Lessons from the European Experience: How the Digital Markets Act Can Inform India’s Digital Competition Bill
I. Introduction
The transition from traditional to digital markets has brought about new challenges for anti-trust regulations. With its unique characteristics, the digital sphere has seen a surge in restrictive trade practices. These challenges have prompted the global competition law regime to explore the ex-ante approach, which focuses on preventing anti-competitive behaviour before it occurs. This is a departure from the conventional ex-post approach, which deals with anti-competitive behaviour after it has occurred. Understanding the unique challenges in implementing the ex-ante approach is crucial to appreciating the need for legislation like India's proposed Digital Competition Bill (‘DCB’) in light of the EU’s Digital Markets Act. Through this article, the author seeks to analyse the shortcomings of the DMA and how the Competition Commission of India can take inspiration from the EU’s jurisprudence in implementing the DCB in the near future to avoid such deficiencies in India.
II. History of DMA and DCB
One of the earliest and pivotal pieces of legislation on Digital Competition Law is the Digital Markets Act (‘DMA’) enacted by the European Union (‘EU’) in 2022, which sought to adopt and set an example for ex-ante regulation. A year later, the Committee on Digital Competition Law (‘CDCL’) drew inspiration from the DMA and submitted its report in 2024 proposing the Digital Competition Bill. At this stage, the DMA has been in force for two years, and the European Commission (‘EC’) has begun investigations in many cases. In contrast, the DCB is still in the proposal stage.
III. Applicability of DMA and DCB
Unlike ordinary competition law, the DMA does not apply to all entities but only to companies that provide Core Platform Services (‘CPS’). However, even the companies that provide CPS must fulfil the criteria laid down under Article 3(1) and are then designated as ‘gatekeepers’ by the EC. To be designated as Gatekeeper, a company needs to impact the market significantly and employ a gateway to reach users such as Gmail and Samsung’s browsers. The obligations of gatekeepers are found under Articles 5 to 7, which restrict gatekeepers from processing users’ personal data, prohibiting the practice of tying in the digital space and allowing users to access its competitor’s apps and other services on its CPS.
A parallel can be observed in the DCB, as seen under Section 3, which defines an enterprise within the digital eco-system as a ‘Systematically Significant Digital Enterprise’ (‘SSDE’). In simpler terms, an SSDE is a digital enterprise that significantly impacts the digital market and is subject to the fulfilment of provisions of the bill under Chapter II. The DCB differs from the Competition Act by adopting an ex-ante mechanism requiring only SSDEs to comply with the bill’s provisions defined under Chapter III. Regarding data specifically, under Section 12(1), the DCB prohibits SSDEs from using or relying on non-public data of its users to compete with other businesses in the same relevant market. This is achieved through the prohibitions laid down under section 12(2), which prohibit SSDEs without end-users’ consent from amalgamating their personal data obtained through different services offered by the enterprise and prohibit SSDEs from permitting third parties to use such data.
IV. Application of the DMA: two years since enforcement
Designation of gatekeepers in the EU and Non-compliance
Pursuant to Article 38(7) of the DMA, the EC is considered to be the sole enforcer of the regulation. The DMA set the ball rolling in September 2023 when it designated six gatekeepers, i.e. Alphabet, Amazon, Apple, Meta and Microsoft, upon meeting the threshold under Article 3. These designated gatekeepers had time until March 2024 to ensure complete compliance with the DMA. However, owing to non-compliance even until March, the commission began non-compliance enquiries into Alphabet’s rules on steering in Google Play and on the same grounds into Apple for their steering rules on the App Store and the choice screen for Safari and Meta's “pay or consent model”.
Does DMA follow the path of Competition Law?
Apple’s and Alphabet’s anti-steering rules violation: A close examination of the allegations against the aforementioned gatekeepers reveals that Apple’s and Alphabet’s practices of anti-steering can be traced back to European Commission decisions fining enterprises such as Apple for having violated Article 102(a) of the Treaty on the Functioning of the European Union (‘TFEU’). The present investigations into Apple and Alphabet include whether these gatekeepers restrict their business users such as app makers from distributing and advertising their offers outside of their CPS, violating Article 5(4) DMA – anti-steering rules. Apart from anti-steering rules, Alphabet is particularly under investigation for indulging in self-preferencing to offer specialised services such as Google Shopping or Google Flights on the Google search engine in violation of Article 6(5) DMA. This is similar to the self-preferencing Google was fined for in the Google Shopping Case.
Case against Meta
Meta is in the limelight for offering a pay-or-consent model that requires users to either link their personal data obtained across multiple platforms or, without consent, pay a fee. However, this practice is scrutinised as the provision of Article 5(2) requires a gatekeeper to provide an equivalent less personalised alternative of their services, which does not rely on processing and cross-use of personal data.
V. Applicability of DMA’s jurisprudence in India
While it is commendable that India through the Ministry of Corporate Affairs appointed the CDCL that proposed the DCB, it is pertinent that all stakeholders involved in implementing the DCB learn from the enforcement of the DMA that has been in force for two years now.
The CCI should strictly enforce provisions such as Section 14 of the DCB (anti-steering provision) akin to Article 5(4) of the DMA, as enterprises such as Google have been fined in the past for engaging in such practices but continue to do so indiscriminately. Another practice that the CCI ought to curb in India is the practice of self-preferencing, which the CDCL has incorporated through Section 11 of the DCB, akin to Article 6(5) of the DMA. The CCI has scrutinised this practice in cases such as Umar Javed and Matrimony.com. However, no clear guidelines exist on this. In such a scenario, it becomes imperative that Section 11 of the DCB, when enacted, should be implemented in its spirit. Meta’s pay-or-consent model is currently under investigation in the EU. When a company like Meta offers such a choice to users, users likely consent to share their data rather than pay a fee. If India wishes to ensure its citizens don’t fall prey to such a practice, a combined reading of Section 12 of the DCB and Sections 5 and 6 of the Digital Personal Data Protection Act, 2023 (‘DPDPA’) should be adopted. Sections 5 and 6 limit the processing of user data for very specific purposes and only with the users' explicit consent. If India allowed Meta to offer a pay-or-consent model, Article 5(2) of the DMA should be incorporated under the DCB to ensure that users can opt for a less personalised version of an SSDEs service without losing control over their personal data.
VI. Ensuring effective compliance with DCB
While the DCB sets out noble objectives through its proposed ex-ante regulations, however effective compliance with the requirements of the DCB should be ensured. To ensure that the SSDEs comply, the CDCL recommended the establishment of the Digital Markets and Data Unit (‘DMDU’). The DMDU acts to facilitate cross-divisional exchange and discussion on anti-trust issues in the digital space, promote stakeholder engagement across academia, and engage in international deliberations and government on digital market matters. It is to be noted that the DMDU was set up to enforce ex-post regulations under the Competition Act, 2002. Attention and resources should be dedicated to the DMDU before the DCB becomes an Act so that the DMDU can effectively monitor SSDEs and ensure fair competition in the digital markets. Inspiration can be taken from the Digital Markets Unit in the United Kingdom that designs rules for each enterprise specifically (principle-based approach), and also seeks to resolve disputes through dialogue and imposes penalties on an ad-hoc basis.
VII. Conclusion
With the emergence of the ex-ante regulatory model in India, the CCI should draw a line between effective enforcement of the DCB and innovation in the digital markets. The goal of competition law is consumer welfare, accordingly the CCI should tailor a principle-based approach for SSDEs instead of a blanket implementation of the law. Furthermore, measures should be taken to ensure that the DCB is a self-implementing law. The provisions of the DCB are well drafted with good intent and when enacted should bring the relief for fair competition in digital markets.