Overview of India's Digital Competition Bill, 2024

On March 12, 2024, the Indian Ministry of Corporate Affairs released the draft report of the Committee on Digital Competition Law along with a draft bill on the Digital Competition Act for public consultation.[1] This initiative follows recommendations from the Parliamentary Standing Committee on Finance regarding anti-competitive practices by big tech companies. It's worth noting that the current draft bears a striking resemblance to the Digital Market Act[2] (DMA) of the European Union (EU), indicating a high probability of its passage in the Indian parliament. The bill primarily aims to establish an ex-ante regulatory regime for the 'Systematically Significant Digital Enterprises’ offering ‘Core Digital Services’.  

Key provisions of the draft Digital Competition Bill, 2024 include: 

• Systematically Significant Digital Enterprises: The bill introduces both qualitative and quantitative criteria (twin test) to identify Systematically Significant Digital Enterprises (SSDE). These criteria are based on financial and user thresholds. For an entity to qualify as an SSDE in the Core Digital Services market, it must satisfy both financial and user thresholds. 

• Quantitative threshold , also known as the financial threshold, is met if it meets any of the following criteria in each of the immediately preceding three financial years: a turnover in India of at least USD 480.027 million (Rs 4000 crore), global turnover of at least USD 30 billion, gross merchandise value in India of at least USD 1.92 billion (Rs 16000 crore), or global market capitalization of at least USD 75 billion. 

• Qualitative threshold, also known as the User threshold, is met if it meets any of the following criteria in each of the immediately preceding three financial years: the core digital service having at least one crore end users or at least 10,000 business users. 

Additionally, the Competition Commission of India (CCI) will hold the authority to designate an enterprise as SSDE even if it doesn't meet the prescribed criteria, considering other factors like enterprise size, user base, market structure, and activity scale. 

• Core Digital Services: Schedule I of the draft defines a list of services that will be considered as ‘Core Digital Services’. It includes (a) online search engines; (b) online social networking services; (c) video-sharing platform services; (d) interpersonal communications services; (e) operating systems; (f) web browsers; (g) cloud services; (h) advertising services; and (i) online intermediation services. Further, 'Online intermediation service' is defined as ‘services including any other digital service, not expressly covered under clauses (a) to (h) of Schedule I, which on behalf of an end user or a business user, receives, stores or transmits electronic record or provides any service with respect to that record and includes web-hosting service providers, payment sites, auction sites, online application stores, online marketplaces and aggregators providing services such as mobility aggregation, food ordering, food delivery services and match-making.’ 

  The Bill proposes a 90-day period for enterprises to inform the CCI in a specified format if they meet the criteria to be recognized as SSDE for one or more of their Core Digital Services. Moreover, enterprises must notify the CCI of any other entities within their group directly or indirectly participating in the provision of Core Digital Services, termed Associate Digital Enterprises. 

• Pre-emptive obligations on SSDE 

• Self-Preferencing: SSDEs are prohibited from showing favoritism in product offerings. They cannot prioritize their own products, services, or lines of business, nor those of related parties or third parties with whom they have arrangements, over those offered by third-party business users on the Core Digital Service. 

• Data Usage: Prohibition on SSDE from using non-public data of business users on their Core Digital Service to compete with those users. Additionally, these enterprises cannot allow the use of such data by any third party without the consent of end users or business users. Furthermore, they must enable easy data portability for both business users and end users in a specified format. 

• Third-party apps: Ensuring freedom for users to use third-party apps on Core Digital Services and allowing users to choose, set, and change default settings. 

• Anti-Steering: SSDEs are prohibited from restricting business users from communicating with or promoting offers to their end users or directing their end users to their own or third-party services. However, restrictions integral to the provision of the Core Digital Service may be allowed, as specified by the CCI through regulations. 

• Tying and Bundling: SSDEs are prohibited from requiring or incentivizing users of their Core Digital Service to use other products or services provided by the enterprise, related parties, or third parties with whom the enterprise has arrangements. This prohibition applies unless the use of such products or services is integral to the provision of the Core Digital Service. The CCI may specify the nature of products or services that are considered integral through regulations. 

The bill also mandates SSDEs to fulfill reporting and compliance duties regarding the abovementioned obligations. Further, it obligates SSDEs to fair and transparent service delivery, prohibits circumvention of obligations, and mandates compliance with additional regulations that CCI shall specify on distinct conduct requirements for each Core Digital Service. Non-compliance with these obligations under the proposed law may result in monetary penalties, limited to 10% of global turnover, with provisions for group enterprises and liability for key personnel.

In light of these advancements, India is contemplating comparable measures to formulate its own version of the DMA. While nations around the world have varying perspectives on such regulations, India must exercise caution against premature adoption. It is imperative for India to embrace a prudent "wait-and-watch" approach before hastily implementing these regulations. Thus, drawing lessons from the EU's experience with the DMA is essential to grasp the repercussions of implementing ex-ante competition laws within a digital ecosystem.