Govt-appointed panel moots ex-ante competition regulations for big tech

New Delhi: In a significant move, a government-appointed panel has proposed ex-ante competition regulations for big tech players to ensure proactive monitoring of their behaviours and curb any possible unfair business practices.

The recommendations of the Committee on Digital Competition Law comes at a time when there are concerns about anti-competitive practices in the digital space and could have significant impact on big tech players.

The panel has come out with a detailed report as well as the draft Digital Competition Bill (DCB), saying that the bill should apply to a pre-identified list of core digital services that are susceptible to concentration.

The list should be drawn based on the Competition Commission of India's (CCI) enforcement experience, market studies, and emerging global practices.

For violations, the penalty could be up to 10 per cent of a company's global turnover.

According to the report of the panel, chaired by Corporate Affairs Secretary Manoj Govil, there should be an 'ex-ante legislation specifically applicable to large digital enterprises, to supplement the Competition Act'.

Such an ex-ante law should ensure that behaviours of large digital enterprises are proactively monitored, and that the CCI intervenes before instances of anti-competitive conduct transpire, it added.

Currently, the Competition Act primarily envisages an ex-post framework of intervention wherein the CCI intervenes after the occurrence of an anti-competitive conduct.

"Such a framework was designed at a time when the extent and pace of digitalisation as is witnessed today could not be foreseen," the panel said.

Vaibhav Choukse, Partner at JSA Advocates & Solicitors, said the committee has recommended the 'ex-ante legislation for pre-identified large digital enterprises i.e., big techs, with significant presence to proactively monitor their behaviour in the market'.

To identify these large digital players, the panel has recommended two test basis -- companies significant financial strength and significant spread.

Based on these tests, Choukse said the companies need to do a self-assessment and report it to the CCI if they fall within the same.

'This will have a major impact on the big tech enterprises like Google, Apple, Amazon, as they will now also be subject to a separate regulatory regime.

"Such ex-ante regulation could potentially stifle innovation by imposing burdensome regulations on tech companies. This could lead to unintended consequences, such as reduced consumer choice and higher prices," he noted.

The CCI is looking into various cases of alleged competition law violations in the digital space and earlier had penalised some entities.

According to the report, there should be an agile and principle-based framework of ex-ante obligations under the bill. The specificities of the obligations as applicable to each core digital service would be specified through regulations drafted by the CCI through a consultative process, it added.

As part of remedies in case of competition law violations, the panel said a monetary penalty should be restricted to a maximum of 10 per cent of the global turnover of the Systemically Significant Digital Enterprise (SSDE) in line with the penalty regime under the Competition Act.

"Additionally, in cases where the SSDE is part of a group of enterprises, the committee recommends that the 'global turnover' cap is calculated in relation to the turnover of the entire group," the report said.

Among other suggestions, the committee said the CCI should strengthen the capacity of its digital markets and data unit with experts from the field of technology to keep pace with the rapid evolution of digital markets.

"Further, the committee recommends instituting a separate bench within the National Company Law Appellate Tribunal to ensure timely disposal of appeals filed against the CCI's orders, particularly those relating to digital markets," as per the report.

The panel was set up in February 2023 following a Parliamentary panel proposing having a new digital competition law to curb anti-competitive practices in the digital markets.