CCI introduces Leniency “Plus” regime in India- Will it suffice?
India joins the western bandwagon in initiating an ex ante regulation of the large digital platforms , the so called “Big Tech”. The Draft Digital Competition Bill, 2023 , has been published by the Indian Ministry of Corporate Affairs (MCA) on 12th March, 2024 and the MCA has invited stakeholders views for public consultation before submitting the Bill to the (New) Indian Parliament , which will be constituted after the current General Elections !
The proposed Draft Bill along with the Report of the Committee on Digital Competition Law , 2023 (“CDCL Report”) is available here.
I was recently invited by the ECONOMIC TIMES PRIME to share my view on the Draft Bill and the CDCL Report as a part of its research based article on the new initiative . The author of the article , which has been published on 28th May ,2024 is available at
Ctrl+Alt+Delete on innovation? Digital Competition Bill has left Big Tech, startups flummoxed. – The Economic Times (indiatimes.com)
Readers may notice that my views have been used selectively by the author of the article in the context of her own sequence to conclude that the proposal to initiate ex ante regulation of the Big Tech as explained in the CDCL Report along with the regulatory infrastructure conceived in the draft Bill is really not due as yet in India and that the existing Indian Competition Act, 2002 is sufficient to tackle instances of abuse of market power by the Big Tech with some minor changes , some of which have already been incorporated in the Competition (Amendment ) Act, 2023.
However, the article does not do justice with the entirety of my comments , which were modulated with caveats . For the benefit of my readers , I reproduce below my complete comments , which were given in Q&A format .
ET Queries
- Considering the evolving nature of the digital landscape, is it too early for India to implement a comprehensive competition bill like the DCB? If so, what are the potential risks of waiting?
Answer: Apparently yes. Any ex-ante regulation based upon the per se illegality rule is the last resort applied in cases of market failure, which situation does not appear to me in the digital markets in India. In certain sectors of e-commerce, the digital markets have yet to evolve in India[1]. For example, the user penetration in e-commerce activities such as online food delivery, hotel booking, and online cab services is below 17% in Tier 2 cities and rural India. In such scenario, the reasoning given in the CDCL Report (Report) that existing ex post law is not sufficient to tackle instances of market power abuse by Big Tech, seems farfetched. In my view, based on my over 15 years of experience as a competition law practitioner in India, the existing provision of the Competition Act, 2002 (Act) on abuse of dominance by the Big Tech in online markets are yet to be tested by the higher judiciary in India and the jurisprudence on the abuse of dominance in online markets is yet to fully evolve in India. This is mainly due to the extreme slow pace of disposals of pending appeals filed by most of the Big Tech companies like Google and Amazon , against CCI final orders , by the Appellate Tribunal , the NCLAT, which being overburdened with the growing litigation under the Insolvency and Bankruptcy Code (IBC) , has exhibited till date neither the required will nor the capacity to deal with intricate matters of interpretation of vexed issues of market power , which require sound understanding of economic issues . Moreover, considering the widening in the definition of anti-competitive agreements under the Competition (Amendment) Act, 2023, which by including all “other agreements” in the category of anti-competitive agreements , would have covered major ACPs , such as self- preferencing , tying and bundling , exclusive tie ups , Anti Steering or restricting Multi homing etc , bringing an ex ante regulation through the draft Digital Competition Law Bill, with the same enforcement and penalty mechanism, as prevailing under the Act , seems like a double whammy to me , which apart from hampering the current economic philosophy of promoting the “ease of doing business” may also cause adverse effect on growth of competitive online markets in India , due to heavy reliance placed on regulatory efficacy , which is yet to be tested even in the most advanced jurisdictions of EU and USA.
I am, therefore, of the prima facie view that in the backdrop of the ongoing debate[2] between consumer welfare Vs harm to competition per se still to be settled due to lack of evidence[3] ( that is whether the direct benefits towards the consumer welfare from the growth of e commerce and digital media in the form of cheaper prices, variety of choices , better quality and fast delivery etc are outweighed by the indirect harm to the consumer welfare due to anti-competitive practices such as self- preferencing and killer acquisitions , Anti Steering policies etc ) , it may not be prudent to join the Western attempt to directly regulate the Big tech by ex-ante regulations[4] , without first observing its effect on innovation and market dynamism in those jurisdictions , considering particularly , the present stage of evolution of the digital economy in India.
Having said so, however, I am also cognizant of the emerging power of the Artificial Intelligence (AI) and the potential of its misuse in moulding not only the demand and supply in our vast country but also in influencing (if not controlling) the non-commercial aspects of human behaviour, which may impact the political and cultural thinkings in India. These more serious possible repercussions do not seem to have been examined in the DCB due to its limited mandate. The risks of leaving the AI Genie unbottled for long is really huge and cannot be even anticipated fully at this point in time. This requires a serious research-based inquiry involving the best available techno-legal minds from the academia and the Bar. The proposed Digital India Act, the likely successor of the IT Act, 2000, is likely to address and regulate these core issues[5] , hopefully.
2.What are your thoughts on the potential for the Bill to create a complex regulatory environment, hindering growth and innovation?
Answer: The vast regulatory maze proposed in the Digital Competition Law Bill (DCB/Bill) starting from the identification or designation of the Systematic Significant Digital Enterprises (SSDEs) and the Associated Digital Enterprises to the SSDEs (ADEs) performing “core digital services”, based on both qualitative and quantitative thresholds and then listing out their obligations of periodic reporting etc. places a very heavy regulatory burden on the Competition regulator, the CCI, for which , I doubt it is presently capable of. From my little experience of working in the CCI in its formative years I can visualize the enormity of the task placed on shoulders of CCI by the Bill. I can only wish best of luck to the regulator and wish it gets competent men and women to join the proposed Digital Marketing Unit.
Without prejudice to the above said, it is perhaps too early to pass any judgment on the efficacy of the proposed regulatory structure, which has been devised after considering the existing and proposed structures in many major jurisdictions contemplating such ex-ante the regulations. However, the reintroduction of the enforcement regime in the form of the same legal and even statutory framework under the Act compels me to describe it being the “old wine in the new bottle”.
At the same time, in the context of the regulatory structure, the recent critique of the Bill emanating from a known think tank in USA[6] is worth reproducing as under.
- The Bill follows the UK’s DMCC in contemplating company-specific prohibitions, as opposed to industry wide generally applicable rules.
- The definition of Systematically Significant Digital Enterprises (SSDE) is unsatisfactory. Firstly, its quantitative threshold targets companies simply because of their size, irrespective of whether they have market power—a necessary even if not sufficient condition of market failure. Moreover, it includes a vague and ambiguous qualitative test for qualifying as an SSDE even if quantitative requirements are not met, which risks creating both an ad-hoc regime that gives too much discretion to regulators as well as uncertainty for many digital firms. This uncertainty is exacerbated by the Bill’s company specific approach to rulemaking, which when taken together raise concerns about regulatory capture and the Bill being used to pick digital winners and losers in India.
- 3.The Bill draws inspiration from the EU’s Digital Markets Act. Do you believe a one-size-fits-all approach works for a market as diverse as India’s? What unique aspects of the Indian market should the DCB consider when it comes to regulating big tech companies? Also, are there unique considerations for the Indian market (e.g., data privacy, regional connectivity) that the DCB should account for when compared to the European Union’s DMA?
Answer: Generally, agree. Though it may be correct to object the DCB being modelled on the EU DMA, yet one must also remember that India’s existing competition law regime, the Act, is also quite similar to the European competition law regime as both regimes follow an “effect based” approach on competition, in so far as anti-competitive agreements are concerned. But in so far as provisions of prohibiting abuse of dominance or market power are concerned, which is the more imminent threat form the Big tech, our law is more in sync with the US, since, unlike the EU, in India , there are no market share based thresholds to determine dominant position under Section 4 of the Act, which is based on subjective criterion based on market realties and economic considerations[7] .
Apart from the difference in the statutory framework as aforesaid, the extent of user penetration for online markets , the vast difference in digital literacy rates and the GDP per capita in terms of purchasing power parity between EU and India noted in the Report itself[8] , the presence of strong personal data protection regime in the form of GDPR in EU and its absence in India, also need to be noticed, as reasons to avoid the adoption of ex ante regulations at this stage .
Even more important factor is the fast growing start up culture in India, which heavily depends upon a robust innovation driven IT infrastructure. Despite acknowledging that “ex ante models of intervention bears the risk of false positives (Type II error) or over regulation and a consequent chilling effect on innovation[9]” , the Report proceeds to negate this well tested theory with its own reasoning of assumed complementary relationship between ex-post and ex ante regulations, based on examples of EU and UK , the “time consuming” ex post investigations and “narrow remedies “, and recommends the extant ex ante regulations , though confined to only those large enterprises that have significant presence and ability to influence the Indian digital market and reemphasizing the need to strike a fine balance between increased regulation and enabling innovation[10].
While I might have agreed that restricting the ex-ante regulation to only SSDEs and ADEs may initially not impact the innovation driven start ups or may even prevent them being acquired through “killer” or “hostile” acquisitions but to my surprise the anti-competitive mergers and acquisitions have been kept out of the purview of the proposed ex ante regulation , just because the Competition (Amendment) Act, 2023 has provided for the additional deal value threshold! This is a naïve approach to my mind as how large corporate restricting is fine tuned in small pieces to keep out of CCI scrutiny by availing the de minimis or target exemption benefit is well known to all competition lawyers at least!
Further, as stated in the recent comments on the Bill by the US based think tank, ITIF ( “Comments “) , the market dynamism exhibited by the Indian Start up ecosystem[11] does not support the conclusion drawn by the Report regarding any evidence of market power in digital markets.
However, I will not subscribe to the above comment specifically since there have been many cases of abuse of dominance by the well known large digital platforms such as Google, Amazon, Intel, Meta and Apple in India which have been duly highlighted and analysed in my blogs[12] . Recent CCI orders against Google, for example, for its highest commission of 30% from third party App developers in India in the Google Play Billing system case[13].
But I tend to agree with the Comments to the extent that the sort of ex-ante bans contemplated by the Bill are justified only if they will improve upon the status quo. And that the report appears to make no findings that the benefits of an ex-ante regime will outweigh these and other harms. Besides, I also subscribe to the argument in favour of India made in the Comments about the possible adverse effect of the extant ex ante regulation on the increasing Indo-US relations as stated thus –
by engaging in regulation that will invariably and greatly burden America’s leading firms, who are already facing overbearing regulatory costs from the DMA, India risks creating frictions in its relationship with the U.S. at a critical time given China’s rise and global techno-economic ambitions.
4.Are there alternative regulatory approaches that could achieve similar goals without introducing new legislation? Are there existing regulations that the DCB could build upon or consolidate to streamline the regulatory landscape?
Answer: Yes. As stated in
response to Q 1 above, I still hold the view that the existing Act, with some
minor changes, is sufficient to proscribe anti-competitive practices including
the abuse of market power by the Big tech, provided we can ensure faster
disposal of their appeals before NCLAT. For instance, in the definition of
dominant position, the extent of private data held by an enterprise could be
included as a factor in the relevant section of the Act. Similarly , What is
missing in the Indian Act as compared to the Sherman Antitrust Act , 1890 of
the USA is that “attempt to monopolise” the market has not been included
under Section 4 of the Act[14]
, which , in my view , would have brought the cases of predatory price conduct
of online cab aggregators like Uber[15] and
Ola under the sword of the Act , none of whom could individually be considered
as “dominant” under the existing form based approach of Section 4 of the Act
(which only Supreme Court could dare to direct investigation, in the first
round of litigation in India ) .
Besides the above lacunae in the Act itself , which ,
though discussed in the CLRC Report , 2019 , yet was recommended to be ignored
for the time being, the CDCL Report itself refers to some sector specific
instruments governing large digital enterprises , such as the FDI Policy, the
IT Rules , 2021 and the proposed Digital India Act and the Draft E-Commerce
policy and RBI’s guidelines on volume cap for third party , which if duly
implemented or fine tuned , can regulate many of the 9 ACPs (anti-competitive
practices) identified in the Report[16]
[1] As also noted by the CDCL Report (Report) in Para 3.23 – the user penetration in e commerce activities such as online food delivery, hotel booking, and online cab services is below 17% in Tier 2 cities and rural India.
[2] Ever since LINA KHAN’s pathbreaking work “Amazon’s Antitrust Paradox “was published in the Yale Law Journal in USA in 2016, the debate is trending and is often referred to as Hipster Antitrust in USA!
Can digital commerce and new BIG technology conglomerates (GAMA) actually harm us? The new age market dynamics governed by the Big Data, Computer algorithms, artificial intelligence (AI), and machine learning (IOT) -leading to growth of price comparison websites, Smartphone Applications, dynamic pricing, web promotions =don’t they serve our interests better- with lower prices, improved quality, widening selection of goods and services, with faster speed not result in CONSUMER WELFARE?
Or could it be that after initial procompetitive and pro-consumer promise all these technologies together can lead to higher prices, poorer quality, fewer options and lesser innovations besides harming us subtly in ways we may not initially understand – in our privacy?
For instance, when consumers use zero-price services, are they in an illusion that the product is actually free or the consumers end up paying with their data. Please recall the famous lines, rightly highlighted in the Netflix movie “The Social Dilemma”: “If you’re not paying for the product, you are the product.”
[3] Please refer to the testimonies of the CEOs of each of GAFA companies before US HJC Subcommittee in 2019, where each of them had taken this defence.
[4] This does not mean that I am against the regulation of the Big Tech by the competition law. Much before this debate actually began to be known and gained momentum in India , I had anticipated it after researching in the advanced jurisdictions and my article “Should Online markets be immune from CCI scrutiny “ appeared in the FINANCIAL EXPRESS on 8th February , 2012 in which I had highlighted the problems much earlier in time. I invite you to read it.
[5] Para 3.16 of the CDCL Report.
[6] Available at https://itif.org/publications/2024/05/15/comments-to-the-indian-ministry-of-corporate-affairs-regarding-digital-competition-law/
[7] “The ability to operate independently of the competitive forces prevailing in the relevant market; or to affect its competitors or consumers or the relevant market in its favour”.
[8] Refer to Para 3.20 -Page 104 of the CDCL Report
[9] Refer to Para 1.1.-Page 91 of the CDCL Report
[10] Refer to Para 1.8 -page 93 of the CDCL Report
[11] ..the Indian startup economy is the 3 largest in the world, with over 68,000startups launched, compared to over 76,000 in the United States. Moreover, a number of these startups have achieved unicorn status, which evinces an ability to scale and challenge large incumbents. This startup growth was also broad, with startups spread across 56 sectors: 13 percent from IT services, 9 percent from healthcare and life sciences, 7 percent from education, 5 percent from agriculture, and 5 percent from food &beverages. To be sure, while Fintech and EdTech continue to especially thrive, new areas are also emerging as growth spots: DeepTech (R&D-focused) startups have seen steady growth, attracting a total of $6.73 billion in funding over a decade, and Space Tech, a sector undergoing significant transformation due to privatization, has also garnered significant investor interest. This growth is backed by a well-capitalized venture ecosystem, with a total of $8.4 billion invested in 2023 despite economic headwinds. 12In fact, consistent with the digital acceleration brought upon by the Covid-19 pandemic, 2020 and 2021 were the peak funding years over the past decade. And, while Bengaluru remains India’s leading startup hub, attracting total funding of $70.4 billion in a decade, cities like Delhi-NCR and Mumbai are increasingly following closely behind. 14In fact, non-metropolitan areas are also emerging as successful startup centres, which bodes well for ensuring economic opportunity across India. For example, Jaipur has secured a prominent position in Fintech funding, attracting $214 million in 2023. Indeed, startups have also played a vital role in job creation, generating around 1 million jobs by 2023, as well as supporting investments in upskilling and education highlight a commitment to empowering India’s workforce. –Comments to the Indian Ministry of Corporate Affairs Regarding Digital Competition Law | ITIF https://itif.org/publications/2024/05/15/comments-to-the-indian-ministry-of-corporate-affairs-regarding-digital-competition-law/ 3/10
[12] For instance , may like to read my detailed analysis on Amazon’s possible strategies to combat an adverse order in the ongoing investigation before CCI at https://www.competitionlawyer.in/can-amazon-be-tamed-in-india-antitrust-probe-will-it-be-forced-to-change-its-modus-operandi-in-india/
[13] https://www.competitionlawyer.in/google-vs-app-developers-madras-high-court-refuses-to-intervene-in-the-terms-of-googles-play-billing-system-on-technical-grounds/
[14] I have been advocating for this and had suggested this idea to the Competition Law Review Committee in my article published in ET dated 5.3.2020 in the context of the earlier amendment bill of 2020 and subsequently in the last amendment bill of 2022 . May like to read https://www.financialexpress.com/opinion/competition-amendment-bill-a-matter-of-fine-tuning/2661757/
[15] https://www.competitionlawyer.in/deep-discounts-by-uber-no-problem-in-india-cci-closes-case-against-uber/
[16] Refer to the Table of ACPs below Para 1.15 of the CDCL Report
In this blog I
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