Draft Digital Competition Bill

Source: The Hindu
GS II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation

Overview

1. News in Brief
2. What is the Draft Digital Competition Bill?
3. What are the features of Digital Competition Bill 2024?
4. Competition Commission of India

Why in the News?

In February 2023, the Ministry of Corporate Affairs (MCA) constituted a Committee on Digital Competition Law (CDCL) to examine the need for a separate law on competition in digital markets.

News in Brief

• It establishes the Competition Commission of India (CCI) as the national competition regulator.
• As with competition law in all other jurisdictions, the Competition Act, 2002 is based on an ex-post framework.
• This means that the CCI can use its powers of enforcement only after the anti-competitive conduct has occurred.

What is the Draft Digital Competition Bill?

• Ex-ante Framework
  • Unlike the current ex-post framework under the Competition Act, of 2002, which allows enforcement only after anti-competitive conduct occurs, the draft bill advocates for an ex-ante competition regulation.
  • This means that the Competition Commission of India (CCI) would have the power to pre-empt and prevent digital enterprises from engaging in anti-competitive behaviour in the first place.
• Unique Characteristics of Digital Markets
  • The CDCL (Committee on Digital Competition Law) supports this approach due to the unique features of digital markets.
  • Digital enterprises benefit from economies of scale and scope, allowing rapid growth.
  • Additionally, network effects play a significant role, where utility increases with the number of users.
  • Given the potential for markets to tip in favour of incumbents quickly, the draft bill aims to supplement the existing framework with preventative obligations.
• Impact on Sectors and Domains
  • The bill could impact various aspects of the digital economy, including user experience, data protection, security, supply chains, investments, business costs for MSMEs, and consumer affordability.
• Cyber Fraud Concerns
  • Some experts warn that the bill might inadvertently lead to a surge in cyber fraud. 
  • Platforms may struggle to control business and consumer interactions, making India’s large internet user base vulnerable to exploitation by malicious actors.

What are the features of Digital Competition Bill 2024?

This is an analysis of the Digital Competition Bill. 

What is the draft digital competition bill?

• The emergence of ‘Big Tech’ companies over the last twenty years has spurred a widespread call for their regulation.
• India is also addressing this issue.
• The government established the ‘Committee on Digital Competition Law’ (CDCL) in 2023 to investigate and report on the necessity of a distinct law for regulating competition in digital markets.
• Following over a year of discussions, the CDCL presented its report to the Indian Parliament in the second week of March 2024.
• The report is accompanied by the Digital Competition Bill, 2024 (DCB). This draft is currently open for public consultation until May 15, 2024.

Key Features of Digital Competition Bill 2024

• Ex-ante regulation
  • The current ex-post framework (intervening after an event occurs) under the Competition Act, 2002, does not facilitate timely redressal of anti-competitive conduct by digital enterprises.
  • Legislation should regulate only those enterprises that have a significant presence and the ability to influence Indian digital market.
• Significant Digital Enterprises (SSDEs)
  • Certain features of digital markets allow digital enterprises to swiftly gain influence.
  • These features include
    • Collection of user data which can allow large incumbent enterprises to enter related markets
    • Network effects where the utility of a service increases when the number of users consuming the service increases
    • Economies of scale wherein incumbents can offer digital services at lower costs as compared to new entrants. 
  • Designating entities offering certain core digital services as SSDEs for ex-ante regulation, which are susceptible to market concentration.
    • These include search engines, social networking services, operating systems, and web browsers.
• Penalties
  • Recommended that contraventions under the draft Bill should be addressed by imposing civil penalties.
  • For calculating the ceiling on penalties, the Committee recommended the use of global turnover of enterprises.
  • The Committee also recommended capping the penalty at 10% of the global turnover of SSDEs.
• Enforcement
  • Empower the Director General, appointed under the 2002 Act, to investigate any contraventions when directed by the CCI.
  • CCI should bolster its technical capacity including within the Director General’s office for early detection and disposal of cases.
  • Constituting a separate bench of the National Company Law Appellate Tribunal for the timely disposal of appeals.

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