India should give itself a period of 4-5 years for evaluation of DMA like regulations

The Indian competition law regime is expected to undergo a significant overhaul in the upcoming months, notably with the introduction of the Competition (Amendment) Bill, 2022. The Bill, in its current form, intends to foster ease of doing business and protect the interests of consumers. However, there are certain gaps that need to be addressed before the implementation. Moreover, the digital ecosystem may also witness the inclusion of Digital Markets Unit (DMU), and a Digital India Act to establish an ex-ante regime for digital businesses in India. The feasibility of these regulations with respect to the ever-evolving Indian market and policy landscape to avoid the risk of imposing a stringent compliance burden on digital players needs to be assessed. ​

The Dialogue hosted a roundtable discussion on ‘Antitrust 2.0: Competition (Amendment) Bill, 2022 and Other Changes’, to provide recommendations and deliberate on the future of India’s antitrust regime. The discussion led to some preliminary recommendations from industry experts part of the panel.

• It must be ensured that the Bill goes through an expansive consultation process, discussing the intricacies of the implementation and enforcement of the Bill with key stakeholders.
• Abuse of dominant position allegations should be subjected to an effects-based test to bring it in line with the ethos of the Act.
• Extension of the Intellectual Property Rights (IPR) exemption to abuse of dominance cases should also be considered.
• Necessary guidance to ensure that the deal value threshold and local nexus requirements are implemented in a consistent manner in the Act itself must be provided.
• The ex-ante framework’s feasibility in the context of Indian policy and market realities need to be given thought, and whether this framework is required should be considered.

Ms. Nirupama Soundararajan, Economist and CEO, Pahle India Foundation, began by saying that we must ensure the competition regime is not a copy-paste of another country’s regulation. “It is important to keep the market realities in place, and not be stringent and rigorous while formulating these legislations. As Indian markets are constantly evolving, regulatory arbitrage based on size and origin of capital of businesses should be avoided. The basic tenets of antitrust should remain agnostic of sectors, company size, company origin, or any other such parameter,” she added.

Mr. Rahul Rai, Partner and Co-founder, Axiom5 Law Chambers, stated, “IPR exception should be built in explicitly in Section 4 of the Bill. Absent this, the Commission lacks the statutory power to consider reasonable and necessary restrictions imposed by IPR holders while examining allegations of abuse of dominance. Often the Commission has relied on literal reading of the Competition Act to condemn perfectly reasonable and necessary restrictions imposed by IPR holders while commercialising their intellectual property. Continuing with this approach would stifle innovation and entrepreneurship.”

Mr. Samir R. Gandhi, Partner and Co-founder, Axiom5 Law Chambers, also highlighted, “We already have protections in place to ensure IPR is upheld through a parallel IPR regime. The competition act must allow patent holders the right to protect their monopoly for a limited period of time and the IPR exception must be incorporated in section 4 of the Act.” He also added, “A supranational regulation like the DMA might be the right fit for the EU, where there are multiple national competition authorities, but may not be necessary in India where there is already a single federal CCI which has both regulatory and adjudicatory powers.”

Dr. Assimakis Komninos, Competition Law Partner, White & Case LLP, concluded by saying, “The DMA is a regulation that applies ex ante, not competition law enforcement that takes place ex post. It is only applicable to corporations that cross a certain threshold, thereby being designated as a gatekeeper. The aim behind DMA is to promote fairness and contestability. However, there are some pros and cons, for example, it is inflexible as it will be applied ex ante, not allowing businesses to account for efficiencies. India could either substantially borrow from the DMA or it can develop its own regulations suited to its ground realities and give itself a period of 4-5 years for evaluation.”

The Bill in its current form also proposes a deal value threshold, wherein transactions valued above Rs. 2000 crores will have to be notified before the Competition Commission of India (CCI) prior to taking effect. The amendment will allow the CCI to analyse global M&As between parties with substantial business operations in India, also known as the local nexus test. While this is a welcome move, it is essential that clarity on the scope and mode of implementation of the deal value threshold and the local nexus test be provided to avoid uncertainty for parties and administrative burden for the CCI.