Faced with increasing instances of antitrust violations noted by the Competition Commission of India (CCI) in the digital space, the federal government has set up a committee to examine the need for a separate anti-competition law in this space.
The contours of the terms of reference indicate that the government wants to ascertain whether the existing rules around anti-competitive business practices would hold good for digital entities operating in multiple areas of marketing and eCommerce. It wants the committee to study global best practices as well as examine the role of digital intermediaries.
Big tech companies and their roles
The move comes in the wake of a spate of lawsuits around best practices followed by Big Tech companies such as Google and Amazon in India. Both companies have faced the ire of local businesses who felt that the companies were using their monopoly status to compel participants in the marketing and digital retail to fork out monies not commensurate with sales.
More recently, Google had approached the Apex Court seeking remedial action for a penalty imposed by the CCI on grounds that it was using its monopoly status over the Android operating system to force app builders off the grid by promoting others into the ecosystem of mobile handsets at the time of their launch.
Parliament had weighed in some time back
Earlier, the Parliamentary Standing Committee on Finance had sought actions on anti-competitive behavior in the digital markets to prevent the formation of monopolies in the business. The panel even went to the extent of suggesting digital competition legislation to ensure a fair, transparent and contestable digital ecosystem in India with proper identification of systemically important digital intermediaries.
On its part, the Parliamentary Panel had identified ten key areas of competition that included deep discounting, steering, exclusive tie-ups, search and ranking preference, advertising policies and third-party applications. They had suggested that appropriate measures be put in place to safeguard the interest of systemically important digital intermediaries.
The contours of the new committee and its brief
As per the government’s latest order, the committee would comprise 16 members and be helmed by the Secretary in the Ministry of Corporate Affairs. It would include members from the CCI as well as other industry participants. It also provided for the provision to include special invitees from other ministries, the NITI Aayog, and the Department of Commerce and the Ministry of Economic Affairs.
As per the notification, the terms of reference of the committee would include to check whether the existing provision of the Competition Act, 2002 and the rules & regulations framed thereunder are sufficient to deal with challenges emerging in the growing digital economy.
What could send some of the existing Big Tech companies into a tizzy involves a specific point around having an ex-ante regulatory mechanism for digital markets via separate legislation. What this means is that if such a regulation does come into force, companies could face action if found breaking it even in an earlier period.
Through an ex-ante regulatory mechanism, the authorities would have powers to take preventive action to safeguard the markets and its constituents from potential antitrust practices. As on date, the CCI is designed to take up only ex-post events, which means that action can only be initiated after a potential violation.
Experts saw this coming too
Industry experts believe that the most important aspect of this effort relates to the study of systemically important digital intermediaries that could potentially harm digital markets. However, the committee would have their tasks cut out as most countries in the global economy are only evolving practices to regulate the digital economies now.
They also argued that this committee’s recommendations would have a major impact on how the government’s own initiative under the Open Network for Digital Commerce (ONDC) to level the playing field for small businesses pans out in the future. At a recent meeting, ONDC CEO T. Koshy had mentioned that decentralized digital economies were the path that could potentially unlock India’s true economic potential and that there were many who would be uncomfortable seeing these efforts succeed in the country.
