The Committee on Digital Competition Law, formed by the Ministry of Corporate Affairs last February, released its report on March 12, recommending legislation to regulate the market power of Big Tech firms like Google and Meta. The Competition Act of 2002 “intervenes after the occurrence of an anti-competitive conduct,” the committee said. “Such a framework was designed at a time when the extent and pace of digitalisation as is witnessed today could not be foreseen.” The recommendations, if implemented, would better equip the Competition Commission of India (CCI) to rule on competition matters for tech firms.
The report raises the alarm on the market power of these Big Tech firms, owing to their “network effects,” through which they are able to rapidly increase their user base and establish market power that is difficult for a new entrant in the industry to dislodge. “As such, digital markets bear the risk of becoming irreversibly polarised in favour of the incumbent,” the report says.
Also read: Explained | Why are U.S. tech firms sceptical about digital trade with India?
The report recommends the creation of a new law, the Digital Competition Act, to “introduc[e] an ex-ante legislation specifically applicable to large digital enterprises, to supplement the Competition Act.” A draft prepared by the committee targets firms with a “significant presence” in the market for a “Core Digital Service,” terming these “Systemically Significant Digital Enterprises,” or SSDEs.
Global turnover
The draft would compel firms to themselves determine whether they are SSDEs. If a firm does not self-designate, the penalty recommended by the committee would be derived from not the individual company’s domestic revenues, but from the entire corporate group’s global turnover. As for what rules would actually apply to such SSDEs, that would, the report says, be notified after public consultations are held.
“This will have a major impact on the big tech enterprises like Google, Apple, Amazon etc., as they will now also be subject to a separate regulatory regime,” Vaibhav Choukse, a partner at JSA Advocates & Solicitors said. “Such ex-ante regulation could potentially stifle innovation by imposing burdensome regulations on tech companies.”
