Need and timing are the two prerequisites for putting in place any kind of regulatory framework. With rapid advancement in digitalisation, which has seen the emergence of big tech firms like Google, Meta, Amazon, and Apple, domestic startups feel constrained in growing beyond a point and frequently raise the point of bringing some form of regulation to check their predatory behaviour and create a level playing field. So, from the need and timing point of view, an initiative was certainly required. The Parliamentary Standing Committee in its report in December 2022 identified 10 predominant anti-competitive practices by large digital enterprises and examined the need for strengthening the competition framework to address such practices. This became the starting point for the ministry of corporate affairs to constitute a committee to examine the need for a Digital Competition Act, which puts in place an ex-ante regulatory framework to prevent such anti-competitive conducts from occurring.
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The current ex-post approach, where intervention takes place after the practices come to the fore, was seen to be not a sufficient remedy in fast-paced digital markets. The context and argument cannot be faulted and the committee’s report is certainly strong theoretically. However, it seems to have bitten off more than it can chew from a practical standpoint. The report clearly highlights the fact that there’s no strict dividing line between global big tech firms and major domestic digital platforms. The lines are blurred, which the industry submissions to the committee clearly bring out. If some domestic firms see Google, Meta, Amazon, and Apple acting as a bully, there are several other homegrown enterprises who see Zomato, Swiggy, and Oyo in similar light. It’s no surprise then that both sets of companies are against ex-ante regulations on the ground that it would kill innovation, leading to slowdown in investments.
The committee does have a point that ex-post investigation is time consuming whereas ex-ante being preventive in nature checks potential harm to a section of players in a timely manner. However, there’s no easy answer whether the ex-ante nature of regulations has the potential to nip the problem in the bud or will lead to long legal battles. If one goes by the Competition Commission of India’s October 2022 order on Google’s anti-competitive practices in the Android space, the matter is far from being resolved till date. Further, regulation works fine in a cohesive sector where the boundaries can be strictly defined. In the digital space, the nature of businesses varies, with the only common thing being that all of them are providers of core digital services and have the ability to influence the digital market. However, the ability of a search engine platform to influence markets and a food aggregator platform varies vastly in nature and the intra-industry fights could be over a wide range of issues, which may be beyond the scope of ex-ante regulations.
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EXPLAINER: Decoding the draft Digital Competition Act
The committee perhaps recognises this and has, therefore, talked about provisions of granting exemptions as well as intervening in areas which cannot be foreseen today. Rather than putting an elaborate omnibus mechanism of levying penalties and strictures, the committee should stick to areas dominated by Google and Apple, who have the potential to cause larger harm because of the ecosystem they control. There is a requirement to lay down some broad-based guidelines, which if violated, would trigger regulatory intervention. A light-touch regulation is a much better option.
Need and timing are the two prerequisites for putting in place any kind of regulatory framework. With rapid advancement in digitalisation, which has seen the emergence of big tech firms like Google, Meta, Amazon, and Apple, domestic startups feel constrained in growing beyond a point and frequently raise the point of bringing some form of regulation to check their predatory behaviour and create a level playing field. So, from the need and timing point of view, an initiative was certainly required. The Parliamentary Standing Committee in its report in December 2022 identified 10 predominant anti-competitive practices by large digital enterprises and examined the need for strengthening the competition framework to address such practices. This became the starting point for the ministry of corporate affairs to constitute a committee to examine the need for a Digital Competition Act, which puts in place an ex-ante regulatory framework to prevent such anti-competitive conducts from occurring.
The current ex-post approach, where intervention takes place after the practices come to the fore, was seen to be not a sufficient remedy in fast-paced digital markets. The context and argument cannot be faulted and the committee’s report is certainly strong theoretically. However, it seems to have bitten off more than it can chew from a practical standpoint. The report clearly highlights the fact that there’s no strict dividing line between global big tech firms and major domestic digital platforms. The lines are blurred, which the industry submissions to the committee clearly bring out. If some domestic firms see Google, Meta, Amazon, and Apple acting as a bully, there are several other homegrown enterprises who see Zomato, Swiggy, and Oyo in similar light. It’s no surprise then that both sets of companies are against ex-ante regulations on the ground that it would kill innovation, leading to slowdown in investments.
The committee does have a point that ex-post investigation is time consuming whereas ex-ante being preventive in nature checks potential harm to a section of players in a timely manner. However, there’s no easy answer whether the ex-ante nature of regulations has the potential to nip the problem in the bud or will lead to long legal battles. If one goes by the Competition Commission of India’s October 2022 order on Google’s anti-competitive practices in the Android space, the matter is far from being resolved till date. Further, regulation works fine in a cohesive sector where the boundaries can be strictly defined. In the digital space, the nature of businesses varies, with the only common thing being that all of them are providers of core digital services and have the ability to influence the digital market. However, the ability of a search engine platform to influence markets and a food aggregator platform varies vastly in nature and the intra-industry fights could be over a wide range of issues, which may be beyond the scope of ex-ante regulations.
The committee perhaps recognises this and has, therefore, talked about provisions of granting exemptions as well as intervening in areas which cannot be foreseen today. Rather than putting an elaborate omnibus mechanism of levying penalties and strictures, the committee should stick to areas dominated by Google and Apple, who have the potential to cause larger harm because of the ecosystem they control. There is a requirement to lay down some broad-based guidelines, which if violated, would trigger regulatory intervention. A light-touch regulation is a much better option.
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Light-touch regulation: Instead of ex-ante regulatory framework, Digital Competition Bill should focus on broad-based guidelines
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19.03.2024
Need and timing are the two prerequisites for putting in place any kind of regulatory framework. With rapid advancement in digitalisation, which has seen the emergence of big tech firms like Google, Meta, Amazon, and Apple, domestic startups feel constrained in growing beyond a point and frequently raise the point of bringing some form of regulation to check their predatory behaviour and create a level playing field. So, from the need and timing point of view, an initiative was certainly required. The Parliamentary Standing Committee in its report in December 2022 identified 10 predominant anti-competitive practices by large digital enterprises and examined the need for strengthening the competition framework to address such practices. This became the starting point for the ministry of corporate affairs to constitute a committee to examine the need for a Digital Competition Act, which puts in place an ex-ante regulatory framework to prevent such anti-competitive conducts from occurring.
Also ReadNo global and local divide: Zomato, Swiggy, Oyo oppose new competition framework
The current ex-post approach, where intervention takes place after the practices come to the fore, was seen to be not a sufficient remedy in fast-paced digital markets. The context and argument cannot be faulted and the committee’s report is certainly strong theoretically. However, it seems to have bitten off more than it can chew from a practical standpoint. The report clearly highlights the fact that there’s no strict dividing line between global big tech firms and major domestic digital platforms. The lines are blurred, which the industry submissions to the committee clearly bring out. If some domestic firms see Google, Meta, Amazon, and Apple acting as a bully, there are several other homegrown enterprises who see Zomato, Swiggy, and Oyo in similar light. It’s no surprise then that both sets of companies are against ex-ante regulations on the........
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