After the first industrial revolution, rapid improvement in technology, electrification, and transportation led to the second industrial revolution (often referred to as the technological revolution). One of the results of this second industrial revolution was that larger businesses/corporations (trusts) became more prevalent, and there began a concentration of economic powers. "Anti-trust law" therefore, became a necessity to protect the economy from monopolistic behaviour. 1

The emergence of the "digital economy" or the "internet economy" arguably marks the third industrial revolution and has brought along with itself grave challenges and ample opportunities alike. It is implicit that the competition law regime, like any other regulatory regime, must adapt. Achieving the fine balance between regulation and innovation, however, has proved to be easier said than done.

Competition authorities across the globe are finding it increasingly difficult to effectively regulate "digital markets", and perhaps the primary reason for that is the fundamental difference in the way digital markets operate when compared to traditional markets. Much of the current competition law principles have been evolved after decades of implementation in the traditional markets, and therefore it is clear that a challenge lies ahead for the competition authorities worldwide – as they can no longer rely upon several years of competition jurisprudence. Consequently, authorities across jurisdictions are deliberating a complete overhaul of their competition law framework – or alternatively looking to introduce separate legislations aimed specifically at the disciplining the "biggest players" in the digital markets.

The experience in India has been somewhat similar, although the Competition Commission of India (CCI) has been active against these big-tech companies and has initiated numerous enquiries, imposed severe penalties and ordered corrective actions in a plethora of cases in accordance with the existing competition principles,2 questions have been raised over whether such actions actually result in effective regulation, timely market correction and consumer welfare – which are some of the key objectives of a sound competition law regime.

To better equip the CCI in achieving these objectives, deliberations have been going on since 2019 on the amendments needed in the Competition Act, 2002 (Act).3 Some of the amendments being proposed in the Competition (Amendment) Bill, 2022 are aimed specifically at such digital markets, but the emerging view is that even those proposed changes are unlikely to be sufficient on their own, since the Act follows an ex-post approach in regulating the conduct of the enterprises. Under this approach, it is argued, that by the time the regulator steps in – it is already too late and the damage is already done. With this in mind, an ex-ante approach to regulating the Digital markets has been touted as the way forward.

To this end, the Parliamentary Standing Committee on Finance (2022 – 2023) (Committee) in its 53rd Report on "Anti-Competitive Practices by big tech companies" has recommended that there is a need for ex-ante regulation of anti-competitive practices by big-tech companies in India.4 The Report was prepared after the Committee heard the views of almost all the big tech companies such as Apple, Google, Amazon, Zomato, PayTM, Uber and others; various industry associations; the Ministry of Corporate Affairs (MCA), Ministry of Electronics and Information Technology (Meity) and the CCI.5

The Report specifically noted that ex- post measures in a digital market fails to curb irreparable harm to affected parties and there is a need of ex-ante regulatory framework in the fast-evolving digital markets. For this purpose, the Committee recommended that the approach similar to the European Union's (EU) Digital Markets Act (DMA) be followed – wherein the market winners in digital markets which serve as "intermediaries" or "gatekeepers" of the market will be designated as 'Systematically Important Digital Intermediaries' (SIDIs) based on revenue, market capitalization and active business and the end users. The Committee further recommended that after being designated as a SIDI, the SIDI must submit an annual compliance report with the CCI detailing measures undertaken to comply with the mandatory obligations.

For this purpose, the Committee recommended the Central Government to frame a separate legislation for regulating the Anti-competitive conduct in the Digital markets – christened as the Digital Competition Act. The Committee has also suggested that a specialized Digital Market Unit should be established within CCI to enable CCI to monitor SIDIs and provide recommendations to Central Government on designating SIDIs, review SIDI compliance and adjudicate on digital market cases. The dedicated unit will be manned by experienced tech-experts, academicians and attorneys.

Additionally, in its Report, the Committee focused on 10 areas/instances of anti-competitive practices that need to be addressed and gave its recommendations thereon: anti-steering practices; platform neutrality; bundling and tying; data usage; mergers and acquisitions; deep discounting; exclusive tie-ups; search and ranking; restricting third-party applications; and advertising policies. Presumably, the recommendations of the Committee are the "obligations" which the SIDI's will be required to adhere to, in case the recommendations of the Committee are enforced. These recommendations are seemingly "inspired" from the multiple foreign legislations referred to in the Report -

Recommendations of the Standing Committee and similar provisions in the other legislations

S. No.

Anti-competitive practice

Recommendations given by the Committee

Similar provisions in other legislations

1.

Anti-Steering

A SIDI should not condition access to the platform or preferred status or placement on the platform on the purchase or use of other products or services offered by the platform that are not part of or intrinsic to the platform.

Section 3 (5), American Innovation and Choice Online Act

2.

Platform Neutrality/Self- Preferencing

An SIDI must not favor its own offers over the offers of its competitors when mediating access to supply and sales markets, in particular, when presenting its own alters in a more favorable manner; and when exclusively pre-installing its own offers on devices or integrating them in any other way in offers provided by the platform.

Section 19(a)(2) , German Competition Act

3.

Bundling and tying

SIDI should not force business users or end users to subscribe to, or register with, any further services as a condition for being able to use, access, sign up for or registering with any of that platform's core platform service.

Article 5 (8), DMU

4.

Data usage

The Committee recommends that a SIDI should not:

· "process, for the purpose of providing online advertising services, personal data of end users using services of third parties that make use of core services of the platform;

· combine personal data from the relevant core service of the platform with personal data from any further core services or from any other services provided by the platform or with personal data from third- party services;

· cross-use personal data from the relevant core service in other services provided separately by the platform, including other core services of the platform, and vice-versa; and

· sign in end users to other services of the platform in order to combine personal data, unless the end user has been presented with the specific choice and has given consent."

Article 5 (2), DMU

5.

Acquisitions and mergers

The CCI must be informed of an intended concentration concerning services or collection of data in the digital sector, irrespective of whether it is notifiable to the Commission. A SIDI should also provide such information prior to its implementation, following the conclusion of the agreement, the announcement of the public bid or "acquisition of a controlling interest".

Article 14(1), DMU

6.

Pricing/Deep discounting

A SIDI "should not limit business users from differentiating commercial conditions on its platform" and must not prevent business users from offering same products and services through third-party online intermediation services or through their own direct channel at varying prices.

Article 5 (3), DMU

7.

Exclusive Tie-ups

A SIDI should not prevent business users from offering same products and services through third-party or direct channels at a different price for fair market conditions to prevail.

Article 5 (3), DMU

8.

Search and ranking preferencing

A SIDI must provide third-party undertaking with access to fair, reasonable and non-discriminatory terms to search-engine related operations such as ranking, click, query and others. Further, SIDI should not treat businesses favorably.

Article 6 (11), DMU

9.

Third-party applications

A SIDI should enable installation of third-party software applications or stores using or interoperating with its operating system. Only exception may be made in case of preventing data from the SIDI or another business user from being transferred to government of a foreign adversary.

Article 6 (4), DMU

10.

Advertising policies:

A SIDI should not process users' personal data for online advertising services using third-party services. It must provide advertisers with information on price paid by the advertiser remuneration received by the publisher on a daily basis. Advertisers and publishers must be able to carry out their independent verification of the advertisements inventory of aggregated and non-aggregated data.

Article 5 (2)(a) & Article 6(8), DMU

The intent and rationale behind the Committee's recommendations are laudable, especially for highlighting the need for ex-ante regulation of anti-competitive practices in the digital market. The Committee adopted a consensus based approach by consulting all stakeholders besides following the International best practices. Apart from the DMA, the Committee also referred to various legislations in multiple jurisdictions such as American Innovation and Choice Online Act (A/CO), Open App Markets App (USA), the 10th amendment of the German Competition Act amongst others. It must be kept in mind, however, that the abovementioned legislations referred to by the Committee, including the DMA are yet to be implemented (except for the 10th amendment in the German Competition Act) and therefore blanket reliance on provisions contained therein may not be apt, at this stage.

Additionally, the regulators, in consultation with the Government, must also seek to avoid over-regulation of market and risk hampering innovation in the market. This is especially true in light of ever-increasing compliance requirements due to the introduction of multiple legislations/rules to regulate the digital market being deliberated and introduced simultaneously, such as the Indian Telecommunications Bill 2022, the Digital Personal Data Protection Bill, 2022, Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, amongst others.

Further, while the Committee's recommendation of the need to enact a Digital Competition Act and form a separate Digital Markets Unit may be the best way forward to effectively regulate the Digital Markets in the future, immediate focus of the Central Government should be on finalising the Competition (Amendment) Bill and tabling it before the Parliament as there is an urgent need for amendments in the primary Act. Given the widespread implications and consequences of introducing the Digital Competition Act, more deliberations are needed and it is expected to be a time-consuming process. Therefore, prudence suggests that priority ought to be to give effect to the proposed changes in the Competition Act while deliberations on the Digital Competition Act should continue to be a "work in progress".

Footnotes

1. Sherman Antitrust Act, 1890 and Clayton Act 1914 were introduced measures to regulate the conduct of such entities.

2. Google Android Case (CCI case no. 39 of 2018), Google Playstore Case (CCI case no. 07 of 2020), FHRAI & anr. v. MMT-GO and OYO (CCI case no. 14 of 2019 and case no. 01 of 2020), ongoing enquiries against Apple (CCI case no. 24 of 2021), WhatsApp privacy policy (Suo Moto case no. 01 of 2021), Amazon & Flipkart (CCI case no. 40 of 2019) Zomato & Swiggy (CCI case no. 16 of 2021) Bookmyshow (CCI case no. 46 of 2022) etc.

3. The Competition Law Review Committee formed by the Ministry of Corporate Affairs to suggest amendments in the Competition Act gave its report in July 2019. The report is available at https://www.ies.gov.in/pdfs/Report-Competition-CLRC.pdf

4. 53rd Report of the Parliamentary Standing Committee on Finance on "Anti-Competitive Practices by Big-Tech Companies", available at https://loksabhadocs.nic.in/lsscommittee/Finance/17_Finance_53.pdf

5. Ibid page 5.

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