Draft Digitial Competition Bill 2024: Detailed Review

Introduction-

Ministry of Corporate Affairs has come up with a the draft report asking for public comments of the Committee on Digital Competition Law along with a draft bill on Digital Competition Law as per news release on March 12, 2024. This development was in context of the evolved landscape of digital markets, specially in light of the increasing scrutiny surrounding the practice of huge tech companies. Draft bill suggests a structured prototype to address concerns related to anti-competitive behaviour in digital markets and aims to complement the existing regulatory landscape.

Digital markets in India have experienced remarkable spike in recent years. This exponential extension has come with new challenges. The Competition Commission of India has received many complaints from companies and individuals against large digital enterprises. Different industries or trade unions had raised issues about digital enterprises with other regulatory bodies. This includes unfair trade practices, one sided and discriminating policies and consumers right of violation.

This article is a review of the Draft Digital Competition Bill 2024.

Why Digital Competition?

Parliamentary Standing Committee elaborated the bill on Digital Competition in 2024 on Finance which aimed at checking anti-competitive behaviour of huge tech companies. With these incidents enlighten, as Google delisting Indian apps that had failed to follow billing policies, there was an urgent need for enhancement of the regulatory prototype to tackle such situations. Eventually, to find if legislation dedicated solely for digital competition is necessary in India. MCA has set up Competition and Digital Markets Committee (CDCL).

Apps delisted by Google-

The Competition Commission of India had ordered an investigation into Google over alleged abuse of dominant position and the imposition of unjust payment policies on app developers operating within the confines of Google Play Store.

Collaborators, consisting Companies and Industry associations both, faced that Google's payment policies, notably the compulsory utilization of the Google Play Billing System (GPBS) and the introduction of the User Choice Billing (UCB) system, which imposes sky-high service fees and show bias against specific app developers. These things are claimed to breach several provisions of Section 4 of the Competition Act, positively influencing competition with the App market and consumer options. The CCI has asked an exhaustive investigation to investigate these claims within a 60-day timeframe.

Key Provisions of Draft Bill-

The reason is for identification of systematically significant digital enterprises that means the bill proposes qualitative and quantitative criteria to identify enterprises as 'Systematically Significant Digital Enterprises' based on turnover, user base and market capitalization.

An enterprise is considered an important Social media intermediary if it meets criteria given below-

1. Significant financial strength test which involves quantitative indicators of economic power such as India-specific turnover, global turnover, global market capitalization and net merchandise value.
2. Significant spread test which assesses extent of the enterprise's presence in providing a Care Digital Service in India based on the number of end-users and business users. The Draft Digital Communication Code requires enterprises to self-assess their compliance with these thresholds and report them to the Competition Commission of India (CCI). Moreover, the Draft DCB anticipates residual powers for designation through 'qualitative' criteria for designating certain enterprises as SSDEs that do not meet the quantitative thresholds but still have the potential to significantly influence the market in which they operate.

Thresholds for business to be called Gatekeeper under DMA-

For a business to be called under Digital Market Act, 3 tests should be met-

1. It should has significant impacts on internet EU market
2. It should offer business users an essential gateway through which they can reach final consumers
3. It possesses deep-rooted and predicable durability in operations. On the other hand, there are also measurable thresholds set out by DMA which if reached will automatically assume compliance with quantitative benchmarks.

These include providing at least 3 member states with the same core platform service either having an annual EU turnover of at least EUR 7.5 billion in each of the last three FYs or average market capitalization of at least EUR 75 billion for last year. To be regarded as significant gateway between business users and end users, this service must have had not less than 45 million monthly active end users and 10,000 yearly active business users within European Union during preceding FY. At last, if you want to establish entrenched and sustainable positions there is need for an entity to satisfy both end user and business user thresholds for each of the past 3 FY.

Measures & Compliance Mechanism-

Designated enterprises and their associates are required to comply with prescribed obligations. Non-compliance may attract penalties.

The bill forbids enterprises from engaging in behaviours that would underestimate compliance with obligations set for within provisions. These obligations typically pertain to several aspects of operation and conduct within digital markets, such as ensuring fair competition, safeguarding consumer rights, confirming data privacy and security standards and adhering to regulatory necessities.

Behaviours that undermine Compliances-

Behaviours that undermine compliance with these responsibilities may include anti-competitive practices such as monopolistic behaviour, predatory pricing or collusion; consumer right violation through deceptive practices or unfair terms such as neglecting data protection measures. By banning such behaviours, the bill targets to foster a more transparent and accountable digital marketplace that benefits consumers and businesses while promoting innovation and healthy competition.

Other main reason is to grant freedom for Apps, Digital Enterprises must not restrict the use of third party applications by end users and business users also enterprises are not supposed to restrict business users from communicating with end users.

CCI is empowered to investigate into non-compliance of obligations by designated enterprises, with presence of provision for settlement procedures for inquiries initiated against enterprises, with the power rested with Director General who is mandated to assist in investigating contraventions.

Penalty for Non-Compliance-

The bill highlights fine for contraventions by systemically Significant Digital Enterprises or the Associates Digital Enterprises. In case of non-compliance with obligations specified in Chapter III and related regulations, the commission may impose fine not exceeding 10% of Global Turnover in the preceding financial year. In case of failure to notify the Commission of meeting specified criteria or misleading information may result in fine not exceeding 1% of Global Turnover.

Particulars in charge of SSDE or ADEs may also be held responsible for contraventions, with fines not more than 10% of the average income for the last three preceding FYs, unless they can prove lack of knowledge. If contraventions happen with mutual consent, connivance or without considering directors, managers or officials, then they also can be subject to penalties not more than 10% of the average income for the last three FYs. For initiation of investigations, period of 3 years has been prescribed.

To maintain the confidentiality of information obtained by Commission or Appellate Tribunal, strict provisions has been made.

Conclusion-

This article, in a nut shell, says that Draft Digital Competition Bill 2024 represents an important step towards the challenges fostered by anti-competitive practices in digital market. Incorporating a comprehensive regulatory prototype, this bill targets to promote fair competition, secure user interests and foster innovation in digital world. Furthermore, as stakeholders suggest feedback on the draft, it is expected to undergo confinement to address spirited and active nature of digital markets and appearing challenges involved.