The draft bill had proposed bringing nine types of digital businesses under its ambit, if these businesses crossed certain thresholds of financial strength and market reach. Now, the list of businesses may be trimmed, and the thresholds raised so the smaller companies can breathe easier, the people cited above said on the condition of anonymity.
The move comes a year after the corporate affairs ministry released the draft bill and the report of an expert committee that helped prepare it. The ministry has received feedback from various startups during this period.
“The need for ex-ante regulations by way of a digital competition law was confirmed by both the Parliamentary Standing Committee on Finance and the expert committee on digital competition law. It is very much on the table. Both the financial and market reach thresholds and the specific market segments to be covered by this statute may need to be recalibrated because the start-up ecosystem cannot be disrupted,” said one of the two persons cited above.
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Ex-ante regulation establishes rules before potential anti-competitive behaviours surface, unlike ex-post regulation, which prescribes action after a problem arises. Recalibrating the thresholds keeps tech giants with the muscle to tip the market within the ambit of the new law, while keeping smaller firms, especially start-ups, out of it, the two people said.
The proposed law will also mandates periodic compliance reporting by digital economy firms designated as ‘systemically significant’ or market gate keepers.
The bill had proposed that a business which, for three years, had annual sales of ₹4,000 crore in India, or had global sales of $30 billion, or had gross merchandise value in India of ₹16,000 crore, or had global market capitalisation of $75 million and also separately had at least 10 million end users in India, or 10,000 business users in India, would qualify as a systemically significant digital enterprise or SSDE.
In addition to a review of these thresholds, the government is also reviewing the segments to be covered by the proposed law.
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The Bill had originally proposed to net digital gatekeeper firms with significant market influence in nine core digital services– online search, online social networking, video-sharing, inter-personal communication, operating system, web-browsing, cloud services, advertising and online intermediation. This list is likely to be trimmed, the person cited above said. The intent is to ensure that a prescribed set of conduct obligations apply to dominant digital economy firms, by setting the thresholds which are appropriate for a large economy with a vibrant start-up ecosystem.
Some of the Indian startup firms had pitched for the law with higher thresholds so that they get the benefit of tighter regulation of the largest players, while they themselves remained out of its ambit.
Going by the earlier thresholds, a host of leading digital businesses such as including Zomato, Myntra and Nykaa may have been identified as digital gate-keepers with stricter compliance obligations, in addition to global entities such as Alphabet, Amazon and Meta, Mint had reported on 8 July 2024, citing an independent study.
These behavioural obligations will include e-commerce platforms not favouring their own products or services or of their associates or related parties, not using non-public consumer data from the platform to compete with the business users on the platform, not cross-using consumer or business user data across different services without their consent, and not disallowing business users of a digital economy firm from talking to the ultimate consumers.
Queries emailed to the ministry of corporate affairs on 27 March and to Amazon, Google and Meta on 4 April remained unanswered at the time of publishing.
What experts say
Experts said the government could bring out a white paper on the proposed statute.
“There is a need for more robust consultations on first, whether ex-ante approach to competition regulation is needed or whether the existing ex-post approach could be made to work more effectively,” said Amol Kulkarni, director of research at CUTS International, an India-based international non-government organization working on competition and public interest issues.
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“Secondly, the government could bring out its thinking on this topic along with the rationale for changes contemplated, in public domain in the form of a white paper so that all stake holders can give their considered views. If the policy intent is to focus on large tech firms and to exclude start-ups, it would be ideal to treat all start-up firms alike without any artificial distinction based on ownership or nationality,” said Kulkarni.
“While there are some aspects of the Digital Competition Bill (like financial and user thresholds) that require consultation among stakeholders to arrive at figures that are more relevant to the Indian context, the anti-competitive practices recognised under the Bill (self-preferencing, anti-steering etc.) are relevant across jurisdictions and need to be regulated sooner rather than later,” said Snehil Khanor, co-founder and chief executive officer of Truly Madly, an online match-making application.
Self-preferencing is the anti-competitive practice of e-commerce platforms displaying their private labels prominently in consumer searches, which compromises platform neutrality. ‘Anti-steering’ is an exclusionary practice adopted by some digital economy firms that prevents business users on their platforms from suggesting to consumers or even offering a hint that a better deal may be available outside that platform.
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