Introduction:
The objective of the Digital Competition Bill (“DCB”) is to impose mandatory obligations upon Systemically Significant Digital Enterprises (“SSDEs”) and Associate Digital Enterprises (“ADEs”), to ensure the fairness, contestability, and transparency of markets. These obligations seem to have been derived from two main sources: (i) The Anti-Competitive Practices (“ACPs”) identified by the Standing Committee Report in 2022[1] and (ii) Doctrinal theories of harm, which have been developed through jurisprudence.[2] These obligations encompass several prohibitions against engaging in anti-competitive behaviours, such as enforcing anti-steering policies, practicing self-preferencing, limiting third-party app access, abusing business user data, and bundling products and services. Upon classification as a SSDE or ADE, adherence to these obligations becomes necessary, with non-compliance attracting substantial penalties.[3]
Cross-Jurisdictional Comparison:
Upon initial examination of the obligations outlined in the DCB, it is evident that the European Union’s Digital Markets Act (“DMA”)[4] serves as the principal basis for comparison. The DMA lays down prohibitory and mandatory ex-ante obligations upon designated entities i.e., Gatekeepers. Prohibitory conduct includes tying and bundling of core-platform services,[5] restricting the switching or changing of default pre-installed services,[6] platform parity clauses,[7]and self-preferencing.[8] In relation to user data, Gatekeepers are also prohibited from utilizing or cross-utilizing data acquired through their core platform, unless they adhere to the notice and consent requirements as outlined in the GDPR.[9] Likewise, the usage of any non-publicly accessible data produced by or provided by business users is prohibited.[10] Certain conducts such as enabling effective interoperability[11] and application of transparent, fair and non-discriminatory self-preferencing conditions,[12] is mandated by the DMA. Furthermore, the DMA imposes affirmative obligations regarding uninstalling default services.[13] Gatekeepers are mandated to furnish end users with technical mechanisms, without charge, ensuring the efficient portability of their data produced during their engagement with the core platform service.[14] Furthermore, Gatekeepers are obliged to afford business users with cost-free, uninterrupted, real-time, and high-calibre access to all data generated by business users utilizing a core platform service.[15] Lastly, the DMA also delineates specific obligations aimed at mitigating data concentration advantages in online search engine markets.[16]
Another point of reference can be the proposed ex-ante obligations under the United Kingdom’s Digital Markets, Competition and Consumers Bill (“DMCC”).[17] This empowers the Competition Market Authority (“CMA”) to impose one or more ex-ante obligations in the form of “conduct requirements”,[18] on a designated Strategic Market Status (“SMS”) entity. The obligations imposed must have a nexus with the objective sought to be achieved i.e., fair dealing, free choices, and trust and transparency.[19] The permitted conduct requirements can be divided into two main categories, obligatory and preventative. An SMS entity is obligated to engage in fair trade with reasonable terms,[20] maintain effective procedures for addressing complaints and disputes from users or potential users,[21] and provide clear, accurate, and easily available information about the relevant digital activity.[22] Furthermore, it is crucial to offer users options or default settings related to the digital activity, in a manner that allows them to make informed and effective decisions about those options or settings.[23] Preventative conduct requirements seek to prohibit an SMS entity from engaging in discriminatory practices,[24] leveraging dominant market position,[25] tying and bundling practices,[26] limiting interoperability,[27] and unfairly using or restricting data.[28]
Lastly, reference can also be made to the 9th and 10th Amendments of Germany’s Act Against Restraint of Competition (“ARC”),[29] which brought sweeping changes to the regime to address digital markets. If an entity is designated as an undertaking of Paramount Significance for Competition Across Markets’ (“PSCAM”), it will not be able to undertake specific prohibited conducts. These conducts include self-preferencing,[30] hindering competitors’ operations in relevant markets,[31] engaging in anti-competitive tying and bundling,[32] and imposing unfair terms and conditions that impede competitors’ entry (anti-competitive data processing).[33] PSCAM entities are also forbidden from refusing to comply with interoperability and data portability requirements or making them more burdensome.[34]
Background Evaluation:
Prior to outlining any recommendations regarding the obligations imposed by the DCB, it is crucial to consider the legislative intent of the drafters. The Committee explicitly noted that the ex-ante framework must be “implemented in a manner that does not hinder opportunities and incentives for innovation for small enterprises, and that such enterprises are not burdened with additional compliance obligations.”[35] Thereby, through mandatory obligations, it seeks to achieve a balance between pro-competitive and anti-competitive benefits. In such markets, the SSDEs will be accountable, and will open up avenues for new competitors.[36]
Further, it must be caveated that jurisprudence regarding compliance and enforcement of obligations is still in its nascent stages. In fact, the compliance deadline for DMA had just ended in March, and now the Gatekeepers are being actively assessed for non-compliance.[37] Gatekeepers have highlighted significant compliance costs and potential losses to consumer welfare as a result.[38] Hence, these recommendations are being presented prior to any significant advancements in jurisprudence.
Recommendations & Comments:
While the author primarily agrees with most of the obligations outlined in the Draft DCB, there are certain nuances and missed opportunities by the Competition Commission of India (“CCI”) that are worth highlighting. The idea of graduated and bloc-wise exemptions from obligations, through separate rules/notifications,[39] in the author’s opinion, adequately balances the pro and anti-competitive effects of regulation. Several scholars and industry experts have noted how start-ups and innovation may be impacted by ex-ante regulation.[40] The author seeks to disagree with the same as (1) Not only will ex-ante regulations create a more competitive market by lowering entry barriers for start-ups; (2) The bloc-wise graduated exemptions, will also ensure that they are not overly burdened with compliances. Exempting start-ups as a complete class may lead to unintended consequences as they may be exempt from regulation. Thus, this is not an instance of over-regulation but a mere safety-net in balancing the pro-competitive aspects of digital competition.
On comparison with the DMA, an obligation which is peculiarly missing is that of “price parity”. The author is of the opinion that this was a misstep by the CCI. Within the FHRAI v Make My Trip Order (“MMT-Go”),[41] CCI explicitly directed MMT-Go to modify their standing agreements with associated hotels, and remove any/all parity and exclusivity related clauses. While the Order specifically relates to online travel agents and their associated hotels, it can easily be expanded to include other “multi-sided platforms offering online intermediation services (especially those which allow transaction processing).”[42] The legitimacy of such parity clauses has been highly debated in contemporary times, especially in relation to digital markets. Some nations such as EU,[43] France,[44] and Belgium have already banned them via enacted legislations.[45] From the Order, it is clear that wide parity clauses are prohibited with narrow clauses requiring clarification. Research evidences that such clauses may not only adversely affect markets, but will also not pose any ameliorating effects.[46] Thereby, it is proposed that an explicit bar on price parity clauses be introduced in the DCB obligations. Moreover, the Commission noted that in light of the new Deal-Value Threshold (“DVT”) Notification, it would be “would be prudent to leave out mergers and acquisitions while formulating ex-ante obligations.”[47] However, the author feels that this was a missed opportunity, as the CCI could have clarified the scope of applicability of DVT, and adequately codified it for digital markets. The DVT Notification has been met with wide criticism from scholars on several aspects such as ambiguous thresholds,[48] interpretative gaps,[49] and lack of sector specific thresholds.[50] Not only could the Commission have taken into consideration and addressed the criticisms but they could have also elevated DVT to a statute-status rather than its current status as a subordinate legislation.
Lastly, a minor recommendation would be to provide specifications regarding Compliance Reports. Under the DCB, a designated SSDE is obliged to report to the Commission on any/all measures taken to comply with the mandated obligations.[51] However there is no specified timeline or format for the same. It is recommend that clarifications be issued in the form of CCI FAQs or general guidelines. The “Example Do’s or Don’ts”[52] issued by the European Commission in relation to the DMA are a great point of reference. With illustrated scenarios highlighting compliance/non-compliance, it will ease the process for SSDEs and ADEs. Additionally, the CCI, like the European Commission can conduct Solution-Based Workshops for designated SSDEs. In these technical workshops, stakeholders who are interested parties of the gatekeeper entities, gather their perspectives on particular issues and queries that might arise concerning specific compliance with obligations.[53] By engaging in direct talks with concerned parties, the Regulators can ensure proper interoperation of obligations and thereby, compliance.
[1] Committee on Digital Competition Law, “Report of the Committee on Digital Competition Law” (March 2024) <https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open> accessed 1st May 2024 (109).
[2] D Zimmer, Göhsl “Enforcement of the Digital Markets Act” (Verfassungsblog, 10 April 2024) <https://verfassungsblog.de/enforcement-of-the-digital-markets-act/> accessed 1st May 2024.
[3] Up to 10% of global turnover up to three years. See: RM M and others, ‘Fair and Competitive Digital Markets for India’ (Vidhi Centre for Legal Policy, 14 March 2024) <https://vidhilegalpolicy.in/research/regulating-indias-digital-markets/> accessed 21 June 2024 and-proportionate> accessed 21 June 2024
[4] Digital Markets Act 2022 (EU).
[5] Digital Markets Act 2022 (EU) Art. 5(7)- (8).
[6] Digital Markets Act 2022 (EU) Art. 6(6).
[7] Digital Markets Act 2022 (EU) Art. 5(3).
[8] Digital Markets Act 2022 (EU) Art. 6(5).
[9] Digital Markets Act 2022 (EU) Art. 5(2).
[10] Digital Markets Act 2022 (EU) Art. 6(2).
[11] Digital Markets Act 2022 (EU) Art. 6(4) – 6(7).
[12] Digital Markets Act 2022 (EU) Art. 6(5).
[13] Digital Markets Act 2022 (EU) Art. 6(3).
[14] Digital Markets Act 2022 (EU) Art. 6(9).
[15] Digital Markets Act 2022 (EU) Art. 6(10).
[16] Digital Markets Act 2022 (EU) Art. 6(11).
[17] Digital Markets, Competition and Consumers Bill <https://bills.parliament.uk/publications/53073/documents/4037> accessed 2 May 2024.
[18] Digital Markets, Competition and Consumers Bill 2023, s 19.
[19] Digital Markets, Competition and Consumers Bill 2023, s 20(2) – 20(3).
[20] Digital Markets, Competition and Consumers Bill 2023, s 20(2)(a).
[21] Digital Markets, Competition and Consumers Bill 2023, s 20(2)(b).
[22] Digital Markets, Competition and Consumers Bill 2023, s 20(2)(c).
[23] Digital Markets, Competition and Consumers Bill 2023, s 20(2)(e).
[24] Digital Markets, Competition and Consumers Bill 2023, s 20(3)(a).
[25] Digital Markets, Competition and Consumers Bill 2023, s 20(3)(b).
[26] Digital Markets, Competition and Consumers Bill 2023, s 20(3)(d).
[27] Digital Markets, Competition and Consumers Bill 2023, s 20(3)(e).
[28] Digital Markets, Competition and Consumers Bill 2023, s 20(3)(f) – 20(3)(h).
[29] Act Against Restraint of Competition 1998.
[30] Act Against Restraint of Competition 1998 s 19a(2) no.1.
[31] Act Against Restraint of Competition 1998 s 19a(2) no.2.
[32] Act Against Restraint of Competition 1998 s 19a(2) no.3.
[33] Act Against Restraint of Competition 1998 s 19a(2) no.4.
[34] Act Against Restraint of Competition 1998 s 19a(2) no.5.
[35] Committee on Digital Competition Law, “Report of the Committee on Digital Competition Law” (March 2024) <https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open> accessed 1st May 2024 (5).
[36] Bhattacharya S, ‘A Defense of Ex-Ante Regulations and the Digital Competition Bill’ (Bar and Bench – Indian Legal news) <https://www.barandbench.com/columns/a-defense-of-ex-ante-regulations-and-the-digital-competition-bill> accessed 5 May 2024.
[37] Martínez AR, Modrall J and Rivas J, ‘Full (Regulatory) Steam Ahead: Gatekeepers Issue the First Wave of DMA Compliance Reports’ (Kluwer Competition Law Blog, 10 March 2024) <https://competitionlawblog.kluwercompetitionlaw.com/2024/03/11/full-regulatory-steam-ahead-gatekeepers-issue-the-first-wave-of-dma-compliance-reports/> accessed 4 May 2024.
[38] Martínez AR and Mândrescu D, ‘Apple’s DMA Compliance Workshop – The Power of No: Breaking Apart the Bundle?’ (Kluwer Competition Law Blog, 18 March 2024) <https://competitionlawblog.kluwercompetitionlaw.com/2024/03/19/apples-dma-compliance-workshop-the-power-of-no-breaking-apart-the-bundle/> accessed 4 May 2024.
[39] Committee on Digital Competition Law, “Report of the Committee on Digital Competition Law” (March 2024)<https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open>accessed 1st May 2024 (112).
[40] Sur A, ‘Digital Competition Bill May Have Indirect Impact on Startups: Experts’ (Moneycontrol, 14 March 2024) <https://www.moneycontrol.com/news/technology/digital-competition-bill-may-have-indirect-impact-on-startups-experts-12458541.html> accessed 5 May 2024.
[41] Case No. 14 of 2019, Order dated 19 October 2022.
[42] Chauhan VPS, Sinha S and Sathe S, ‘Clarity on Parity? Potential Implications of the CCI’s Order against MMT-Go for Intermediation Platforms’ (Cyril Amarchand Mangaldas, 6 February 2023) <https://competition.cyrilamarchandblogs.com/2023/01/clarity-on-parity-potential-implications-of-the-ccis-order-against-mmt-go-for-intermediation-platforms/> accessed 4 May 2024.
[43] Digital Markets Act 2022 (EU).
[44] Law No. 2015-990 for Growth, Activity and Equal Economic Chances (2015).
[45] Act on pricing freedom for tourist accommodation operators in contracts concluded with online reservation platform operators (2018).
[46] Pathak P, ‘Price Parity Clauses in the Digital Era: A Competition Law Concern’ (Society for International Trade & Competition Law, 24 December 2023) <https://nujssitc.wordpress.com/2023/12/24/price-parity-clauses-in-the-digital-era-a-competition-law-concern/#:~:text=Essentially%2C%20price%20parity%20clauses%20forbid,or%20on%20their%20own%20websites.> accessed 4 May 2024.
[47] Committee on Digital Competition Law, “Report of the Committee on Digital Competition Law” (March 2024)<https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open>accessed 1st May 2024 (109).
[48] Sahu U, ‘Revaluing Transactions: Navigating the Competition Law Terrain with Deal Value Threshold’ (Manupatra, 15 March 2024) <https://articles.manupatra.com/article-details/Revaluing-Transactions-Navigating-the-Competition-law-Terrain-with-Deal-Value-Threshold> accessed 6 May 2024.
[49] Gupta A, ‘Deal Value Threshold: A Critique of India’s Latest Competition Regime’ (IRCCL, 1 May 2023) <https://www.irccl.in/post/deal-value-threshold-a-critique-of-india-s-latest-competition-regime> accessed 6 May 2024.
[50] RB M, ‘Pitfall of Deal Value Threshold: Lessons from the Indian Pharma’ (CBCL, 21 October 2023) <https://cbcl.nliu.ac.in/competition-law/pitfall-of-deal-value-threshold-lessons-from-the-indian-pharma/> accessed 6 May 2024.
[51] Committee on Digital Competition Law, “Report of the Committee on Digital Competition Law” (March 2024) <https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open> accessed 1st May 2024 (161).
[52] European Commission, ‘Antitrust: Commission publishes Guidance on new EU rules applicable to horizontal cooperation agreements’ (Press Release, 19 November 2020) <https://ec.europa.eu/commission/presscorner/detail/en/qanda202349https://ec.europa.eu/commission/presscorner/detail/en/qanda202349> accessed: 5 May 2024.
[53] European Commission, ‘Digital Markets Act – Workshops’ <https://digital−markets−act.ec.europa.eu/events/workshopsenhttps://digital−markets−act.ec.europa.eu/events/workshopsen> accessed 5 May 2024.