What is Draft Digital Competition Bill?

July 10, 2024

India’s Ministry of Corporate Affairs (MCA) set up the Committee on Digital Competition Law (CDCL) in February 2023 to look into whether digital markets need their own set of competition rules. After thinking about it for a year, the CDCL suggested adding an ex-ante regulatory system to improve the ex-post regulations of the Competition Act, 2002. The draft Digital Competition Bill was made because of.

What is an Ex- this ante Framework?

The current Competition Act deals with actions that hurt competition after the fact. The proposed ex-ante framework, on the other hand, aims to stop these kinds of actions before they happen in digital markets. This preventive regulation is based on models such as the Digital Markets Act of the European Union. It aims to deal with the fast growth and unique dynamics of digital businesses by taking preventative steps.

Characteristics and Challenges of Digital Markets

Because of economies of scale and scope, digital markets work differently than traditional ones. This lets digital businesses grow faster and bigger than traditional ones. Network effects also make digital services more useful as more people use them, which could lead to a few companies controlling the market. The CDCL thinks that the current system’s slow response time could let digital monopolies form and act without being stopped. This means that we need to move toward ex-ante control.

The Draft Digital Competition Bill

The proposed law is very much like the EU’s Digital Markets Act, and it only sets rules for digital businesses that are the biggest in their markets. It adds things like “significant financial strength” and “significant spread” (number of users in India) as ways to figure out who is the most powerful. It also suggests a group of companies called “systemically significant digital enterprise (SSSD)” that meet certain quality standards. Fair operation, nondiscrimination, and openness are some of the things that these businesses have to do. They are also not allowed to do self-preferencing, anti-steering practices, or use data without permission.

Reception and Critiques of the Draft Bill

People have different thoughts on the draft Bill. Some Indian startups support the law as a way to stop bigger tech companies from abusing their monopoly power, but most people are against it because they are worried about how it will work in real life. Some people say that this ex-ante approach might not work as well in India’s market as it does in the EU, and it could make it harder for startups to get investments and grow. Also, putting limits on business strategies like bundles could hurt small and medium-sized businesses (MSMEs) that use them to cut costs and reach more customers. Some people want to lower the financial and user base requirements so that growing local startups don’t get caught up in strict regulatory measures.

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