New Digital Competition Bill Proposed to Regulate Big Tech

In a move set to reshape the regulatory landscape, the Ministry of Corporate Affairs (“MCA”) has unveiled the draft Digital Competition Bill. The bill introduces an ex-ante competition framework for digital markets and seeks to regulate Systemically Significant Digital Enterprises (“SSDEs”), commonly referred to as gatekeepers, that provide core digital services within India.

By following an ex-ante regulation, the Competition Commission of India (“CCI”) seeks to intervene before a combination is finalised to prevent the occurrence of any potential anti-competitive conduct that may ensue afterwards. If enacted, this legislation will serve as a supplement to existing competition laws, imposing heightened compliance obligations on large digital platforms.

A group comprising of 47 organizations, civil society groups, and individuals has written a letter to the corporate affairs ministry, requesting a five-month extension to provide feedback on the draft Digital Competition Bill, designed to oversee Big Tech.

The government has recently prolonged the consultation period for the proposed legislation from April 15 to May 15.

“We submit that the present deadline to submit comments by 15th May 2024 is insufficient to make a nuanced and informed submission, considering the technical complexity of the subject matter, cross-cutting impact of the Bill and regulatory overlaps,” the letter said.

Key Points of the Digital Competition Bill:

• Criteria for determining SSDEs: An enterprise is assessed based on its turnover, gross merchandise value and financial and user thresholds with respect to one or more of its core digital services. Additionally, a local nexus to India, as indicated by the number of end users and business users, will be a prerequisite for such a designation.

• Enterprise self-reporting requirement: An enterprise is obligated to self-report or notify the CCI within ninety (90) days after assessing their financial and user thresholds. If they fail to do so voluntarily, the CCI may request information about their thresholds and designate the same.

• CCI’s Discretion in designation: The CCI shall retain discretionary powers to designate SSDEs for a period of three (3) years which will be automatically renewed unless it submits an application for revocation in respect of certain core digital services offered, as outlined in the Schedule I of the Bill. Taking into account various factors including but not limited to the economic power of the enterprise, dependence of end-users and barriers to entry, the CCI can designate an SSDE even if financial and user thresholds are not met while allowing the enterprise to explain why they should not be designated as an SSDE.

• Designation of Associate digital enterprise: In case, where an enterprise is part of a group, thresholds are calculated for the entire group and the CCI may at its discretion designate them as Associate Digital Enterprise (“ADE”) of SSDE by prescribing different obligations while preventing them to circumvent the thresholds directly or indirectly by segmenting or fragmenting services through contractual, commercial, technical or any other means.

• Regulatory Obligations: Regulated entities will be subject to obligations concerning the imposition of anti-steering policies, prohibiting self-preferencing, data usage with respect to consent requirement and data portability in a format, third-party app restrictions and tying and bundling practices.

• Specified obligations for each CDS: The CCI will specify obligations applicable not in the same way to all but to each of the core digital services depending on the factors including but not limited to cybersecurity, pre-existing IPRs and fraud prevention. Also, the proposed bill diverges from the Parliamentary Standing Committee’s recommendations by omitting mandatory notification requirements for mergers and acquisitions.

The MCA has invited public comments on the expert committee report and the draft Bill. Big Tech firms such as Google, Apple, Flipkart, Amazon, and Uber have opposed ex-ante regulation while responding to the suggestions of the expert committee on the draft bill. While Twitter and Paytm are among those in favour, the latter in its stakeholder submission said it was in favour as long as only large digital enterprises with a critical mass were subject to the regulations.