Feedback on the Committee on Digital Competition Law Report and draft Digital Competition Bill, 2024

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Feedback on the Committee on Digital Competition Law Report and draft Digital Competition Bill, 2024

Sudipto

@Sudipto

May 17, 2024

Public Policy

338

On May 15, 2024, nasscom submitted feedback on the Report of the Committee on Digital Competition Law (CDCL) and draft Digital Competition Bill, 2024 (DCB).

Our overall position is that before government adopts a new ex-ante law, it requires more in-depth examination of what can be fixed in the existing scheme of things and better understanding of market realities/concerns.

Our feedback is organised in two parts: overall comments and specific comments. While we have provided here a summary of our feedback, please refer the attachment below for detailed representation.

In overall comments, we highlight the gaps in the proposal of CDCL to enact a new law with ex-ante obligations. Considering the high error costs of ex-ante regulations, and a lack of global prior experience on their implementation, we suggest that if Government adopts any new ex-ante law, it requires more careful and in-depth examination of market realities. Therefore, it is imperative to:

Examine the need for an ex-ante law: The CDCL Report has highlighted the enforcement gap under the Competition Act, 2002, and has listed two main shortcomings of the existing competition law regime, i.e., time-consuming nature of ex-post investigation and the narrow remedies and repetitive scrutiny. However, we note that it may be desirable to address these shortcomings by strengthening the existing regulatory framework before enacting a new legislation.
Provide empirical evidence: The need of introducing a new ex-ante law should be credibly demonstrated through extensive empirical evidence. This is particularly relevant in the Indian context.
Analyse impact with respect to MSMEs/start-ups: India is an emerging economy with a huge scope of innovation and growth for homegrown start-ups. At present, it is not clear whether the CDCL has considered the future impact of an ex-ante law on the innovation ecosystem in India.

Our specific comments list the concerns emerging from the provisions of the DCB, along with suggestions to minimise the same where possible. Some of these suggestions are:

Designation as Systematically Significant Digital Enterprises (SSDE): SSDE to be allowed to contest designation when it does not have significant presence.
Quantitative thresholds for designation are too low: User thresholds should be grounded in some basis that is relevant to the Indian context. Additionally, both end-user and business users’ criteria need to be satisfied to meet the user threshold.
Right to consult CCI: SSDEs should have a right to consult CCI during the framing of conduct requirements and notification of CDS.
Concept of Proportionality should be included in the DCB: CCI must ensure that conduct requirements under DCB are proportionate to the harms they seek to prevent. Further, the penalties should be revised with a view to reducing them. Additionally, penalties should not be imposed on the associate digital enterprise’s managerial personnel for the conduct of the SSDE.
Countervailing benefits: SSDEs should be allowed to seek exemption from obligations under DCB by demonstrating the countervailing benefits of their conduct.
Self-Preferencing: Ranking based on objective and transparent parameters to be allowed as an exception.
Data usage: The obligations on data usage should be removed due to several reasons, such as lack of clarity, misalignment with Digital Personal Data Protection Act, and unintended outcomes. Further, an informed decision can be made by CCI after conducting India focused studies to identify the possible competitive harms associated with data usage.
Restriction on third party application: The scope of obligation needs to be reduced.
Tying and Bundling: The scope of obligation should be reduced to ensure its non-applicability on legitimate business practices.
Schedule I: Cloud service and video-sharing platform services should be excluded from the list of CDS. The definition of online intermediation service and advertising service should be made narrower.
Investigation findings: A copy of the Director General investigation findings and supplementary report should be mandatorily provided to the parties concerned.

We continue our discussions with industry on competition matters to evolve our views. For any queries related to the subject-matter above, please contact Garima Prakash (garima@nasscom.in), Sudipto Banerjee (sudipto@nasscom.in), or Dhananjay Sharma (dhananjay@nasscom.in) with a copy to policy@nasscom.in.

digital markets competition ex-ante gatekeeper

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Sudipto