Divergent Views Emerge Within IAMAI on Proposed Digital Competition Bill

What’s in today’s article?

• Why in News?
• What is Digital Competition Bill, 2024?
• What is the need for such bill?
• What are the key proposals of the draft digital competition Bill 2024?

Why in News?

• Four members of the Internet and Mobile Association of India (IAMAI) have expressed a divergent stance on the proposed Digital Competition Bill (DCB). They have written to the Ministry of Corporate Affairs (MCA) to quickly implement regulations that prevent anti-competitive practices.
• In May 2024, the IAMAI has expressed apprehensions about the draft Digital Competition Bill 2024. It had argued against the need for ex-ante (before the event) regulations for digital markets in their submission on the draft Digital Competition Bill.
• IAMAI is a key industry body that represents numerous digital entities, including big tech firms.

What is Digital Competition Bill, 2024?

• About
  • The bill seeks to further regulate large digital enterprises, including news aggregators, as part of efforts to ensure a level-playing field and fair competition in the digital space.
    • It was proposed in March 2024.
  • The new law could prevent big tech companies like Google, Facebook, and Amazon from favoring their own services or using data collected from one of their businesses to help another one of their businesses.
  • It has provisions to set presumptive norms to curb anti-competitive practices before they actually take place.
  • It promises to impose heavy penalties — which could amount to billions of dollars — for violations.
• Nodal ministry
  • The Ministry of Corporate Affairs (MCA) is handling the draft.

What is the need for such bill?

• Ex post antitrust framework being followed in India
  • Currently, India follows an ex post antitrust framework under the Competition Act, 2002. 
  • One of the biggest criticisms of the law has been that regulating after the incidence of market abuse involves delays.
    • By the time the offending company has been penalised, market dynamics change to rule out smaller competitors.
  • Due to the complex world of digital markets, regulating for market abuse after it takes place (as in an ex-post framework) is not optimal.
  • A forward-looking, preventive, and presumptive law (an ex-ante framework), which foresees the potential harms that can arise out of antitrust issues and prescribes pre-determined no-go areas is perhaps the way forward.
• Big tech companies have shown a history of engaging in anti-competitive practices
  • In 2023, Google was fined Rs 1.337 crore by the CCI for its anti-competitive conduct in the Android ecosystem.
• High market barriers for new entrants
  • Many analysts believe that majority of the innovation has been confined to within the stables of a handful of big tech companies, mostly from the US.
  • A big reason for this is the high market barriers for new entrants in the sector — in the online market.
    • Once a company gets a significant portion of the market, their product becomes the default way to access that particular service, with rivals finding it increasingly difficult to challenge their dominance.

What are the key proposals of the draft digital competition Bill 2024?

• List of Core Digital Services (CDS)
  • The list of core digital services has been mentioned under Schedule I of the bill.
  • It consists of 
    • online search engines, 
    • online social networking services, 
    • video-sharing platform services, 
    • interpersonal communications services, 
    • operating systems, web browsers, cloud services, advertising services, and 
    • online intermediation services (includes web-hosting, service providers, payment sites, auction sites, app stores, e-commerce marketplaces and aggregators, etc.)
• Significant entities
  • The Bill proposes to designate certain enterprises as Systemically Significant Digital Enterprises (SSDEs).
    • SSDEs are those enterprises that provide core digital services in India and have a significant presence and significant financial strength in the country.
• Parameters to determine whether the enterprise may be designated as SSDE
  • If an enterprise is engaged in a CDS, the Bill proposes two tests – the financial strength test and spread test (user base test) to determine whether the enterprise may be designated as SSDE.
  • The quantitative parameters for a company to be designated a SSDE are:
    • If in the last 3 financial years, its turnover in India is not less than Rs 4,000 crore; or its global turnover is not less than $30 billion; or
    • Its gross merchandise value in India is not less than Rs 16,000 crore; or
    • Its global market capitalisation is not less than $75 billion; or
    • The core digital service provided by these companies should also have at least 1 crore end users, or 10,000 business users.
• Entities that do not fall under these parameters can still be designated as SSDEs if the CCI believes that they have a significant presence in any given core digital service.
• Obligations imposed on SSDE
  • Entities which are designated as SSDEs, have been prohibited from engaging in practices such as self-preferencing, anti-steering, and restricting third party applications. 
  • If they violate these requirements, they can be fined up to 10% of their global turnover.
• Associate Digital Enterprises
  • The Bill proposes to designate associate digital enterprises (ADEs) to understand the role that data collected by one company of a major technology group can play in benefiting other group companies.
  • If an entity of a group is determined to be an associate entity, they would have the same obligations as SSDEs.
    • However, this will depend on the level of their involvement with the core digital service offered by the main company.
  • For example, Google Maps could be seen as an associate entity because Google Search directs users to it. 
  • The same goes for YouTube, depending on how much data is shared between Google Search and YouTube, affecting the video recommendations YouTube makes to users.

Q.1. What is meant by for ex-ante regulations?

Ex-ante regulations are proactive rules designed to prevent anti-competitive practices before they occur. These regulations set predetermined guidelines and restrictions for companies to ensure fair competition in the market, rather than addressing issues after they have already happened. 

Q.2. What is Internet and Mobile Association of India (IAMAI)?

The Internet and Mobile Association of India (IAMAI) is a not-for-profit industry body that represents the digital services and mobile content sectors in India. Established in 2004, IAMAI works to expand and enhance the online and mobile value-added services sectors.

Source: Divergent views emerge within IAMAI on proposed digital competition bill

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Indian Express