Digital Competition Law (CDCL)

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Context

• The Ministry of Corporate Affairs (MCA) had constituted a 16-member Committee on Digital Competition Law (CDCL) on the recommendations of the 53rd report of the Parliamentary Standing Committee on Finance.
• It is based on the subject titled ‘Anti- Competitive Practices by Big Tech Companies’, to examine the need for a separate law on competition in digital markets.
• The Committee has submitted its report along with the Draft Bill on Digital Competition Law.

Key Points on Proposed Digital Competition Legislation:

• The bill aims to bring regulations for larger companies based on turnover, gross merchandise value, global market capitalization, user base, and other relevant factors.
• In response to conflicts between Big Tech firms and Indian companies, like Google's recent delisting and eventual restoration of Indian apps, the legislation seeks to empower the Competition Commission of India (CCI) for proactive intervention.
• It proposes the designation of "Systemically Significant Digital Enterprises" (SSDEs) based on quantitative and qualitative criteria, ensuring robust regulation of major players in core digital services.
• The Committee recommends flexible designation of SSDEs and Associate Digital Enterprises (ADEs) within corporate groups, ensuring comprehensive regulation.
• Monetary penalties of up to 10% of global turnover are proposed for SSDEs for non-compliance, with additional penalties for incorrect reporting and liability for key managerial persons. Group penalties would be based on total turnover, subject to CCI discretion.
• The CCI is entrusted with the authority to determine SSDEs, ADEs, and exact penalty amounts, ensuring adaptable enforcement mechanisms.

MAJOR TAKEAWAYS IN A NUTSHELL

• A major takeaway from the report is the recommendation of a new Digital Competition Act to enable the Competition Commission of India (CCI) to “selectively” regulate large digital entities on an ex-ante basis.
• For the uninitiated, ex-ante framework envisages the government taking measures before an issue occurs.
• The Committee further notes that the proposed Digital Competition Act should complement and strengthen the existing competition framework governing large digital enterprises by ensuring timely detection, enforcement, and disposal of proceedings in digital markets.

Key highlights

• Identifying quantitative thresholds (tests) for designating an enterprise as an SSDE under the new digital competition law
• Adopting a base value of $75 Bn for the determination of the value of global market capitalisation of a company under the financial test
• Base value of at least 1 Cr end users or at least 10,000 business users in India for the purposes of the significant spread test to determine SSDE
• All SSDEs should be obligated to institute a transparent grievance redressal mechanism 
• Empowering the Centre to exempt certain enterprises (startups) or classes of enterprises from the purview of the draft bill
• The CCI ought to bolster its technical capacity to ensure early detection and disposal of cases, need for dynamic regulation making, among others
• Setting up a separate bench within the NCLAT for speedy disposal of appeals related to digital markets
• The draft bill also entrusts the big tech giants with a slew of obligations, spanning aspects such as prevention of fraud, cybersecurity, prevention of trademark and copyright infringement, compliance to local laws, among others.
• Alongside, these major entities will also have to comply with various rules, including the relevant provisions of the Digital Personal Data Protection Act, 2023. Under the draft rules, the SSDEs will also be barred from restricting the ability of end users and businesses to use third-party apps.
• Note: This comes when a major standoff between Indian startups and Google after the latter began delisting apps from Play Store for non-compliance with the new user choice billing system.
• The draft bill also empowers the CCI to order an inquiry into a big tech company for non-compliance of obligations. It also underlines penalties to the tune of 10% of the global turnover of SSDEs.

Significance

• The move is significant and comes amid the ongoing raging debate on competition laws.
• Apart from the recent standoff between startups and Google, a parliamentary panel also raised concerns over foreign-owned companies (Walmart-backed PhonePe and Alphabet-owned Google Pay) dominating the UPI payments space.
• Besides, big tech companies like Meta and Apple are also facing antitrust probes in the country.

MUST READ ARTICLES:

https://www.iasgyan.in/daily-current-affairs/law-on-digital-competition

https://www.iasgyan.in/daily-current-affairs/the-competition-amendment-bill-2022