Ministry of Corporate Affairs: The Report of the Committee on Digital Competition Law – 2024 targeted large digital markets catering users across sectors such as healthcare, tourism, financial services, etc., made several recommendations to regulate competition on digital platforms as per the Competition Law and shared a ‘Draft Digital Competition Bill 2024’.
The Committee was setup on 6-02-2023 to examine the need for an ex-ante regulatory mechanism for digital markets in India, review the current provisions of the Competition Act, 2002, assess sufficiency to deal with challenges emerging from digital economy, and evaluate the need for a separate legislation to regulate digital markets.
The Committee compared traditional markets with digital markets to hint towards the threshold for intervention, and also looked into prevailing trends in other countries. It also looked at the Parliamentary Standing Committee’s Report on ‘Anti-Competitive Practices by Big Tech Companies’. The Committee Report acknowledged that the dynamics of digital markets are underpinned by robust network effects and increasing returns to scale, which often leads to a ‘winner-takes most’ outcome where a leading player adopts strategies that curtail market contestability, which reinforces its strength. It found that the ex-post model of regulation under the Competition Act, by design, involves fact-finding and inquiry processes which are time-consuming. Protracted enforcement proceedings hinder early detection and redressal.
The Committee observed that the Digital Public Goods like Aadhaar, Unified Payments Interface (“UPI”), and Open Network for Digital Commerce, created a platform for Indian start-ups to build products and solutions to serve the remotest parts of the country and drive India towards a trillion-dollar digital economy. It also took note of the Indian IT services industry, which grew from under USD 100 million to USD 250 billion in revenue in barely three decades, creating the world’s largest pool of high-quality tech talent.
The Committee on Digital Competition Law 2024 recommended the following:
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Introduction of a Digital Competition Act with ex-ante measures (a form of financial analysis that uses forecasting or predictions for future events as against the prevailing practice of ex-post framework under the Competition law);
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The legislation to be applicable to a pre-identified list of Core Digital Services that are susceptible to concentration;
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Regulation of digital enterprises with ‘significant presence’;
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Thresholds and criteria for designation as Systemically Significant Digital Enterprises (‘SSDEs’);
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Designation not limited to just one enterprise in a group but having Associate Digital Enterprises;
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An agile and principle-based framework of ex-ante obligations;
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Providing grounds for exemption from complying with the ex-ante obligations;
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Borrowing procedural framework from Competition Act for recommended draft due to enforcement of both being entrusted with Competition Commission of India;
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Monetary penalty for non-compliance with ex-ante obligations to be restricted to a maximum of 10% of the global turnover of the SSDE.
