Why India Needs a Digital Competition Bill

Introduction

As India’s digital economy undergoes rapid expansion, the current legislative framework faces mounting challenges in addressing the unique dynamics of digital markets. The rise of e-commerce platforms has intensified competition, but it has also exposed gaps in existing regulations, particularly when dealing with anti-competitive practices that are increasingly hard to detect. In response, the Government of India has proposed the Digital Competition Bill, a separate legislative framework tailored to regulate the intricacies of the digital economy. This bill, expected to be tabled in Parliament soon, seeks to address emerging issues such as anti-steering practices, platform neutrality, bundling and tying, and the exploitation of personal data for targeted services.

As digital platforms dominate the market, concerns grow over practices like predatory pricing, exclusive agreements, and manipulated search results, which exclude competitors and limit consumer choice. Additionally, ad-tech supply chain integration leads to unfair advertising policies, further entrenching dominant players. While the bill navigates the legislative process, this article explores the forces driving its creation and examines how the bill aims to curb these behaviors and foster a fairer competitive landscape in the digital age.

The Need for Proactive Regulatory Intervention

The necessity of a separate legislative framework like the Digital Competition Bill becomes even more evident when examining cases that highlight the severe impact of anti-competitive practices in the digital marketplace.

MakeMyTrip India Pvt. Ltd. & Ors. v. Competition Commission of India¹
In this case, MakeMyTrip and GoIbibo were found to have engaged in practices that included exclusivity clauses with certain hotels and delisting competitors such as Treebo and FabHotels. These actions raised concerns about the impact on competition within the online travel industry. While penalties and remedies were imposed by the Competition Commission of India (CCI), including reinstating the delisted hotels, significant harm had already been done to smaller competitors.

Google LLC v. Competition Commission of India²
This case involved Google’s conduct regarding its Android operating system, where the company required pre-installation of its applications on devices, thereby limiting consumer choice and affecting competition. The CCI imposed several remedies, including allowing Original Equipment Manufacturers (OEMs) to have the option of selecting pre-installed apps and ensuring users could choose their default search engine. However, the damage to competition had already occurred.

Both cases underscore the need for legislative frameworks that can address harm to competition in digital markets, fostering a more level playing field.

Key Provisions of  DCB

Upon enactment, the legislation is expected to trigger substantial reforms across the platforms operated by major tech corporations. Some key provisions of the DCB include:

1.       Ex-Ante Regulation aims to anticipate and prevent potential anti-competitive practices. It allows the CCI to intervene pre-emptively
2.     Core Digital Services (CDS) mentioned under Schedule I of the bill, covers various digital services like search engines, social networks, video-sharing platforms, communication services, operating systems, web browsers, cloud services, advertising platforms, and online marketplaces.
3.       SSDE (Systematically Significant Digital Enterprises) are enterprises that provide CDS and have a significant presence and financial strength in the country. To determine SSDE designation, the Bill proposes financial strength and spread tests. Once classified as an SSDE, these businesses will face increased regulatory oversight to ensure their activities align with equitable competition and consumer protection principles.
4.       SSDEs will be barred from self-preferencing, anti-steering, and limiting third-party apps. Fines of up to 10% of their global turnover could be charged upon violation. Associate Digital Enterprises (ADEs) are entities benefiting from data shared by major tech groups. They will also be subject to the same obligations as SSDEs.
5.       CCI is empowered to inquire into non-compliant enterprises under the bill. 

Conclusion

The Digital Competition Bill presents a new legislative framework that complements the existing Competition Act of 2002 while addressing the distinct challenges of digital markets. With its focus on data governance, algorithmic transparency, and digital platform regulation, the bill is poised to tackle the complexities that the current framework has struggled to manage. Digital markets, characterized by rapid innovation, network effects, and data-driven business models, demand a tailored approach to competition regulation.

While some advocate for separate legislation to ensure fair competition and protect consumer welfare, others believe that adapting existing laws might be sufficient, avoiding potential regulatory burdens. A balanced, hybrid approach—combining amendments to current laws with sector-specific guidelines—could offer an effective solution to promote competition and innovation in the digital economy. The debate continues as stakeholders seek the most effective way to regulate and foster growth in this dynamic sector.

¹2022 SCC OnLine Del 4440

²2023 SCC OnLine NCLAT 147