Wrong Move? How the Proposed Digital Competition Bill will Lead to False Convictions and Crush Innovation

[By Anmol Aggarwal]

The author is a student of Rajiv Gandhi National University of Law, Patiala.



The Ministry of Corporate Affairs (“MCA”) on 12 March 2024 released the draft report of the Committee on Digital Competition Law (“CDCL”) and a Draft Digital Competition Bill (“the draft bill”). The CDCL report seeks to lower the threshold of proof required to determine anti-competitive practices by certain large undertakings to the lowest threshold of “ex-ante measure” or determining the abusive practices on a “by object” basis. This essentially means that the anti-competitive practices by such undertakings would be determined without examining any effects or potential effects of the conduct. The report proposed several quantitative and qualitative benchmarks to determine the entities that would fall under the ambit of the new bill, designating these entities as Systematically Significant Digital Enterprises (“SSDE”). In this piece, the author analyses how this shift from ex-post to ex-ante framework for SSDEs is harmful. It poses a huge risk of false convictions and will disincentivize such enterprises to indulge in innovations. The report mentions that the current move is in line with the Digital Markets Act, 2022 (“DMA”) enacted in the European Union (“EU”). Although not viable, under the EU Competition Law, the low threshold of the ex-ante framework can still work as it imposes only monetary fines for infringements. However, such a low threshold is dangerous in the Indian Competition regime as it consists of monetary fines and imprisonment of a term extending up to 3 years in case of an infringement. The author argues that such a low threshold is not viable in a framework in which the punishment consists of imprisonment in addition to monetary fines. 

Risk of false convictions 

The new ex-ante framework or “by object” approach in identifying abuse of dominance by SSDEs poses a huge risk of false convictions, which goes against the principle of presumption of innocence. This principle is an undebated principle that works to favour the undertaking alleged of the abusive conduct. The determination of the abuse by object, i.e. before even looking at the facts, will result in innocent actions of the firms to come under the ambit of anti-competitive conduct.  

For instance, let us assume a dominant software company provides an office suite with several tools like Word processing software, presentation software and spreadsheets, among others. This company has introduced a new email management system integrated into the suite. Now, the company has done the same with an intent to improve the consumer experience and provide seamless productivity and streamlined workflows to the consumers. The dominant firm, while not intending to foreclose competition, would face liability for tying under the ex-ante framework, leading to the imposition of a huge fine. 

Under the EU jurisprudence, the antitrust fines qualify as “criminal sanctions” as they meet the “Engel criteria” developed by the European Court of Human Rights (“ECHR”). This criterion considers several factors, such as the nature of the penalty and domestic context, among others. Given that the Indian Competition regime has largely evolved by examining the EU Competition regime, one can infer that antitrust fines in India also qualify as “criminal sanctions”. Looking at the severity of punishments for finding abusive conduct, avoiding false convictions at any cost is imperative. As stated by a famous English Jurist that “It is better that ten guilty persons escape than that one innocent suffer”. The new bill seeks to prevent anti-competitive conduct before it even materialises, which, looking at the high risk of false convictions, will prove to be a blunder in the Indian Competition regime. 

To avoid such risks, the EU Competition regime has consistently shifted towards an effects-based approach or ex-post framework when analysing anti-competitive conduct.  As can be observed in the recent competition policy brief (“policy brief”) regarding 2023 amendment to the 2008 Guidance on the Commission’s Enforcement Priorities in Applying Article 82 (“Guidelines”), wherein the policy brief departs from the object-based approach of the 2008 Guidelines, stating that “the Commission is committed to an effects based enforcement of Article 102 TFEU, which fully takes into account the dynamic nature of competition and constitutes a workable basis for vigorous enforcement”. As the EU competition regime progressively adopts an effect-based approach, it is incongruous for the Indian Competition regime to regress towards an object-based approach in assessing anti-competitive conduct. 

The Justification Of It Being In Line With EU’s DMA Is Erroneous 

One line of reasoning we can observe while looking at the report is that the proposed bill is in line with the EU’s DMA, 2022. This reasoning is highly erroneous, as discrepancies exist in the punishments prescribed in the proposed bill and DMA. The punishment under the DMA is a monetary penalty of up to 10% of the undertaking’s worldwide annual turnover, which extends to a maximum of 20% considering the repetitive infringements. Contrary to this, the punishment for repetitive infringements and not following the orders of the Competition Commission of India (“CCI”) embarks an imprisonment of up to 3 years in addition to huge monetary fines. Thus, the threshold of determining anti-competitive conduct cannot be compared to the DMA, as the punishments under the proposed Bill and DMA are inconsistent. 

Further, the criteria to determine the firms that would fall under the ambit of SSDE is highly arbitrary as it vests a disproportionately large discretion with the CCI. This arbitrariness exists because the report gives discretionary power to CCI to designate an undertaking as SSDE, even if it does not meet the quantitative and qualitative criteria laid down in the report. An ex-ante approach coupled with such arbitrariness and punishments, including imprisonment in addition to the monetary fines, will be a disastrous measure for the Indian Competition Regime. 

The Proposed Rules will Disincentivise Firms To Indulge in Innovatation 

The proposed bill puts the SSDEs under large scrutiny and restrictions, which will, in turn, lead to a strike at the innovation. The dominant firms are the largest contributors to present-day innovations around the globe, consider the case of Google, a dominant player in the search engine market. Google continuously innovates its search algorithms and develops new products and services to enhance user experience. Putting these firms under such excessive scrutiny will lead to over-enforcement by the competition authorities and will disincentivize such firms to indulge in innovation. For instance, in many situations, tying can be done in favour of the consumer for a smoother and more convenient experience, as explained in the illustration earlier in the article. However, the ex-ante framework would render such factors inconsequential, as it would categorize such actions as anti-competitive tying, resulting in the imposition of fines amounting to up to 10% of the firm’s global turnover. Large firms would prefer to play safe in the market and not take any risks, as such a large fine can change the entire trajectory of the firm in terms of its metamorphosis and revenue. Thus, the new framework will prevent any anti-competitive conduct but, at the same time, will restrict any innovation. 


The proposed shift towards an ex-ante or “by object” framework to identify anti-competitive conduct among SSDEs in India raises concerns regarding false positives or false convictions, disproportionate punishments, and possible retching of innovation.  

While the concern regarding anti-competitive practices by the SSDEs is real, adopting an ex-ante framework to determine such practices is not the appropriate solution. Instead, stakeholders should consider a solution that fosters a balance between addressing concerns of anti-competitive conduct and maintaining innovation and consumer welfare. In this respect, the author proposes an ex-post framework with a lower threshold of effects, meaning that merely plausible or capable effects of the alleged anti-competitive conduct would be enough to determine the anti-competitive conduct. When proposing an ex-post framework with a lower threshold of effects, the author suggests that competition authorities should require less stringent evidence to establish the effects of anticompetitive behaviour, particularly for firms falling under the SSDE criteria. Essentially, the effects of the alleged abusive conduct will have to be considered; however, the threshold to prove those effects would be lowered substantially for the SSDEs. This framework would enhance deterrence, meaning the undertakings will be cautious of their behaviour in the market and, at the same time, will not hesitate to take risks to indulge in innovation. 

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