NEW DELHI: It’s not only big tech firms like Google, Meta, Amazon, which are opposed to the proposed ex-ante digital competition law. Domestic platforms having leadership position in segments they operate in are also opposed to any such legislation.
Interestingly, in the case of big domestic platforms, their local rivals which are opposed to their practises, have fully supported the ex-ante provisions, the draft of which was released by the ministry of corporate affairs on Tuesday.
So, food aggregator platforms like Zomato, and Swiggy, and travel-tech platform Oyo have voiced their reservations against having any ex-ante provisions. Surprisingly, the Internet and Mobile Association of India, which has members from domestic and global players, but the current management committee of which is dominated by members of domestic firms, is also against any such regulation. During the current Google versus domestic startups over the former charging a commission fee of 11-26% for in-app purchases, the association had sided with the home-grown firms.
Quite in contrast, there are associations led by domestic firms, which are opposed to the stand taken by domestic platforms in the matter. For instance, while Zomato and Swiggy are opposed to ex-ante regulations, Federation of Hotel & Restaurant Associations of India and National Restaurant Association of India are in favour of such a regulation. The reason being that they view the practices of platforms like Zomato and Swiggy as predatory and have been locked in a tiff with the two players.
“Broad based legislation creating uniform categories and imposing uniform obligations may have unintended consequences like actually removing incentives to innovate, create more efficient products or user experiences,” Oyo said in its submission to the committee, which drafted the Bill.
Quite similarly, while voicing its opposition to any such regulations, Zomato said, “Unlike the mature economies of the EU, the Indian economy is developing and needs nimble regulation” adding that the existing competition framework in India appears to be sufficient and CCI has wide-ranging powers.
Similarly, Swiggy said, “ex-ante regulations may pose a risk of incorrect/misplaced regulation of smaller home-grown players which provide digital technology-enabled products and services”. According to it, in case the framework is introduced, the government should consider applying separate thresholds to each specified sector/service.
According to analysts, the reason for this intra-division within the domestic firms, is because of the nature of the market and the regulations proposed in the draft Competition Bill (DCB). Ex-ante regulations prevent anti-competitive conducts from occurring as against the current ex-post framework of intervention wherein the Competition Commission of India (CCI) intervenes after the occurrence of an anti-competitive conduct.
To put in place ex-ante provisions, the MCA-led committee has proposed a set of provisions which would flag anti-competitive behaviour and has fixed penalties. In short, the provisions would act against any platform, which has a dominant position in any segment it operates in and if its practices – commissions for example — is seen as anti-competitive by other platforms in the business.
Large digital enterprises and their unique business models have prompted a variety of anti-competitive concerns that have been brought forth before the CCI. These include unilateral and opaque policies on search rankings, and anti-competitive usage of aggregated data.
The DCB has proposed a new term – systematically significant digital enterprises (SSDE), which have been defined as enterprises that offer “core digital services” such as online search engines, social networking services, video-sharing platform services and so on.
An enterprise can be declared an SSDE offering core digital services if its India turnover is not less than Rs 4,000 crore or its global turnover is not below $30 billion.
A company can also be deemed an SSDE if its gross merchandise value (GMV) in India is not less than Rs 16,000 crore or if its global market capitalisation is not below $75 billion.
An enterprise can also be treated as an SSDE if it has had 10 million Indian users of its digital service in the three immediately preceding financial years, or if it has at least 10,000 business users.
For such companies, the Bill proposes introducing additional obligations such as ensuring dealing with end-users in a fair and transparent way, not preferring own products over others, not restricting third-party applications and so on.
CCI, which will have the same powers as a civil court, will be empowered to inquire into non-compliance by an SSDE.
If CCI orders are violated, enterprises face a penalty, which may extend to Rs 1 lakh for each day of non-compliance to a maximum of Rs 10 crore.
If a person does not comply with the orders and also fails to pay the fine, the Bill proposes imprisonment for a term that may extend to three years or a fine of up to Rs 25 crore or both.
In addition to laying down such quantitative thresholds, the Bill has also proposed laying down of qualitative criteria – subjective factors that are indicative of an entity’s ability to influence the market. Metrics such as resources of the enterprise, volumes of data aggregated, direct and indirect network effects at play, and the entity’s bargaining position vis-à-vis its business users and consumers, fall under this.
Further, the CCI will be empowered with residuary powers, which means to include areas or platforms, which today may not fall in any of the categories but later may be seen to influence the market.
Competition law experts said that since the digital sphere is dynamic and evolving, such flexibility is needed in any legislation but at the same time both global as well local players are apprehensive of ex-ante regulation.
Source: The Financial Express