Introduction

Digitalization and technological advancement have reached a crucial stage, bringing both benefits and concerns. Prominent platforms such as Flipkart, Ola, Uber, Swiggy, and various other IT giants are strengthening customers' connection to the digital realm, steadily capturing substantial market shares. Consequently, these tech companies have exhibited a growing inclination toward engaging in anti-competitive practices. In a recent development, the Supreme Court refused to grant an interim relief to Google for a $161 million fine imposed by the Competition Commission of India (CCI) for its abuse of a dominant position in the relevant market.

The current framework of competition law relies on ex-post regulation to address anti-competitive agreements and the abuse of dominance. Recognizing the need for effective regulation of anti-competitive conduct in digital markets, the Parliamentary Standing Committee on Finance has recommended the Central Government to establish a dedicated Digital Competition Act. This proposed legislation aims to establish a fair and level playing field, bringing about equitable opportunities in these markets by altering the existing ex-post regulatory framework.

Taking into account the feedback from various stakeholders, the Parliamentary Standing Committee on Finance (2022-2023) has submitted a comprehensive report titled "Anti-Competitive Practices by Big Tech Companies." The report highlights the undesirable practices observed in the digital economy and emphasizes the necessity for a "code of conduct-based approach" (ex-ante approach) to address the concerns surrounding the digital market winners which are also known as "digital market gatekeepers."

Taking a significant stride towards curbing the dominance of Big Tech, the parliamentary panel has put forth a proposal to identify "systemically important digital intermediaries" (SIDIs), inspired by the European Union's Digital Markets Act (DMA). Under this proposal, the market winners in digital markets who function as intermediaries or gatekeepers will be designated as "Systemically Important Digital Intermediaries" (SIDIs). The criteria for such designation will be based on factors like revenue, market capitalization, and the number of active businesses and end users - all of which will be regulated by the Digital Market Unit.

Notably, the European Union also recently adopted the Digital Market Act (DMA) in November 2022, which aims to impose ex-ante structural limitations on the practices of large technology platforms. This aligns with the recent proposal made by the Standing Committee on Big Tech, indicating a similar approach in tackling the issues surrounding dominant players in the digital landscape.

Competition (Amendment) Bill: an ex-ante approach

The transition from modernization to the digital era has presented a significant challenge for legislators and enforcement agencies in addressing issues such as unfair competition and anti-steering within the market system. To tackle these concerns, the proposed act introduces the concept of Systemically Important Digital Intermediaries (SIDI), along with a code of conduct aimed at curbing unfair practices by powerful players in the digital market, as discussed earlier.

Countries like the USA, UK, Australia, and the EU have recognized the necessity of ex-ante legislation to proactively prevent harm. The Expert Panel Report, also known as the Furman Report, on digital competition, extensively examines the cost-benefit analysis of market monopolies in the digital sector. While acknowledging potential benefits like increased efficiency, the report concludes that such monopolies come at a cost, such as reduced choice and quality for consumers.

Data analysis reveals that although these market players initially recognized the need for a digital system and potentially diversified their resources for the betterment of society, this reasoning may not hold true. The paradox lies in the fact that new players are disadvantaged either way— their opportunities are restricted by dominant incumbents, or they are forced to negotiate at lower values than what they truly deserve. This perspective is also acknowledged in various other reports, such as the Special Advisors' Report of the European Union and the report of the German Commission Competition Law 4.0. The introduction of the European Union's Digital Markets Act and the establishment of the Digital Markets Unit will have a significant impact on the regulation of major digital companies referred to as "gatekeepers."

According to the OECD report, a comprehensive approach should be taken by considering market studies and providing guidelines for dealing with digital markets proactively, rather than solely focusing on damage control. The implementation of regular checks and balances will strengthen existing competition laws. Clear definitions of terms and prohibited conduct, coupled with effective enforcement by regulatory bodies, can ensure a smooth and fair operation of the market for all participants.

Conversely, the United States has revised its merger guidelines, and its antitrust agencies are implementing a review and analysis system that scrutinizes even transactions previously overlooked. This new antitrust enforcement strategy is guided by a strategic vision aimed at initiating and winning cases against major technology corporations, utilizing innovative and distinct approaches to achieve this goal.

The existing regulations in India do not adequately acknowledge the significance of data collection and processing. This issue has been evident in various cases involving companies like Facebook, WhatsApp, Microsoft, and LinkedIn. Google, in particular, has frequently found itself embroiled in controversies worldwide due to antitrust concerns related to search manipulation, Android dominance, and monopolies in online advertising. The European Union (EU) has been investigating Google since 2010 and has imposed fines amounting to approximately $10 billion thus far. These instances indicate that the current legislation fails to address the challenges of the digital landscape, as certain e-commerce websites also exploit these regulatory loopholes.

To address these concerns, the committee established for the digital regulation of competition has identified ten major anti-competitive practices by big companies and has put forth recommendations to mitigate them. In formulating the recommendations, the Committee referred to various legislations from different jurisdictions, such as the American Innovation and Choice Online Act (A/CO), Open App Markets Act (USA), and the 10th Amendment of the German Competition Act, among others. One issue highlighted is "Platform Neutrality/Self-Preferencing," where tech giants utilize digital stores or platforms, which serve as the driving force of the digital economy, to promote their own applications, products, and services over those of their competitors. Lawsuits have also been filed against food delivery giants Swiggy and Zomato. In this context, the Committee recommended that digital intermediaries refrain from favouring their own offerings over competitors' when facilitating access to supply and sales markets. This includes presenting their own changes in a more favourable manner and avoiding exclusive pre-installation of their own offerings on devices or integrating them in any way within platform offers.

However, it is crucial to recognize the potential challenges that may hinder the successful implementation of the proposed Bill, including resource constraints and irregularities in enforcement. Additionally, considering the political landscape of the country, it is important to acknowledge that established market players who hold positions of power and dominance will likely seek loopholes to protect their interests. They may also leverage their networks to influence public opinion. To prevent this, a rigorous and stringent process may be implemented. Without such measures, these dominant players can undermine emerging startups and businesses across various domains, given the interconnected nature of digital markets. While major technological market players have expressed concerns about the proposed regulation, it is essential that the concerns raised by this new Bill thoroughly scrutinize their operational practices. Adopting an ex-ante approach offers an opportunity to monitor and address any wrongdoing without causing harm to society at large. These concerns also extend to areas such as consumer privacy, data protection, and freedom of choice.

Conclusion

One of the crucial questions at hand is whether the proposed measures will effectively strengthen the competition law regime. In the past, the competition enforcement machinery has often proven to be slow in complex technological sectors. Multiple issues persist with tech giants like Amazon, Zomato, and Swiggy. The efficacy of competition authorities in effectively regulating digital markets is diminishing. In India, new startups face barriers to entry as a limited number of enterprises either offer significant discounts on their services or establish monopolies by acquiring competing firms. By the time effective orders are issued, the market may already be tilted in favor of the offending firm. The intended move aims to bolster the competition law regime by introducing restrictions related to fairness, transparency, and more. It could take the form of a set of regulations rather than a standalone law specifically targeting anti-competitive behaviour. However, the success of this initiative heavily depends on a well-planned and effective implementation process. It is important to be cognizant of the potential loopholes that intermediaries may exploit while adhering to the legislation, particularly considering the current resource shortage in our nation. Ensuring proper oversight and control of illicit activities is essential for the benefit of the overall market. If the concept is implemented, it would foster transparency and create a level playing field for all stakeholders in the market.

Shaswat Kashyap and Akshita Bhansali are second-year law students at Gujarat National Law University.