[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 SSDEs. Both SSDEs and ADEs will have to follow certain mandatory and prohibitory obligations to comply with the ex-ante legislation.
Since the formulation of the bill, the Ministry of Corporate Affairs has invited public comments which concluded in May. The bill has faced opposition from the big tech stakeholders. Currently, the Ministry of Electronics and Information Technology (MEITY) is in talks with corporate stakeholders. These meetings have brought forth anxieties regarding excessive regulations by the government. It was suggested that these regulations are likely to have a negative impact over MSMEs and non-digital sectors due to their unavoidable dependance over the digital sector. It was also provided that the scope of the bill is broad, including both large and small entities. Since, the talks remain, it is now clear that the bill has received opposition from the big tech firms, a mixed reaction from industry stakeholders with a general support for the bill by the policy makers.
Analysis
The question arises, does India need such ex-ante sectoral regulation? India’s bill is a stark copy of the EU DMA. India has indeed rapidly progressed towards becoming a digitalised economy. However, the economic and technological development of India is unique and cannot be equalised with any other country. Such copying of law without a detailed study regarding peculiarities of the Indian economy seems a risky move. The Parliamentary Standing Committee on Finance’s 53rd Report on Anti-Competitive Practices by Big Tech Companies was formed and the report mentioned various malpractices taken up by big tech companies, but in an obscure manner. There were around ten vaguely defined anti-competitive practices and no detailed analysis of past trends with statistics. It is the author’s suggestion that the CCI should conduct a detailed study to examine the need of such law.
Further, such sectoral regulations can make compliance onerous for the digital sector. It is the opinion of the author that the tech companies will have to comply with both ex-post and ex-ante laws. This may result in the stifling of pro-competitive practices by the entities since such increased regulation may disincentivise innovation. Resultantly, it may backfire against its intended purpose of promoting innovation. Anti-competitive barriers were already high in this sector and such legislation does not help. Additionally, the anxieties of the stakeholders related to the vague nature and broad scope of the act should not be ignored.
Further, Indian law makers should have learnt from the EU DMA experience. The DMA act is causing unintended problems for EU innovators and the consumers. For instance, intended to avoid self-preferencing, Google Maps is no longer accessible to consumers through a google search. Even, Apple has to open its iPhones to different app stores. India has the advantage of learning from the mistakes of the lawmakers from other jurisdiction. Hence, Indian lawmakers should have analysed the usefulness of the law before blindly emulating it.
Conclusion
India emulated its anti-trust framework from the EU at the beginning given the similarities between the Competition Act and the European Commission Competition Law. As time has passed, CCI has developed antitrust jurisdiction by using judicial conscience and applying reason to unique Indian cases. At this juncture, India should avoid imitating the laws of other countries and should come up with its own laws which will specifically cater to the Indian conditions. India is still a developing country, and such hefty compliance by big tech can result in stifling innovation and driving out the big tech companies. This could limit technology access, reduce investment, and hinder India’s digital and economic growth.
There is no definitive answer to whether India needs sector-specific regulation. However, if regulators are advancing such legislation, the author suggests that Indian lawmakers should consider a platform-specific approach instead of service service-specific approach. This would more precisely target problematic entities like Google and Apple. Such an approach would provide a more balanced regulation for the digital sector, supporting innovation without unduly burdening smaller players.
Additionally, law makers should not have tossed out the possibility of amending the existing ex-post law to make it more comprehensive just because other countries have not followed such a course. Policymakers and legal experts have expressed mixed opinions about the legislation. Big tech companies, as expected, have opposed the bill. The author concludes that legislation tailored to Indian conditions is the requirement instead of following a one size fits all approach.