Digital Competition Act (DCA)
panel to review the need for digital market regulation has recommended the introduction of a separate ‘Digital Competition Act’ (DCA) with ex-ante (based on forecasts rather than actual results), i.e., pre-emptive, measures to regulate large digital enterprises selectively.
In February 2023, the Ministry of Corporate Affairs (MCA) constituted the Committee on Digital Competition Law (CDCL) to examine issues linked to the need for a separate law on competition in digital markets in India, including the need for an ex-ante regulatory framework.
The CDCL has now submitted its recommendations in a 236-page report, along with the draft bill on digital competition law.
CDCL has observed that competition jurisprudence, traditionally, has favoured ex-post or after-the-fact models of intervention, where corrections and actions are made once something goes wrong, because of the potential risks of the ex-ante model, which would see preventive measures put in place.
According to the draft bill, an enterprise will be considered a ‘Systemically Significant Digital Enterprise’ (SSDE) in respect of a ‘Core Digital Service’ if it has - a turnover of at least Rs 4,000 crore in India or - a global turnover of at least $30 billion or - a gross merchandise value of at least Rs 16,000 crore in India or - global market capitalisation or fair market value of $75 billion, and - if its core digital service has at least one crore end-users or - at least 10,000 business users in India in each of the preceding three financial years.
Core Digital Service’ might include online search engines and social networking services, video-sharing platform services, interpersonal communications services, operating systems, web browsers, cloud services, and advertising services
proposed penalties for SSDEs for failure to comply with the provisions of the ‘Act’. The penalties could go up to 10 percent of the enterprises’ global turnover in the preceding financial year.
global giants such as Amazon, Apple, Google, Uber and Meta, as well as Indian firms such as Zomato, Swiggy, Oyo, and Internet and Mobile Association of India (IAMAI), have opposed ex-ante regulations.
Some enterprises that have supported ex-ante regulation are Paytm, MakeMyTrip, X, the National Association of Software and Service Companies (NASSCOM), and the Digital News Publishers Association.
The draft law has ensured that smaller startups or innovators would not be immediately subjected to obligations until they have consistently breached the thresholds for at least three years
the draft bill has not considered anti-competitive mergers and acquisitions. “The stated reason for this is the Competition (Amendment) Act, 2023, has already introduced a deal value threshold, which is likely to catch mergers and acquisitions in technology markets that the CCI have not previously notified.
