Analysis of India's Draft Digital Competition Bill, 2024: Provisions, Impact on Big Companies, and Industry Reaction

India's Ministry of Corporate Affairs (MCA) released the draft Digital Competition Bill, 2024, on March 12, signaling a significant step towards regulating digital markets in the country. The bill, akin to the Digital Markets Act in the EU, aims to address anti-competitive practices by large digital platforms, termed Systemically Significant Digital Enterprises (SSDEs). This article provides an in-depth analysis of the provisions outlined in the draft bill, its potential impact on big companies, and the industry's reaction.

Provisions of the Draft Digital Competition Bill, 2024

The draft bill introduces several key provisions aimed at curbing anti-competitive behavior in digital markets:

Identification of Systemically Significant Digital Enterprises (SSDEs): SSDEs are designated based on financial thresholds (turnover, global turnover, gross merchandise value) and user thresholds (number of end-users or business users). The Competition Commission of India (CCI) is empowered to designate SSDEs and may also consider qualitative criteria to identify enterprises with significant market influence.

Obligations of SSDEs: SSDEs are required to adhere to various obligations, including:

• Prohibition of self-preferencing: SSDEs are barred from favoring their products or services over those of third-party business users.
• Restrictions on third-party applications: SSDEs cannot impede users from accessing third-party applications on their platforms.
• Anti-steering policies: SSDEs are prohibited from restricting business users' ability to communicate with end-users or promote offers.
• Tying and bundling: SSDEs must not require or incentivize users to utilize additional products or services.
• Data usage obligations: SSDEs are restricted from using non-public data of business users to compete with them and must ensure transparency and consent in the cross-use of personal data.

Enforcement Mechanisms: The CCI is empowered to conduct inquiries, impose penalties, and issue orders to ensure compliance with the bill's provisions. Penalties for non-compliance can be substantial, with fines of up to 10% of the enterprise's global turnover.

Exemptions and Government Powers: The central government has the authority to exempt enterprises from certain provisions in the interest of national security or public interest. It can also amend the list of Core Digital Services and issue rules and regulations for the effective implementation of the bill.

Impact on Big Companies

The draft Digital Competition Bill, 2024, is poised to have a significant impact on big companies operating in India's digital ecosystem:

1. Regulatory Compliance: Large digital platforms identified as SSDEs will need to ensure compliance with the bill's obligations to avoid hefty penalties. This may require substantial adjustments to their business practices and operational frameworks.
2. Market Dynamics: The bill aims to promote fair competition and level the playing field in digital markets. As a result, dominant players may face increased competition from smaller entities, leading to a more diversified and competitive landscape.
3. Innovation and Consumer Benefit: Companies like Uber have expressed concerns that ex-ante regulations could stifle innovation and limit consumer benefits. However, proponents argue that such regulations are necessary to prevent anti-competitive behavior and ensure a fair marketplace for all stakeholders.
4. Data Privacy and Security: The bill's provisions regarding data usage obligations aim to safeguard the privacy and security of user data. Big companies will need to enhance their data management practices to comply with these requirements.
5. Legal Challenges and Appeals: Companies aggrieved by the CCI's decisions can appeal to the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court. Legal challenges may prolong the enforcement process and lead to further scrutiny of the bill's provisions.

Industry Reaction

The draft Digital Competition Bill, 2024, has elicited diverse reactions from industry stakeholders:

1. Support from Regulators: Regulators and policymakers view the bill as a necessary step towards regulating digital markets and addressing concerns related to anti-competitive practices by large platforms.
2. Opposition from Big Companies: Companies like Uber have opposed the introduction of ex-ante regulations, arguing that existing frameworks are adequate and that new legislation may hinder innovation and consumer benefits.
3. Calls for Empowering the CCI: Some industry experts advocate for empowering the CCI to monitor and regulate digital markets more effectively. Strengthening the CCI's capacity and expertise could enhance regulatory oversight and enforcement mechanisms.
4. Concerns about Impact on Innovation: There are concerns that stringent regulations may deter investment in innovation and technological advancement. Balancing regulatory requirements with fostering innovation remains a key challenge for policymakers.
5. Need for Transparency and Accountability: Industry stakeholders emphasize the importance of transparency and accountability in the implementation of the bill's provisions. Clear guidelines and effective enforcement mechanisms are essential to ensure compliance and fairness in digital markets.

The draft Digital Competition Bill, 2024, represents a significant milestone in India's efforts to regulate digital markets and promote fair competition. While the bill introduces stringent obligations for large digital platforms, it also raises concerns about potential impacts on innovation and consumer benefits. As the bill undergoes public consultation and scrutiny, stakeholders must engage in constructive dialogue to address these concerns and ensure that regulatory frameworks strike the right balance between competition, innovation, and consumer protection.