Unlocking Fairness in Digital Markets: Embracing the Call for a Digital Competition Law

The Committee on Digital Competition Law, initiated by the Ministry of Corporate Affairs, advocates for the implementation of the Digital Competition Act to regulate the dominance of big tech companies. MCA seeks public comments on the Committee's report and Draft Bill regarding Digital Competition Law.

The Competition Act of 2002 primarily operates on a reactive basis, where the Competition Commission of India (CCI) steps in after anti-competitive behavior has occurred. This approach was formulated before the rapid expansion of digitalization that India is experiencing today.

India has witnessed a surge in digitalization due to increased internet accessibility. With over 759 million active internet users, India now hosts significant digital market segments serving various sectors like healthcare, finance, and retail. This digital growth has given rise to large digital firms, often functioning as multi-sided platforms.

These large digital firms and their distinctive business models have raised concerns regarding anti-competitive practices, such as unilateral and opaque search ranking policies and the misuse of aggregated data.

In response, the Parliamentary Standing Committee on Finance presented the 53rd Report on "Anti-Competitive Practices by Big Tech Companies" to the Lok Sabha on December 22, 2022. This report identified ten main anti-competitive practices by large digital firms and highlighted the necessity of enhancing India's competition framework to tackle these issues.

?Acknowledging the dynamic nature of digital markets, characterized by strong network effects and increasing returns to scale, the report emphasized the risk of market polarization towards dominant players. It suggested that an ex-post regulatory approach might not be adequate for swiftly evolving digital markets and recommended the implementation of an ex-ante Digital Competition Act to ensure a fair and transparent digital ecosystem.

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Following this recommendation, the Ministry of Corporate Affairs established the Committee on Digital Competition Law (Committee) to assess the sufficiency of existing provisions in the Competition Act and the need for an ex-ante competition law in the digital economy.

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After thorough deliberations, the Committee proposed several key recommendations:

1. Introduction of a Digital Competition Act with proactive measures to monitor large digital firms and intervene before anti-competitive behavior occurs.

2. Definition of Core Digital Services and identification of Systemically Significant Digital Enterprises (SSDEs) based on their significant presence and influence in the Indian digital market.

3. Establishment of obligations for SSDEs and Associate Digital Enterprises (ADEs) tailored to their specific business models and market influence, with exemptions and enforcement mechanisms aligned with the Competition Act.

4. Strengthening the capacity of the CCI's Digital Markets and Data Unit and establishing a dedicated bench within the National Company Law Appellate Tribunal for cases related to digital markets.

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Overall, the proposed Digital Competition Act aims to foster competition, transparency, and innovation in India's rapidly evolving digital landscape.

Read "Report of the Committee on Digital Competition Law" at:?https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open

Ministry of Corporate Affairs is inviting public suggestions/ comments on both the report and the Draft Bill. Additionally, you can find a copy of the same on the MCA website's 'e-Consultation module.' Any comments or suggestions can be submitted through this module until April 15, 2024.

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