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DIGITAL COMPETITION BILL

WHY IN NEWS?

  • Recently, Ministry of Corporate Affairs (MCA) released the draft Digital Competition Bill.

ABOUT THE BILL:

  • The bill proposes an ‘ex-ante’ approach to regulate Big Tech and large Indian tech firms.
  • The “Systemically significant digital enterprises” are defined as firms with domestic revenue of over ₹4,000 crore or global revenue of over $30 billion, and with over 10 million end-users or 10,000 business users in India.
  • Also nine ‘core’ services have been identified, including search engines, social networks, browsers and e-commerce aggregators.
  • The bill prohibits bundling of services,restricting third-party apps or data cross-sharing, self-preferencing among other mandates.

AIMS AND OBJECTIVES OF THE BILL:

  • The main aim of the proposed legislation is to tackle Big Tech firms anti-competitive practices.
  • The bill aims to regulate bigger companies based on their turnover, gross merchandise value, global market capitalisation, number of users and other factors.
  • The bill comes at a time when Big Tech firms and Indian companies have often locked horns over various issues.
  • This draft bill is a part of the report that Committee on Digital Competition Law (CDCL) submitted to the Ministry of Corporate Affairs.

REGULATING BIG TECH COMPANIES:

  • There is a need for a new law as the existing Competition Act, 2002 could not “imagine the current scale of digitalization.”
  • Thus when Big Tech firms will be regulated under the bill’s ambit, large India-based startups too will have to comply.
  • According to Legal experts, “Big Tech will struggle to function with restrictions in cross-sharing of data, as well as unbundling of services”. As currently popular tech platforms work as ecosystems of services. Thus, mandating unbundling with penalties may dilute user- experiences of most apps that right now work seamlessly.

CHALLENGES WITH THE BILL:

  • As the provision of the bill, unbundling services by a tech firm may lead to users having to grant permission for every single feature.
  • As per various experts, proposal could lead to regulatory confusion in terms of how such services are defined.
  • The non-compliance penalties are as high as 10% of a firm’s global revenue, while incorrect submission penalties are up to 1% of a company’s global revenue.
  • The bill has also raised questions among legal and policy experts on whether the regulations are workable.
  • As the most of digital services come from firms with successful tech products, so multiple apps fall under one tech umbrella and the draft bill forbids this.
  • Global investors can feel that such a law could go against the ability of firms to innovate.
  • Lawyers too believe that such a bill may push India towards a consumption economy and not an innovation-first one.
  • This provision on cloud providers may also limit startups access to global tech.
  • The experts also argued that ex-ante regulation for big techs, especially for e-commerce sector may be untimely and excessive and may lead to over-regulation.

WAY FORWARD:

  • As this draft bill competition is largely inspired from the European Union’s Digital Markets Act (DMA), but further consultations with stakeholders will lead to India- specific proposals that would relax certain restrictions.
  • As India is also seeking global investments in order to present itself as an innovation ecosystem, thus the writers of the draft should believe that India needs more flexible regulations.

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