can strike a more balanced and equitable approach to regulating Systematically Significant Digital Enterprises. This, in turn, will foster a more conducive environment for the growth

[By Sunidhi Kashyap] The author is a student of Rajiv Gandhi National University of Law, Punjab.   Introduction   A failed attempt at acquiring a healthcare company involved in developing early cancer detection tests, led to an interesting take on the European Union Merger Regulation (“EUMR”). Illumina, an American biotechnology company manufacturing and selling next generation sequencing (“NGS”) systems, used in developing blood-based tests to detect cancer, wanted to acquire GRAIL, an American healthcare company engaged in developing an early multi-cancer detection test in asymptomatic patients.   Illumina had publicly announced its intention to acquire GRAIL for $8 billion in 2020. However, this acquisition embroiled Illumina in a legal battle with both, the EU and the US regulators on account of the anti-competitive nature of this deal. While the unsuccessful deal of Illumina and GRAIL is known for the unique interpretation of Article 22 of EUMR given by the General Court (“GC”), it has also paved a path for regulating combinations. The interpretation given by the GC shows that though the deal was within the threshold limit of notifying the relevant authorities, it still had the potential of stifling innovation in a constantly evolving and emerging market like healthcare.   In this context, this post will firstly shed light on the role of Article 22 of EUMR in this deal; secondly, it will discuss the importance of regulating combinations in markets of innovation and lastly, it will identify the lacunae in the Indian competition regime and would suggest a way forward.   Article 22 of EUMR and the Illumina-GRAIL deal   Illumina is the top supplier of NGS systems and GRAIL was a customer of Illumina, using its NGS systems to develop cancer detection tests. According to the investigation of the European Commission (“EC”), a vertical merger between the two could destroy competition in the market of early cancer detection tests as Illumina would be incentivized to not share its technology with GRAIL’s rivals and consequently, without the essential input from Illumina, GRAIL’s competitors would be put in a disadvantaged place. The market players were apprehensive that post the acquisition, Illumina would monopolize the emerging market of early cancer detection tests by limiting access to its NGS systems.   While both the American healthcare companies did not exceed the relevant thresholds and did not have any European dimension it was still subject to scrutiny by the EC. This was possible only because Article 22 of EUMR permits Member States to request the EC to investigate the concentration if it affects competition within the territory of the Member State. When looked closely, Article 22 plays a crucial role by regulating those combinations which fall within the turnover threshold but still carry an adverse effect on competition in a market. Especially, in cases of killer acquisitions, where the nascent firms are bought by the incumbents to prevent any future competition, provisions like Article 22 are important to maintain healthy competition in the market.   In India, however, combinations under the Competition Act, 2002 (“The Act”), are looked from an antitrust lens only when it exceeds the turnover or asset thresholds. This “safety net” or the de minimis exemption excludes many combination deals in emerging markets, especially where a tangible product may not be developed yet but its merger with an incumbent firm still poses antitrust concerns. In this context, this article will argue for treating combinations in emerging markets or markets of innovation differently, by accounting for their peculiarities.   Markets of Innovation and Antitrust Concerns  Emerging or markets of innovation refer to those markets where there is constant scientific development, inventions, technological advancements, improvements or modifications. They largely refer to the research and development (“R&D”) intensive sectors. A unique characteristic of such markets is that it may not necessarily possess a tangible good which is ready to be sold. For instance, in the case of the Illumina and GRAIL deal, the early cancer detection test being developed by GRAIL was not a ready product yet. Despite that, the merger would have stifled innovation and competition in an emerging market which could potentially lead to a reduced consumer choice.   In innovation markets, the R&D development is much more fast-paced, making it more volatile than a traditional market. For instance, the infamous IBM “debacle” presents the perfect example of how innovation markets are difficult to predict. In 1969, IBM was a major player with the highest market share in the computer manufacturer sector and was being sued under Section 1 of the Sherman Act for restraint of trade. The case went on till 10 years and towards the end, it was simply dismissed in 1982 because IBM was no longer a monopolist and had lost its dominance in the market. This case shows that R&D firms are always vulnerable to radical changes and their dominance is only temporary. However, this does not mean that antitrust analysis would be completely absent in these ever-evolving markets. Being dominant in such markets for 10-20 years takes substantial resources from the economy and stifles innovation and competition both.   Lacunae in the Indian Competition Regime  While dealing with combinations in innovation markets, the biggest roadblock is posed by the “safety net” or the thresholds specified under the Act. The thresholds prescribed under the Act are of two types- turnover and asset. Only if a combination surpasses these thresholds would the Competition Commission of India (“CCI”) undertake an investigation for ruling out any appreciable adverse effect on competition in the market. Moreover, given the recent enhancements of these limits and the de minimis exemption, a lot of combination deals fall outside the scope of the Act. Additionally, it seems that the Act has a brick-and-mortar enterprise centric approach which assumes that a firm would traditionally make large investments in assets and aim to obtain a higher turnover. However, in the current technologically advanced times where the internet is progressively reducing the requirement to acquire assets, and firms are becoming dominant without heavy investments, such an approach seems outmoded.   Another hindrance with respect to innovation markets is

[By Anubhav Patidar] The author is a student at Narsee Monjee Institute of Management Studies.   Introduction In an era of increasingly sophisticated financial crimes, regulatory bodies worldwide are intensifying their efforts to combat money laundering and terrorist financing. On 06 June 2024, the Securities and Exchange Board of India (SEBI), proposed a comprehensive Master Circular (Circular) on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT). This circular, aimed at securities market intermediaries, seeks to consolidate and update existing guidelines under the Prevention of Money Laundering Act, 2002 (PMLA) and its associated rules.   The proposed Master Circular comes at a crucial time when India is strengthening its financial regulatory framework to align with global best practices. According to a 2022 report, India’s Financial Intelligence Unit (FIU-IND) processed over 1.42 Lakh Suspicious Transaction Reports (STRs) in the fiscal year 2021-22, highlighting the increasing vigilance in the financial sector. This blog post aims to unravel the key elements of SEBI’s proposed Master Circular, examine its implications for various stakeholders, and understand how it fits into the broader landscape of India’s fight against financial crimes.    Decoding AML/CFT and SEBI’s Circular Anti-Money Laundering encompasses the legal and regulatory framework aimed at preventing the transformation of illicitly gained funds into legitimate assets. Closely related, Combating the Financing of Terrorism focuses on preventing the funding of terrorist activities. In India, these efforts are primarily governed by the PMLA and its associated rules. Section 4 of the PMLA criminalizes money laundering related to property derived from offences listed in the Act’s Schedule, termed as “proceeds of crime.”    The Master Circular on AML/CFT is a detailed document designed to unify and update the earlier existing guidelines on anti-money laundering and Standards and Combating the Financing of Terrorism for securities market intermediaries. It establishes the key principles for combating money laundering and terrorist financing, providing detailed procedures and responsibilities that has to adhered by registered intermediaries.  Client Due Diligence Client Due Diligence (CDD) forms the cornerstone of the circular’s provisions. The circular mandates that intermediaries must conduct thorough due diligence procedures for all clients, with a special underlining on identifying beneficial owners. The process extends beyond merely verifying the immediate client but also understanding the entire ownership and control structure, especially for non-individual clients. For example, the circular requires registered intermediaries to identify the natural persons who ultimately own or control a company client, using thresholds like ownership of more than 25% of shares, capital, or profits. This level of scrutiny aims to prevent the use of complex corporate structures to mask the true beneficiaries of financial transactions.   Risk Based Approach The circular introduces a risk-based approach to AML/CFT measures, recognizing that not all clients and transactions pose the same level of risk. Intermediaries are required to categorize their clients into low, medium, and high-risk categories based on various factors such as the client’s background, country of origin, nature of business, and transaction patterns. This approach allows for more efficient allocation of resources, with enhanced due diligence measures applied to higher-risk clients. For the First Time, “Clients of Special Category” (CSC) are specifically defined by the circular and also provided  elaborated list who will be considered as CSCs which include the non-resident clients, high net-worth individuals, trusts, charities, NGOs, politically exposed persons (PEP), and clients from high-risk countries. These CSCs are subject to enhanced scrutiny and continuous monitoring.   Monitoring and Reporting Monitoring and reporting form another crucial pillar of the circular. Intermediaries are required to have robust systems in place to detect and report suspicious transactions. The circular provided a detailed definition of suspicious transactions, including those that seem to lack any economic or lawful purpose, unusually complex, or show patterns inconsistent with the client’s normal activity. It mandates that intermediaries should not only monitor individual transactions but also pay attention to the overall financial behaviour of their clients. The circular sets specific timelines for reporting of different types of transactions such as Cash Transaction Reports, Suspicious Transaction Reports, and Non-Profit Organization Transaction Reports to the Director, FIU-IND.   Record Keeping The Circular imposes obligation on intermediaries to maintain detailed records of transactions, client identification and account files for a five years after the business relationship has ended or the account has been winded-up. The retention of data is a pivotal step for securing the data for future audit and investigations. The circular specifies the exact nature of the information to be maintained, including the nature of transactions, amount and currency, date of transaction, and parties involved. This meticulous record-keeping not only aids in investigations but also helps intermediaries in their ongoing monitoring efforts.   Compliance Structure The circular places significant emphasis on the compliance structure within intermediaries. It mandates the appointment of a Principal Officer who will act as a central point of contact for all AML/CFT related matters. Additionally, a Designated Director must be appointed to ensure overall compliance with AML/CFT obligations. These appointments underscore the importance of top-level commitment to AML/CFT efforts within organizations. The circular provides specific definitions and responsibilities for these roles, ensuring that there is clear accountability and a structured approach to compliance.   Employee Training and Investor Education Lastly, the circular recognizes the importance of ongoing education and awareness in the fight against financial crimes. It requires intermediaries to have comprehensive and ongoing training programs for their employees. These programs should cover various aspects of AML/CFT measures, including the latest techniques and trends in money laundering and terrorist financing. Moreover, the circular emphasizes the need for investor education. The requirements of AML/CFT measures and the rationale behind requesting certain personal information shall be explained to clients by intermediaries. This two-pronged approach of employee training and investor education aims to create a more informed and vigilant ecosystem that can effectively combat financial crimes.   Analysis and implications of the Circular The proposed Master Circular has far-reaching implications for various stakeholders in the Indian securities market. For registered intermediaries, the circular represents a significant enhancement of their AML/CFT responsibilities. The emphasis on a risk-based