Breaking Ground: Analysing MCA’s Draft Digital Competition Law Unleashed

Introduction

The Ministry of Corporate Affairs ,on 12th March 2024 ,released a draft bill on digital competition law, submitted by the committee on competition law. This committee had been formed on the recommendation of 53 reports of parliamentary standing committees. The main aim behind bringing in this legislation is to tackle anti competitive practices used by Big Tech firms .For instance , recently ,google delisted (and then eventually reinstated) a number of Indian apps that had long before violated the company’s app payment guidelines.Furthermore, in order to supplement the current ex-post framework, the Committee suggests implementing ex-ante measures, such as identifying large digital firms that have a “significant presence” in India in specific “core digital services” and establishing pre-established guidelines for their behavior.

Qualification and Obligations of Systematically Significant Digital Enterprises (SSDEs)

The bill outlines criteria for identifying ‘Systematically Significant Digital Enterprises’ (SSDEs) based on financial and user thresholds. SSDEs must notify the Competition Commission of India (CCI) within 90 days to qualify, with obligations and penalties for non-compliance.

SSDEs must meet financial thresholds over three years: Rs 4000 crore turnover in India, USD 30 billion global turnover, Rs 16000 crore gross merchandise value in India, or USD 75 billion global market capitalization. They must also meet user thresholds: 1 crore end users or 10,000 business users in India over three years.

The CCI may designate an SSDE based on factors like enterprise size, user base, and market structure, even if thresholds aren’t met.

To prevent service segmentation, SSDEs can’t split services to avoid thresholds.SSDEs and their associates must comply with obligations once designated, with penalties for non-compliance.Measures against circumvention of compliance include prohibiting behavior undermining obligations and allowing users to raise non-compliance issues.SSDEs must establish transparent complaint handling and compliance mechanisms and operate fairly with users. SSDEs can’t favor their own products or those of related parties over third-party business users’ offerings.They also can’t use non-public data of business users to compete or share such data without consent, and must allow easy data portability for users.

Settlement Procedures for Alleged Contraventions

The bill outlines settlement procedures for enterprises facing inquiries under Section 16 for contravening the Act. Enterprises may submit written applications to the Commission for settlement, considering the nature and impact of the contraventions. The Commission may agree to settlement proposals upon payment of specified amounts or other terms. No appeals are permitted against the Commission’s orders

Regulatory Powers and Investigation Authority

The Commission is granted the authority to regulate its procedures and conduct studies, with powers akin to a Civil Court under the Code of Civil Procedure, 1908. It can direct individuals to produce documents for investigation purposes. Additionally, the Director General is empowered to assist in investigating contraventions and examine individuals under oath with prior approval from the Commission.

Exemptions and Penalties

The Central Government holds the power to exempt enterprises from certain provisions of the Act through notification. Failure to comply with Commission orders or directions may result in penalties up to Rs 10 crore, with daily penalties capped at Rs 1 lakh. Non-compliance with this may lead to imprisonment for a term extending upto 3 years or fine up to Rs 25 crore as determined by the Chief Metropolitan Magistrate, Delhi.

Conclusion

Personally, I think there are a few good things about the draft digital competition law that the Indian competition law committee has put up. First, the law aims to address the growing concerns about the dominance of Big Tech businesses and their propensity to hinder competition by adopting criteria for defining Systematically Significant Digital Enterprises (SSDEs).This action may help startups and smaller companies compete on an even playing field, encouraging creativity and diversity in the online economy. More importantly, it is a positive step that the law forbids SSDEs from favoring their own products over those of third parties in order to prevent service segmentation and ensure fair competition. In the end, customers would gain from this clause, which might also prohibit monopolistic behavior and encourage a more dynamic and competitive digital economy. Though the proposed law provides advantages, there may be hazards and difficulties with it as well.

The difficulty of establishing thresholds and other criteria for identifying SSDEs is one such worry. Accurately estimating variables like cash turnover and user base might be challenging, particularly in the quickly changing digital context where businesses operate internationally. Furthermore, there’s a chance that unduly strict laws could hinder innovation and the expansion of digital businesses. It’s critical to strike the correct balance between regulating Big Tech companies to stop anti-competitive behavior and leaving space for innovation and expansion. Excessive regulation has the ability to deter investment and impede the advancement of novel technology and services, so undermining the legislative objectives.

Author:- Ananta Chopra, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or   IP & Legal Filing.