The Corporate & Commercial Law Society Blog, HNLU

Category: Competition Law

  • Contesting The ‘Big Tech’ Tag: India’s Digital Competition Bill At A Turning Point

    Contesting The ‘Big Tech’ Tag: India’s Digital Competition Bill At A Turning Point

    BY UJJWAL GUPTA AND BHAVISHYA GOSWAMI, SECOND- YEAR STUDENTS AT RMLNLU, LUCKNOW

    INTRODUCTION

    With India’s digital economy being nearly five times more productive than the rest of the economy, technological​‍​‌‍​‍‌​‍​‌‍​‍‌ companies have become central economic actors of a rapidly digitalising India, which prompted the need for a digital competition law to prevent the build-up of market power before it materialises. The Digital Competition Bill, 2024 (‘DCB’), aims at introducing ex-ante oversight to ensure competition in digital markets, thus complementing the already existing ex-post regime under the Competition Act, 2002. The DCB envisages a regime to identify Systemically Significant Digital Enterprises (‘SSDE’) and to impose conduct obligations on them.

    However, the draft has sparked discussion about whether its design manages to achieve the proper balance between restraining potential gatekeepers and protecting the growth of India’s tech ecosystem. While industry players and policy-makers generally agree on the necessity to control highly concentrated digital power, they are still worried that this tag may negatively affect rapidly growing Indian companies. The emerging proposal to allow companies to contest their SSDE designation reflects this balance-seeking approach. It indicates that the balance between protecting competition and giving the regulated entities fair treatment is not lost, i.e. the control does not hamper the innovation, investment, and the rise of domestic digital ​‍​‌‍​‍‌​‍​‌‍​companies.

    The SSDE DESIGNATION DEBATE

    One​‍​‌‍​‍‌​‍​‌‍​‍‌ of the key ideas of the DCB is SSDEs, which are entities that, due to their scale, reach, or market interlinkages, require ex-ante regulatory oversight. Under section 3 of the draft Bill, a company may be designated as an SSDE if it meets certain financial and user-based criteria. For example, a turnover in India of ₹4000 crore, global market capitalisation of USD 75 billion, or at least one crore end users. Besides, the Competition Commission of India (‘CCI’) can also identify an enterprise as an SSDE, even if it does not meet these quantitative criteria, by using qualitative factors like network effects, market dependence, or data-driven advantages. This allows the CCI to take preventive measures by identifying “gatekeepers” before their dominance becomes monopoly power.

    However, the Parliamentary Standing Committee and industry associations have pointed out that India’s comparatively low user threshold (one crore end users) might inadvertently prematurely rope in rapidly growing domestic firms, like Zomato or Paytm, that are still in the process of consolidating their market positions. By equating India’s digital scale with that of smaller Western markets, the Bill could act as a silent killer of innovation, deterring investment and freezing the entrepreneurial spirit. The concern is that the Bill’s broad definition of “systemic significance” could lead to a growth penalty and disincentivize the very growth India seeks to encourage under its “Digital India” and “Startup India” programs.

    Globally, the DCB draws clear inspiration from the European Union’s Digital Markets Act, 2022 (‘DMA’) and the UK’s Digital Markets, Competition and Consumers Act, 2024 (‘DMCC’). Each of their aims is to control the gatekeeping power of big tech companies. However, the implementation of the measures varies. The DMA is limited to ten defined “core platform services”, and it has already identified seven gatekeepers: Alphabet, Amazon, Apple, Booking, Byte Dance, Meta, and Microsoft. Moreover, it permits rebuttals under exceptional circumstances, a measure that is not in the current draft DCB. The DMCC creates the concept of “strategic market status” for dominant firms and thus puts more focus on tailor-made conduct rules. As per Schedule I, the draft DCB identifies nine “Core Digital Services”, similar to the DMA, excluding “virtual assistants”, and introduces “Associate Digital Enterprises”, defined under section 2(2), an Indian innovation to ensure group-level accountability.

    III. The Case for a Rebuttal Mechanism

    As established earlier, a ‍​‌‍​‍‌major concern of technology firms about the DCB is the lack of a mechanism to challenge a designation as an SSDE. These firms see such a designation as bringing problems of high compliance costs and of reputational risk to them, thus potentially labelling them as monopolistic even before any wrongdoing is established.

    The Twenty-Fifth Report of the Standing Committee on Finance recognised this problem. It stated that the current proposal has no provision for rebutting the presumption of designation based on quantitative thresholds, i.e., the Committee suggested referring to Article 3(5) of the DMA by implementing a “rebuttal mechanism in exceptional cases”. This would allow companies that meet or exceed quantitative criteria to demonstrate that they do not possess the qualitative features of gatekeepers, such as entrenched dominance or cross-market leveraging.

    Article 3(5) of the DMA is a good example in this case. Under it, companies can show “sufficiently substantiated arguments” which “manifestly call into question” their presumed gatekeeper status. In ByteDance v. Commission, the General Court of the European Union set a high standard for the issue and demanded that the companies bring overwhelming evidence and not mere technical objections. Firms like Apple, Meta, and Byte Dance have used this provision as a ground to challenge their identification; however, the evidentiary burden is still significant, and market investigations go on despite the fact that compliance with obligations is expected within six months after designation. Yet, the EU’s model illustrates that a rebuttal does not weaken enforcement; rather, it enhances it by allowing for flexibility in rapidly changing markets without compromising the regulator’s intention.

    The implementation of a similar mechanism in India would be beneficial in several ways. It would enhance the predictability of regulation and discouraging the over-designation of large but competitive firms, and also send a signal of institutional maturity consistent with international standards. In this context, the Centre is reportedly considering the introduction of an appeal mechanism that would allow firms to contest their designation after a market study on the digital sector is completed. However, the government still needs to deal with the possible disadvantages, such as the delay of enforcement against dominant players, the procedural burden on the CCI and the risk of strategic litigation by well-funded ​‍​‌‍​‍‌​‍​‌‍​‍‌corporations.

    IV. Dynamic vs. Fixed Metrics: Rethinking ‘Big Tech’

    The biggest challenge in DCB lies in the criteria for identifying SSDE as choosing between fixed quantitative metrics and dynamic qualitative assessments will shape administrative efficiency and long-term success. DCB follows primarily fixed metrics based on the DMA , having fixed quantitative criteria such as valuation or turnover for SSDE designation.

    The biggest advantage of fixed metrics is its speed and legal certainty. It becomes very simple vis-à-vis the administrative screening process when one has clear numerical boundaries, which then allows CCI to quickly identify the potential firms that pose competitive risks. However, this approach has attracted a lot of criticism. Industry stakeholders opine that the thresholds in DCB are “too low” and oversimplistic in the wage of a unique economic context and population scale of India.

    Another limitation is the risk of arbitrariness; if the benchmark were solely based on numerical terms, it could disconnect from the regulatory framework in finding a genuine entrenched competitive harm. For instance, in a market as large as India, having a high user database may only reflect the successful scaling and effective service delivery rather than having the real ability to act as an unchallengeable bottleneck. This challenge, where restriction is just imposed because a firm is successful irrespective of conserving if that firm has demonstrated any specific harmful market power, has led to a widespread demand that SSDEs forms should be allowed to contest this designation, and this tag should be revoked if they prove not to be harmful in the competitive or entrenched market power.

    On the other hand, the dynamic criteria are recognised in the DMCC, where the firm must possess ‘substantial and entrenched market power’. Through this, the UK regime can put conduct requirements based on qualitative and contextual market analysis, rather than quantitative analysis. However, its effective application requires resources vis-à-vis institutional capacity and legal justification while imposing terms on powerful firms.

    The dynamic criteria have been recognised by the CCI itself and provided a roadmap, which highlights the challenges arising out of the structural control that the big players have across the entire AI value chain and AI ecosystems, especially the control over data, computing resources, and models. The definition of the “significant presence” shall expand beyond turnover and should incorporate the firm’s control over the proprietary and high-quality resources, such as high-end infrastructure.

    V. The Road Ahead: Regulation without Stifling Growth

    The DCB will have a significant responsibility to manage the compliance needs of such a large country in its evolving shape. For that, the government is considering the establishment of a dedicated Digital Markets Unit within the CCI. It will be responsible for communicating with industry, academia, regulators, government, and other stakeholders, and facilitating cross-divisional discussions. It will avoid any structural damage caused by delays in the above-mentioned things.

    Yet another challenge is the very limited capacity of Indian regulators compared to other jurisdictions, which leads to the execution of prescriptive and technically complex regulations being extremely challenging. This deficiency in terms of specialised economists, data scientists, and technology lawyers would be the deciding factor in this fast-changing world, and India needs to cope with this as soon as possible.

    India’s number one priority is job creation through rapid growth, so that we can achieve sufficient wealth for all age groups. In the present scenario, policy experts have criticized the DCB, saying that it is “anti-bigness and anti-successful firms” that discourage Indian firms from expanding globally. Therefore, the DCB should maintain a balance that gives a fillip to competitiveness in the market while upholding the digital scale and innovation of one’s country.

    The DCB overlaps with the recently implemented amendments to the Competition Act, 2002. The Competition (Amendment) Act, 2023, has introduced the Deal Value Threshold, which makes it compulsory for any merger and acquisition that exceeds INR 20 billion to be notified prior. The problem would be the friction between the conduct control that the DCB would govern through its conduct rules and prohibitions, and structural control, because the mergers and acquisitions are subject to DVT clearance under the Competition (Amendment) Act.

    This dual scrutiny increases the legal complexity and transactional costs. Thus, if the proposed Digital Markets Unit under DCB lacks clear guidelines as to harmonise the existing inconsistencies between the conduct requirements and merger clearance conditions. This would lead to nothing but slowing down essential acquisitions imperative for scaling of the firm, and would contradict the overall aim of promoting efficient market dynamics.

  • Regulatory Turf Wars Resolved: Rethinking Regulatory Boundaries

    Regulatory Turf Wars Resolved: Rethinking Regulatory Boundaries

    NITIN PRADHAN AND MAHADEV KRISHNAN, FOURTH- YEAR STUDENTS AT ARMY LAW COLLEGE, PUNE AND NLUO, ORISSA

    INTRODUCTION

    The question of jurisdiction between the sectoral regulators and the Competition Commission of India (‘CCI’) is not new. Since the establishment of the CCI, concerns have been raised as to whether it is possible to co-exist with specialised regulators in technologically intensive sectors. The Kerala High Court (‘Court’), in Asianet Star Communications Pvt. Ltd. v. CCI & Ors. recently provided some sorely needed clarity by holding that the Telecom Regulatory Authority of India (‘TRAI’) and the CCI play different but complementary roles.

    The Court stressed that the mandate of one of the regulators cannot be displaced by that of the other and that the interaction between the two regulators should be driven by functional harmony, rather than displacement. TRAI comes into play in the structural and technical regulation of the telecom sector, licensing, tariffs, interconnection, and service quality, which provide smooth foundations of operations. In comparison, the mandate of the CCI is to protect competition, ensure that dominance is not abused and to ensure fairness in the market. Naturally, the two spheres overlap. The decision by the Court is important in that it enhances regulatory synergy instead of turf wars and the fact that overlapping jurisdictions, despite being a challenging issue, can be harmonized by working together.

    The case raises fundamental questions about institutional balance in markets where both technical oversight and competition enforcement are indispensable. More broadly, it signals the maturing of India’s regulatory architecture, where cooperation rather than conflict may increasingly define the relationship between regulators.

    Both regulators tend to claim that they are the first responder during jurisdictional conflicts. TRAI makes such a claim when complaints are technical or regulatory-based, e.g. when complaints are about licensing or interconnection. On the contrary, CCI intervenes when the matter involves anti-competitive practice or damage to the fairness of the market, which may not be within the regulatory jurisdiction of TRAI.

    It also gained national attention in the landmark decision of Bharti Airtel Ltd. v/s CCI. There, the Supreme Court ruled that whenever technical issues are involved then the sectoral regulator such as TRAI must suggest an opinion before the CCI steps in, this seemed to tilt the balance towards TRAI. However, this raises an important question; can sectoral regulation and competition law operate side by side without undermining each other?

    In this article, the authors explain the different roles of TRAI and CCI and reflect upon what the Asianet v. CCI judgment means for businesses, regulators, and the future of regulatory practice in India. Aiming to shed light on a possible forward path towards a more coordinated and effective framework for addressing overlaps between sector-specific regulation and competition law.

    BACKGROUND TO THE DISPUTE

    The dispute started when a major Kerala-based multi-system operator (‘MSO’) called Asianet Digital Network Pvt. Ltd. (‘ADNPL’) filed a complaint with the CCI against one of the dominant broadcasters called Star India Pvt. Ltd. (‘SIPL’). ADNPL claimed that SIPL had misused its market dominance in the broadcasting service market by: (i) Granting disproportionately high discounts to a rival MSO, Kerala Communicators Cable Ltd. (KCCL); (ii) Entering into “sham marketing agreements” involving unjustified payments to KCCL; and (iii) Effectively denying market access to ADNPL by conferring undue advantages on its competitor.

    On observing a prima facie case, the CCI issued an order of an investigation under Section 26(1) of the Competition Act, 2002 (‘Act’). SIPL opposed the argument that the complaint was clearly within the jurisdiction of TRAI, as it involved tariffs, discounts and interconnection agreements all of which were covered in details by TRAI Act, 1997. According to SIPL, the CCI had interfered with a domain that should be left to the sectoral regulator by intervening. ADNPL responded that TRAI governs technical and structural concerns and that discriminatory pricing and sham agreements are anti-competitive practices which are well within the jurisdiction of the CCI.

    Therefore, the High Court was obliged to consider two points: whether the presence of TRAI denied the jurisdiction of CCI, and whether the Section 26(1) of the CCI direction to investigate on the basis of which it ordered a certain investigation without issuing prior notice, infringed natural justice.

    COURT’S REASONING AND KEY FINDINGS

    In the present case the Court took a measured approach to address the seeming conflict between the TRAI and the CCI. The Court recognised TRAI and CCI as specialised regulators, but with distinct mandates. TRAI’s jurisdiction is deeply rooted in the technical and operational aspects such as licensing, tariff regulation and interconnection. Whereas, the duty of CCI is to ensure the fair market behaviour, investigating abuse of dominance and maintaining competitive equilibrium.

    Crucially, the Court declined the notion that an overlap of functions implied the jurisdictional exclusion. Instead, it emphasised upon maintaining functional harmony while echoing the principles laid down in Bharti Airtel case. It reaffirmed that sectoral expertise should not forbid competition oversight where market manipulation is concerned.

    Regarding the procedure, the Court clarified that under Section 26(1) of the Act, the CCI is not required to issue prior notice before directing the DG to investigate. Additionally, the Court also clarified that marketing agreements, when used to disguise anti-competitive conduct, clearly falls under jurisdiction of CCI not TRAI’s.

    Thus, the judgement upheld the autonomy of the CCI while also reaffirming the value of inter-regulatory cooperation rather than conflict.

    EU EXPERIENCE: WHY TURF WARS ARE RARE

    This is unlike the country India which has not experienced any conflict of jurisdiction between sectors within the European Union. This can be called the result of a highly orchestrated regulatory design. The Regulation 1/2003 clearly stipulates the application of Articles 101 and 102 TFEU, in parallel to national or sectoral regulations, whereas the ECN+ Directive (2019/1) takes the matter of coordination by supporting the national competition authorities with harmonization of powers and its integration into the European Competition Network (‘ECN’) The ECN serves as the facilitator of coherent enforcement so that the regulatory intersections do not result into the inter-institutional disagreements.

    The reduction of redundancy and construction of cooperative enforcement is reflected not only in scholarly analysis, e.g., in Potocnik & Manzour, in European Papers, but also in the ICN, 2025 report. The principle has been entrenched in courts interpretation: in Deutsche Telekom (C-280/08 P) and Telefnicia (C-295/12 P), the CJEU said that even approved by the regulator tariffs could amount to margin compression under Article 102 TFEU. In Meta v Bundeskartellamt (C-252/21) decided more recently, the Court empowered competition authorities to take into account compliance with the GDPR and stressed that cooperation with regulators must be followed.

    The combination of these aspects demonstrates that they are established on complementary and coordinating basis, with not much room left to turf wars as seen between TRAI and CCI in India continuously.

    PREDATORY PRICING OR PRICE PENETRATION?

    In the landmark Bharti Airtel Case, the SC was confronted with the critical question of whether Jio’s initial free pricing model amounted to predatory pricing under the Act. Bharti Airtel alleged that Jio’s deep pricing offering telecom services at virtually no cost was not a legitimate market entry strategy but a means to eliminate competition through price predation. The CCI, however, dismissed the complaint at the prima-facie stage, holding that no case of abuse of dominance was made out, especially since Jio was a new entrant and not a dominant player in the relevant market at the time.

    The case not only clarified the line between legitimate price penetration and predatory pricing but also underscored the importance of TRAI’s sectoral expertise which includes regulating tariffs, interconnection agreements, and market entry conditions. It held that CCI should intervene only after TRAI has addressed the relevant technical and regulatory concerns.

    The decision is particularly relevant in this case of similar allegations of discriminatory pricing and jurisdictional overlap between CCI and TRAI and therefore, the necessity of coordinated regulation and the balancing of market entry and anti-competitive protection in regulated industries.

    IMPLICATIONS FOR BUSINESSES AND REGULATORY PRACTICE

    The Asianet judgment is not just an institutional ground score settlement, but has real consequences on the market players. Telecom and media businesses will no longer be able to believe that their conformity to TRAI norms will exempt them of competition scrutiny. In even the most regulated industries, anti-competitive practices like discriminatory pricing, exclusive agreements or fake agreements could be subject to parallel proceedings by the CCI.

    The judgement also hereby denoted that both regulatory due diligence is now a two-dimensional authentication, on one hand, sectoral compliance and on the other hand, competitive impact. Marketing agreements, tie-ups, or discount structures will not only have to be tested against TRAI guidelines but also against possible exposure to the competition law.

    Furthermore, this facilitates a more cooperative style, switching from a turf war to a joint control that balances technical oversight and equity in the market. This move deters the exploitation of regulatory areas by businesses and ensures a transparent conduct across all operations.

    CONCLUSION

    The Asianet case is a milestone in the regulation development of India that was in conflict to cooperation. The Kerala High Court in maintaining the concurrent jurisdiction of TRAI and CCI, allowed that regulatory overlaps are not necessarily problematic provided both regulatory authorities are mindful of functional limits. In conjunction with Bharti Airtel, the ruling highlights the fact that the judiciary favours cooperation among regulators as opposed to competition.

    Nonetheless, harmonisation through judges is not a complete solution. The convergence of telecom, media and technology sectors has been growing and as a result, overlaps will continue to increase. India should thus institutionalise inter-regulatory coordination by statutory reforms, memoranda of understandings or joint decision making. The UK and EU are good examples where coordination models are clear, and the regulators follow them.  The Indian regulation of the future is not in the strict jurisdiction separation but in the collaborative models that provides predictability to the business, efficiency to the markets and fairness to the consumers.

  • Digital Competition Bill: Complementing or Competing with the Competition Act?

    Digital Competition Bill: Complementing or Competing with the Competition Act?

    BY Winnie Bhat, SECOND- YEAR STUDENT AT NALSAR, HYDERABAD
    Introduction

    Data is the oil that fuels the engine of the digital world. The economic value and competitive significance of data accumulation for companies in the digital age cannot be overstated. It is in recognition of this synergy between competition and data privacy laws, that the Competition Commission of India (‘CCI’) has imposed a fine of Rs 213 crore on Meta, the parent company of WhatsApp, for abusing its dominant market position under Section 4 of the Competition Act, 2002 (‘CA’).

    As digital markets evolve, so too must the legal frameworks that regulate them. This article considers whether the proposed Digital Competition Bill, 2024 (‘DCB’) enhances the current competition regime or risks undermining it through regulatory overlap. In doing so, it assesses how traditional competition tools have been stretched to meet new challenges and whether a shift toward an ex-ante model is necessary and prudent.

    Reliance on Competition Act, 2002

    In the absence of a dedicated digital competition framework, Indian regulators have increasingly relied on the CA to address issues of market concentration, data-driven dominance, and unfair terms imposed by Big Tech firms. One of the clearest examples of this reliance is the CCI’s scrutiny of WhatsApp’s 2021 privacy policy. In the present case, CCI found that WhatsApp’s 2021 privacy policy which mandated sharing of users’ data with WhatsApp and thereafter its subsequent sharing with Facebook vitiated the ‘free’, ‘optional’ and ‘well-informed’ consent of users as WhatsApp’s dominant position in the market coupled with network and tipping effects effectively left users with no real or practical choice but to accept its unfair terms.

    This contrasts with the CCI’s previous stances in Vinod Kumar Gupta v WhatsApp and Harshita Chawla v WhatsApp & Facebook, where it declined to intervene because data privacy violation did not impact competition. However, in a slew of progressive developments, a market study by CCI has now recognized privacy as a non-price competition factor and the Supreme Court’s nod in 2022 for CCI to continue investigation in the Meta-WhatsApp mater has effectively granted CCI the jurisdiction to deal with issues relating to privacy that have an adverse effect on competition.

    The facts of this case very closely resemble that of Bundeskartellamt v Facebook Inc.,2019 wherein the German competition regulator had flagged Facebook for imposing one sided terms about tracking users’ activity in the social networking market where consent was reduced to a mere formality. Both cases illustrate how dominant digital platforms exploit their market power to impose unfair terms on users, effectively bypassing meaningful consent. This pattern reflects a deeper structural issue—where existing competition law, focused on ex-post remedies, is used to address the unique challenges of digital markets. It is precisely this regulatory gap that the proposed DCB seeks to fill through its ex-ante approach.

    Abuse of dominant positions by Big Tech companies in the digital era occurs in more subtle ways as the price of these services is paid for with users’ personal data. A unilateral modification in the data privacy policy leaves users vulnerable as they have little bargaining power against established corporate behemoths. These companies collect huge chunks of “Big data” by taking advantage of their dominance in one relevant market (in the present case, the instant messaging market) and use them in other relevant markets (social networking, personalized advertising, etc.) which gives them a significant edge against their competitors. This creates entry barriers and a disproportionate share of the market goes to a few large corporations resulting in monopoly-like conditions.

    To deal with such issues, competition law first identifies a corporation’s dominant position in the market. Once this is established, it investigates the factors that lead to the abuse of this position. Here, the factor is collection of data which invades the privacy of users without their free and informed consent. The CCI, in its ruling against Meta, held WhatsApp to be in violation of Sections 4(2)(a)(i), 4(2)(c) and 4(2)(e) of the CA, dealing with imposition of unfair conditions in purchase of service, engagement in practices resulting in denial of market access and use of dominant position in one market to secure its market position in another relevant market respectively.

    The Digital Competition Bill, 2024

    The proposed Digital Competition Bill, 2024  when enacted, would signify a landmark shift in how India approaches competition regulation in digital markets. Unlike the CA, which operates on an ex-post basis; acting upon violations after analysing their effects, the DCB introduces a proactive approach that seeks to regulate the conduct of Systemically Significant Digital Enterprises (‘SSDEs’) through an ex-ante framework. SSDEs are large digital enterprises that enjoy a position of entrenched market power and serve as critical intermediaries between businesses and users. The DCB aims to curb their ability to engage in self-preferencing, data misuse, and other exclusionary practices before harm occurs, rather than waiting for evidence of anti-competitive outcomes. While this progressive approach aims to address the unique challenges posed by the dominance of digital giants, it also raises critical concerns about legislative overlap, disproportionate penalties on corporations and potential legal uncertainty.

    A key issue with the coexistence of the DCB and the CA is the overlap in their regulatory scopes. The CA, particularly through Section 4, targets abuse of dominance through a detailed effects-based inquiry. As evidenced in the CCI’s ruling against WhatsApp, a compromise or breach of data privacy of the users will not be tolerated and has the potential to be considered as a means of abuse of an enterprise’s dominant position. By contrast, the DCB imposes predetermined obligations on SSDEs, which are deemed to have significant market power. Section 12 of the DCB prescribes certain limitations on the use of personal data of the users of SSDEs, whereas Section 16 grants the CCI the power to inquire into non-compliance if a prima facie case is made out, regardless of the effects such non-compliance may have on competition.

    Concerns about dual enforcement

    This duality creates an ambiguity. For instance, should a prima facie case involving data misuse by an SSDE, which unfairly elevates its market position, be assessed under the CA’s abuse of dominance provisions, or should it fall exclusively within the purview of the DCB? The risk of dual penalties further compounds these challenges. Section 28 (1) of the DCB empowers the CCI to impose significant fines (not exceeding 10% of its global turnover) on SSDEs for non-compliance with its obligations. However, under Section 48 of the CA, these entities are also subject to penalties for engaging in anti-competitive behaviour that may stem from the same act of data misuse.

    Although, the protection against double jeopardy only applies to criminal cases, the spirit of double jeopardy is clearly visible in this case, wherein businesses could face disproportionate punishments for overlapping offenses, raising concerns about fairness and proportionality. This mirrors similar concerns in the European Union, where the Digital Markets Act (‘DMA’) (India’s DCB is modelled on EU’s DMA) and Articles 101 and 102 of the Treaty on the Functioning of the European Union (traditional EU competition law provisions) operate in tandem. However, EU’s DMA grants the European Commission overriding powers over the nations’ competition regulating authorities, which brings unique challenges and is not applicable in India since the regulating authority (CCI) oversees implementation of both the CA and DCB. This vests the CCI with considerable discretion in deciding which act takes precedence and their spheres of regulation. The MCA report leaves potential overlaps in proceedings to be resolved by the CCI on an ad hoc basis. Therefore, statutory clarity on the application of the DCB and the CA are essential to avoid inconsistency in outcomes.

    The Way Forward

    To address these challenges, India must focus on creating a harmonious regulatory framework. Moreover, a Digital Markets Coordination Council could be established to harmonize enforcement actions, share data, and resolve jurisdictional disputes. Such a body could include representatives from the CCI, the Ministry of Electronics and Information Technology (MeitY), and independent technical experts to ensure holistic oversight.

    Proportional penalties are another area for reform. Lawmakers should ensure that corporations do not have to bear the burden of being punished in two different ways for the same offence. Introducing a standardised penalty framework across the DCB and CA would prevent over-penalisation and ensure fairness.

    Since the DCB has not been enacted yet, India can pre-empt these concerns of overlap and ensure that the CA and DCB complement rather than compete with each other. The exact scope of a solution to these concerns is beyond the scope of this article, but by learning from the EU’s experiences and adopting a coordinated, balanced approach, India can create a regulatory framework that promotes innovation, safeguards competition, and protects consumers’ rights and interests in the digital age.

  • The European Commission’s Fine On Meta For Tying Allegations And Why India Needs To Do More

    The European Commission’s Fine On Meta For Tying Allegations And Why India Needs To Do More

    BY ANUSHKA GUHA, THIRD-YEAR STUDENT AT NLU, ODISHA

    INTRODUCTION

    The European Commission (‘EC’) fined Meta for tying Facebook Marketplace (‘FM’) to its social media platform, Facebook, in November 2024. FM is Meta’s online classified advertisement service which was introduced in 2016 and can be used to sell and buy products. Tying is a practice in which the availability of a product or a service is made conditional upon the availability of another. The EC found that Facebook had used its dominant position in the market for social networks and in the market for displaying classified ads to tie both services. What this essentially does is, expose all users of Facebook to FM, regardless of whether they want to see those ads or not. Such practices pose a competitive disadvantage for other online classified ads services, as they do not have access to the enormous database of social media users like Facebook does. Meta has also been accused of imposing unfair trade conditions through its terms of service that authorizes it to use ad-related data of competing classified ads service providers, who advertise on Facebook and Instagram, for the benefit of FM.

    GLOBAL SCRUTINY ON META

    This comes at a time when Meta is also under the scrutiny of the United States Federal Trade Commission for its acquisition of WhatsApp and Instagram resulting in the elimination of competition among social media platforms. The EC has previously fined Meta for providing misleading information during the WhatsApp-Facebook merger in 2014. In India, the Competition Commission of India (‘CCI’) has penalised Meta for abuse of its dominant position over WhatsApp’s contentious privacy policy introduced in 2021, which authorized the messaging platform to share user data with its parent company Meta and its subsidiaries. 

    This is not the first time Meta has been accused of tying its services. The launch of Threads in 2023 raised concerns about tying, as it requires one to have an account on Instagram. Meta, formerly known as Facebook, acquired Instagram, a photo-sharing app, in 2012. Although marketed as a competitor of microblogging platform X, the prerequisite of an Instagram account to operate the application makes it vulnerable to antitrust scrutiny, because the functioning of Threads and Instagram is fundamentally different. The Turkish Competition Authority, Rekabet Kurumu (‘RK’), has been investigating Meta’s anti-competitive practices since last year. In December 2023, the RK launched an investigation into the alleged tying of Threads and Instagram. 

    Subsequently, in January 2024, Meta was fined $160,000 per day for failure to adequately address competition concerns arising from its dominance in social networking, consumer communication, and online advertising. Most recently, the RK fined Meta $37.20 million over data-sharing practices between Facebook, WhatsApp, Instagram, and Threads.

    TYING : THE INDIAN PERSPECTIVE

    Tying is prohibited under section 4(2)(e)  of the Competition Act, 2002, in the context of abuse of dominance. The CCI’s interpretation of tying has been a bit more restrictive than its European counterpart. This is especially demonstrated by the element of ‘coercion’ which is very narrowly considered by the CCI. We will try to understand this through two cases: Harshita Chawla v. WhatsApp and Facebook (‘Harshita Chawla’) and the Baglekar Akash Kumar v. Google LLC (‘Google Meet case’). 

    In Harshita Chawla, WhatsApp was accused of tying its Unified Payments Interface, WhatsApp Pay (‘WPay’) services with its messaging platform. The CCI dismissed the allegations on two grounds: first, that the element of ‘coercion’ in using the two products was absent; and second, that it did not cause foreclosure of competition in the market for payments services. It is prima facie amply clear that WhatsApp’s messaging platform and WPay operate in different relevant markets, which is a consideration that was taken into account by the CCI as well. However, its rationale for reaching the conclusion stands on shaky ground. The CCI has failed to consider here that WPay is not independent of the messaging platform, and users need to have a WhatsApp account in order to use it. While the implementation of WPay did not foreclose competition in the market of payment services by itself because it is a heterogeneous market, WhatsApp’s conduct is in clear violation of Section 4(2)(e) for two reasons: first, that users need to use the messaging platform in order to use WPay; and second, that WhatsApp leveraged its dominance in the smartphone-based OTT messaging service market to enter into the payments services market.

    A similar reasoning was used in the Google Meet case. In 2020, Google was accused of anti-competitive tying following the integration of its video-conferencing service Google Meet (‘Meet’) with its client mail service, Gmail. This meant that Meet came pre-installed with Gmail and the latter could not be used without the former. CCI dismissed the allegations on Google on two grounds. Firstly, users were free to use Meet without having a Gmail account. They just needed a Google account, not Gmail. Additionally, they were not under an obligation to necessarily use the video-conferencing service while using Gmail. Secondly, it did not restrict users from using other video conferencing apps with their Google account, thus reaching the conclusion that users are not being ‘coerced’ to use Meet and Gmail together. This approach again overlooks the fact that a dominant enterprise (here, Google) leveraged its position in one relevant market (here, client mail service) to enter into another relevant market (here, video-conferencing service). 

    A PROBLEMATIC APPROACH

    The CCI’s narrow interpretation and mandatory requirement of ‘coercion’ in order to constitute tying is arguably not a favorable one. As demonstrated by both the cases above, it clearly neglects the presence of leveraging. Even if we consider that WPay did not cause foreclosure of market competition in Harshita Chawla, it does not weaken the fact that if a user wishes to use WPay, they would necessarily have to pass through WhatsApp, thereby increasing the market power of the messaging platform and giving it a competitive edge over its counterparts in that relevant market. Additionally, the CCI completely ignores the aspect of consumer inertia or status quo bias with its disproportionate focus on coercion. The concept of status quo bias assumes that consumers refrain from making active choices to change the status quo regardless of economic irrationality. In comparison, it has been due importance by the EC on more than one instance, a notable one being the Google Search (Shopping) decision, where it was observed that of the total consumers, only 1% looked at the second page of Google search results. Similarly, a user with a Gmail account is more likely to tilt towards using Meet over other video-conferencing apps, simply out of convenience, or one may say, irrationality. 

    If we apply the Indian approach to the present case of Meta tying FM with Facebook, chances are that Meta will probably escape CCI’s scrutiny, specifically with respect to tying, because it does not ‘coerce’ Facebook users to necessarily use FM. Users can use the social media platform without using the classified ads services and are also free to use other classified ads services while using Facebook. This approach ignores the aspect that FM is a service that cannot be used in isolation without having a pre-existing Facebook account. Consumer inertia is a significant factor in this case, considering the enormous user base of Facebook. Additionally, as compared to any other online classified ads services, Meta obviously has access to a variety of personal data of millions of users across the world (‘Big Data’), which gives it a significant competitive advantage. Something that has been consistently also ignored is the annoyance caused to the users who do not want to use the additional services but are unable to disable them. These are factors that must be taken into account by CCI while adjudicating upon tying allegations in the digital market. 

    CONCLUSION AND THE WAY FORWARD

    In evolving digital markets, Big Data raises competitive concerns, when dominant undertakings use it to the detriment of other competitors, by indulging in tying and leveraging. Being a non-price parameter for competition, possession of Big Data by technological giants (‘Big Tech’) puts non-dominant enterprises at a disadvantage. This is where competition regulators are expected to step in. As Big Tech is under stringent scrutiny around the world, remarkably in jurisdictions other than the European Union, it calls for stronger compliance strategies. For more market-friendly effects of antitrust regimes, it is essential to go beyond the imposition of fines. A monetary penalty, no matter how hefty it is, does not act as an effective deterrent for Big Tech as compared to the money that they make every minute of the day. Antitrust watchdogs should go further than that, and ensure the termination of the services or modification of anti-competitive features of such services, in order to protect and promote competition in the market. Considering liberal jurisdictions like the United States are becoming more active in scrutinising the distortion of competition by Big Tech, it is essential for developing economies like India to catch up as well, and not shy away from imposing stringent measures in the interest of consumer welfare. As we anticipate India’s ex-ante framework, one can hope that CCI will take its lessons and adopt a more dynamic approach in the future. 

  • Algorithmic Enforcement and Anti-Competitive Effects: CCI vs. Swiggy and Zomato

    Algorithmic Enforcement and Anti-Competitive Effects: CCI vs. Swiggy and Zomato

    BY VASHMATH POTLURI, THIRD-YEAR STUDENT AT NALSAR, HYDERABAD

    INTRODUCTION

    The food delivery market in India has been one of the most dynamic and volatile markets, witnessing the quick exit of players like Uber Eats and Food Panda, among others, while being dominated by Zomato and Swiggy with a whopping market share of 58% and 42%, respectively. While there are many factors for such dominance, the recent allegations of Price Parity Clauses (“PPCs”) and exclusive agreements by the National Restaurants Association of India (“NRAI”) against both these platforms shed some light on the reasons for such market share. The findings of the Director General (“DG”), as reported by Reuters, indicate that the Competition Commission of India (“CCI”) is proceeding against these platforms under section 3(4)(c) of the Competition Act, 2002 (“Act”) based on the presumption that Swiggy and Zomato operate in a vertical framework as intermediaries distinct from their restaurant partners. However, this article challenges this presumption and argues that Swiggy and Zomato’s ownership of cloud kitchens transforms their relationship with restaurants into one of direct competition. As a result, this paper pushes for a reclassification of this case under Section 3(3)(a) and (b), enabling a shift from a ‘rule of reason’ approach to a per se standard. 

    The article advances this argument in a two-fold manner. First, it will analyze the anti-competitive effects of PPCs and exclusivity agreements, particularly in conjunction with Swiggy and Zomato’s cloud kitchens. Second, it will examine the role of dynamic algorithms in furthering these practices, proposing the introduction of the Algorithmic Facilitation Standard (“AFS”) in the Act, to ensure regulatory scrutiny and transparency in the market in line with the approach of the EU. 

    HORIZONTAL PRICE FIXING AND MARKET ALLOCATION

    The allegations by the NRAI that Swiggy and Zomato operate their cloud kitchens and enter into arrangements such as PPCs and exclusivity agreements throw light on the dominance of these platforms through anti-competitive practices. These practices demonstrate that these platforms are not merely intermediaries with restaurants as downstream partners, but competitors operating simultaneously in both the food preparation and delivery markets. This dual role works to the detriment of independent restaurants. 

    In the MakeMyTrip (“MMT-GO”) case, the CCI assessed the anti-competitive effects of wide Price Parity Clauses (“PPCs”) and exclusivity partnerships in a vertical framework between MakeMyTrip, Goibibo, and OYO with their hotel partners. The CCI found that these agreements restricted hotels from offering lower prices or better terms on competing platforms, creating entry barriers and limiting consumer choice. As a result, the CCI held that these agreements resulted in an Appreciable Adverse Effect on Competition (“AAEC”) — a standard under Section 19(3) of the Act, which examines factors such as foreclosure of competition, barriers to entry, and harm to consumer choice. Relying on these findings, this article argues that the anti-competitive practices of Swiggy and Zomato produce identical effects, such as inflated prices and foreclosure of competition, but in a horizontal framework rather than a vertical one. 

    Applying the findings of the MMT-GO on wide PPCs, the PPCs entered into by Swiggy and Zomato are wide because they suppress competition in the market by mandating that restaurants maintain uniform prices across all channels, including their direct platforms and competing delivery services. This eliminates price differentiation and forces restaurants to inflate prices, depriving consumers of competitive pricing or discounts. These clauses also ensure that Swiggy and Zomato’s cloud kitchens are insulated from price competition, as restaurants cannot undercut them even when operating more cost-effectively. On the other hand, exclusivity agreements further suppress competition by restricting restaurants from listing on competing platforms or offering direct delivery services, creating a “lock-in” effect. This limits consumer access to popular restaurants and forecloses rival platforms from competing effectively. 

    These arrangements unfairly establish the dominance of Swiggy and Zomato’s cloud kitchens by allowing them to leverage vast data generated through their platforms. This data provides critical insights into consumer preferences, including popular cuisines, peak ordering times, delivery locations, and pricing trends. Using this information, Swiggy and Zomato can strategically design their cloud kitchen offerings to align with market demand precisely, bypassing the trial-and-error process faced by independent restaurants. They can quickly identify underserved cuisines or delivery zones and establish cloud kitchens to fill these gaps with minimal risk and cost. This data-driven approach grants their cloud kitchens a significant competitive edge over independent restaurants, which lack access to such comprehensive data and must rely on slower, costlier market research methods.

    The combined effects of PPC, exclusivity agreement, and cloud kitchens on a horizontal level, results in the creation of barriers to entry and foreclosure of competition, causing an AAEC under Section 19(3)(a) to (c). Hence, this article argues that the CCI must re-examine this case under Section 3(3)(a) and (b) through a ‘per se’ approach. Taking inspiration from the EU’s Vertical Block Exemption Regulation (“VBER”), which removed wide PPCs from the regulatory exemption, the CCI could impose cease-and-desist orders and monetary penalties, ensuring a competitive marketplace.

    ALGORITHMIC FACILIATATION STANDARD

    Swiggy and Zomato’s algorithms play a crucial role in enforcing PPCs and exclusivity agreements, amplifying their anti-competitive effects. These platforms use algorithms to monitor pricing across various channels, including restaurants’ direct platforms and competing delivery services, ensuring strict compliance with PPCs. By scanning for pricing discrepancies, the algorithms flag instances where restaurants offer lower prices on alternative channels. Non-compliant restaurants face automated penalties, such as reduced visibility in search results or exclusion from promotional campaigns, discouraging price competition. Similarly, these algorithms enforce exclusivity agreements by tracking restaurants’ activities on competing platforms. Exclusive partners receive preferential treatment, such as enhanced visibility, while restaurants breaching exclusivity face reduced exposure, limiting their ability to attract orders.

    Operating as a “black box,” these algorithms lack transparency, leaving restaurants unaware of the reasons for penalties or visibility changes. This creates a unilateral power dynamic that disproportionately favours Swiggy and Zomato, making it difficult for restaurants to challenge or adapt to platform policies.  In this context, the article proposes that the AFS identify the role of such algorithms and bring them under regulatory scrutiny. Under this, the CCI would be required to follow a two-step inquiry-

    MANDATORY ALGORITHMIC DISCLOSURES: 

    The first step in the proposed AFS is to mandate disclosures by Swiggy and Zomato regarding their algorithmic decision-making. These platforms must provide information about the design, operation, and structure of their algorithms, specifically in relation to penalizing or incentivizing restaurants. Such disclosures should be made to the DG under Section 36(4)(b) of the Act during the investigation stage. This requirement mirrors the EU Platform to business regulations 2019/1150, which mandates transparency in ranking criteria, ensuring that platforms do not manipulate search results based on monetary compensation or preferential treatment.

    EFFECTS BASED OUTCOME ANALYSIS:

    The second step shifts the scrutiny from intent to effects, applying an effects-based outcome analysis to assess whether these algorithms control prices, foreclose competition, or limit consumer choice by restricting visibility or promotions. If these practices result in an AAEC, the burden of disproving their anti-competitive impact should shift onto Swiggy and Zomato, allowing the CCI to order a rollback of such algorithms, if necessary. This aligns with the EU Court of Justice’s ruling in the Google Shopping case which found algorithmic self-preferencing anti-competitive, and rejected short-term efficiency arguments as justifications for long-term market harm. Likewise, under Section 19(3)(d) to (f) of the Act, any efficiency claims by Swiggy and Zomato should be dismissed if they come at the expense of competition.

    WAY FORWARD

    This article proposes that the AFS could be incorporated into the Act in two ways. First, under the ‘Hub-and-Spoke’ model, introduced through the Competition Amendment Act, 2023, wherein, a central entity (hub) can facilitate anti-competitive coordination among independent entities (spokes), even if they do not explicitly collude with each other. In this context, Swiggy and Zomato function as hubs, using algorithms to impose price parity and exclusivity conditions on restaurants (spokes), effectively orchestrating market behavior without direct collusion between restaurants. Second, the liability of Swiggy and Zomato could be invoked under Section 2(b), as part of tacit collusion through algorithmic enforcement. Since intent is irrelevant under ‘per se’ approach, the AFS would impute intent constructively, aligning with the Competition Law Review Committee 2019’s recommendation of a “guilty until proven otherwise” standard in cases involving algorithmic anti-competitive practices.

    CONCLUSION

    While the case is still pending before the CCI, this article has established that Swiggy and Zomato’s anti-competitive practices produce effects similar to horizontal price fixing and market allocation under Section 3(3)(a) & (b). A reclassification accordingly would enable for a shift to ‘per se’ from ‘rule of reason’, under which the entire burden to prove the anti-competitive effects rests on the complainant, and in such situations where these practices are furthered by opaque algorithms, it becomes difficult to hold Swiggy and Zomato responsible for their actions. Thus, under the AFS, the mere presence of algorithms and assessment of their prima-facie effects after due disclosure to the CCI, the burden to disprove AAEC would be heavy on Swiggy and Zomato. This reclassification would represent a significant jurisprudential shift, setting a precedent for addressing algorithm-driven anti-competitive practices and establishing a framework for future actions against quick commerce platforms.

  • Assessing the Deal Value Threshold: Shortcomings and the Way Forward

    Assessing the Deal Value Threshold: Shortcomings and the Way Forward

    BY DHRUV MEHTA, FIFTH-YEAR STUDENT AT JINDAL GLOBAL LAW SCHOOL, SONIPAT

    introduction

    Recently, the Parliament passed the Competition Amendment Act, 2023, which makes substantial amendments to the Competition Act, 2002 (‘Act‘). Amongst the plethora of amendments, the most prominent amendment is the introduction of the deal value threshold (‘DVT‘). DVT is the additional threshold that requires notification (in the absence of any exemption) of a merger or acquisition with a deal value threshold of INR 2,000 crores (USD 0.24 billion) where either of the party to the deal has ‘substantial business operations in India’ (‘SBOI‘). Through the introduction of the Competition Commission of India (Combinations) Regulations, 2023 (‘Draft Regulations‘), the Competition Commission of India (‘CCI‘) has brought more clarity with respect to the ‘transaction value’ and ‘substantial business operations’ under the DVT framework. Through this blog post, the author examines the limitations in the CCI’s interpretation of the DVT and offers recommendations to enhance its clarity and effectiveness.

    Once the Amendment Act was passed, the onus was now on the CCI to quickly define what constitutes ‘value of transaction’ and ‘substantial business operations’. The CCI has followed the footsteps of Germany and Austria by rightly defining what exactly constitutes ‘value of transaction’ and ‘substantial business operations’. However, there are a few shortcomings as to how transaction value has been interpreted and defined by the CCI.

    Transaction Value: Shortcomings and Recommendations

    a. Incidental Arrangements

    Regulation 4(1)(c) of the Draft Regulations requires the value of a consideration to include ‘incidental arrangements’ for calculating DVT. The definition of ‘incidental arrangement’ is confusing and excessively broad. Examining whether a transaction is notifiable would be difficult if an incidental arrangement is accepted in its current form as it may encompass unconnected transactions that weren’t anticipated by the parties when entering into the main transaction.

    To ensure certainty for parties involved in a transaction and to reduce ambiguity in applying the DVT, the CCI should limit ‘incidental arrangements’ to those arrangements foreseen by the parties when the transaction was initiated. Such arrangements should also be explicitly documented in the transaction records. Furthermore, under Regulations 9(4) and 9(5) respectively, read along with Regulation 4(1)(b), the CCI has the power to review interconnected steps of a single transaction when the transaction meets the test of interconnection. In the past, the CCI has exercised its powers by reviewing interconnected transactions in proceedings against the Canada Pension Plan Investment Board and ReNew Power Limited under Section 43A of the Act.  

    This makes the proposed provision unnecessary if ‘incidental arrangements’ are linked to the transaction because the CCI already has the power to look at subsequent transactions that are interconnected. It is recommended that given CCI’s ambit to assess interconnected transactions, it should reconsider the need for incorporating ‘incidental arrangements’  under the value of a transaction. Furthermore, in the event that the CCI decides to retain the said clause, ‘incidental arrangements’ should only include, transactions foreseen by the parties which are included in the transaction documents during execution.

    b. Uncertainty in the Valuation of Non-Compete Clauses

    The draft regulations require that the value of any non-compete clauses be included while calculating the value of a transaction for DVT. There are a few shortcomings with the said requirement.

    Firstly, it is often difficult to attribute value to non-compete clauses. The value of such non-compete clauses is often reflected in the purchase price listed in the transaction documents. When a non-compete clause is not listed in the transaction document, it is often challenging to assign an exact value to such a clause, and assigning an exact value would compromise the DVT’s inherent predictability and clarity. This would be against the ICN Recommended Practices for Merger Notification and Review Procedures, which highlight how important it is for merger control systems to have clear, transparent rules- especially in light of the growing number of deals happening across several jurisdictions.

    Secondly, the value of the transaction is the value that is attributed to the non-compete provision. If the CCI wants to attribute a separate and distinct value to a non-compete agreement that is separate from the value of a transaction, it should not speculate on assigning the value to the non-compete agreement. Rather, when the board of directors of the acquirer or the seller gives a specific value to the non-compete agreement at the time of the transaction, the CCI should also value the non-compete at the same specific value as given by the board of directors.

    It is recommended that the CCI amend the Draft Regulations to include the value of non-compete clauses and agreements as part of DVT as listed in the transaction documents. It should also be made clear in the Draft Regulations that the CCI can only assign a value to a non-compete agreement if it has been given careful thought and approval by the boards of directors of the target company and the acquiring company.

    c. Valuation of Options and Securities

    According to the Draft Regulations, the whole value of the options and securities to be acquired, along with the assumption that such options would be exercised to the fullest extent possible, must be included in the consideration for the DVT for a transaction.

    It is observed that by including the whole value of options, DVT could be breached or relatively small transactions could also be flagged. Moreover, including the full value of options that could potentially be exercised may lead to an overstatement or understatement of their value, as the price at the time of exercise could differ from the price when the option is initially granted. In the USA, the Hart-Scott-Rodino (‘HSR‘) rules state that valuation reports presented to the board of directors would be used as a point of reference for determining the value of a consideration when the same value is unknown but capable of being estimated. The CCI could adopt the practice as stated by the HSR rules, where it could consider the value of an option not on the basis of assumption but instead based on valuation reports presented to the board of directors.

    In line with the stance in other countries and the CCI’s own decisional practice, it is advised that the whole value of shares received upon exercising an option be considered only if and when the option is exercised. Further, to eliminate any doubt regarding the value of the options, the CCI could only take into account the entire value of the options if they are exercised at the per-share price paid to shareholders (perhaps as a way to assign a portion of the transaction value to particular persons).

    Substantial Business Operations: Shortcomings and Recommedations

    Under the Draft Regulations, SBOI is established if, within the 12 months preceding the transaction, the business demonstrates that 10% or more of either (a) its global user/subscriber/customer/visitor base, (b) global gross merchandise value, or (c) global revenue from all goods and services in the prior financial year, is attributable to India. The author welcomes the CCI’s target-only approach for judging local nexus. However, to ensure that transactions having a limited nexus to the Indian markets are adequately filtered out, the CCI needs to make a few amendments to the SBOI framework in India.

    • Redefining ‘Users, Subscribers, Customers, and Visitors’

    Considering ‘every download’ as a ‘user’ would be an overstatement and therefore the threshold of ‘users, subscribers, customers, and visitors’ could lead to double counting as the said requirement is extremely expansive. For a single product business, such as a social networking website, there is a possibility to have a different number of subscribers than users or visitors, and these subscribers may not be active users or visitors. Thus, such ‘visitors’ might not contribute towards the economic value of the target enterprise and should be discounted from the threshold.

    Furthermore, the CCI could have taken inspiration from Germany and Austria who have provided adequate guidance on how to compute the user threshold for digital markets. The Digital Markets Act of the EU also includes clear definitions for terms such as ‘active end users’ and ‘active business users‘ tailored to various products and services such as online intermediation services, search engines, social networking platforms, video sharing services, and more. The measurement of such users, subscribers, customers, and visitors should be carried out according to industry standards as providing an exhaustive list is nearly impossible.

    The CCI through a guidance note could narrow down the ambit of ‘users, subscribers, customers, and visitors’ to that of ‘monthly active users’, ‘unique visitors’ and ‘daily active users’ in the digital markets for assessing SBOI as done by German and Austrian Competition regulators. The CCI could further bring more clarity to its implementation of DVT by referring to the rulings of Meta’s Acquisition of Kustomer and Meta’s acquisition of GIPHY.

    Under the ambit of ‘users’ the CCI could consider both direct and indirect users. Taking inspiration from the aforementioned cases, the CCI could define direct users as those who were paying for the product as well as who are licensed customers. Indirect users would be considered as those who accessed the application, for example, GIPHY library through third-party mediums/applications such as Facebook, Instagram, Twitter, and Snapchat. Moreover, it is important to highlight that the CCI ought to establish distinct standards for evaluating activities across various sectors, just as the German and Austrian guidelines on transaction value threshold do.

    Thus, the author suggests that the criteria of ‘users, subscribers, customers, and visitors’ be replaced by ‘active users which consists of daily, monthly, yearly, direct and indirect users, and unique visitors’. Further, as specific definitions are provided in the Digital Markets Act for ‘active business users’ and ‘active end users’ the CCI could provide guidance for the same across various sectors.

    Conclusion

    The CCI is seen to be taking some major strides in regulating competition in new-age deals within the digital sphere. Taking inspiration from Germany and Austria, the Competition Act was amended to introduce the deal value threshold, which effectively provides the CCI the jurisdiction to assess those digital mergers with little or no assets or revenue. The CCI has tried its best to bring more clarity with regard to the interpretation of transaction value and substantial business operations under the DVT framework. However, it remains to be seen as to how the practical implementation of DVT would be undertaken by the CCI. As highlighted, under the ‘substantial business operations’ prong, the CCI should bring more clarity by clearly redefining ‘users, subscribers, customers, and visitors’.  Towards the final step, the CCI also needs to streamline its approach to reviewing interconnected transactions and the valuation of non-compete clauses.

  • Revamping Antitrust for Digital Ecosystems: Exploring ‘The Draft Digital Competition Bill, 2024’

    Revamping Antitrust for Digital Ecosystems: Exploring ‘The Draft Digital Competition Bill, 2024’

    BY GARIMA THAKUR AND AISHWARYA S. NAIR, THIRD-YEAR STUDENTS AT RGNUL, PATIALA

    I.      INTRODUCTION

    The digital realm has become integral to modern society, encompassing activities from banking to shopping and socializing, all conducted online. India’s digital economy is set to nearly double, reaching about 20% of GDP by 2026. While digitalization promotes market contestability and innovation, it also raises concerns about anti-competitive behaviour, unfair business practices, and discriminatory policies by enterprises. 

    In 2022 the Parliamentary Standing Committee on Finance presented the 53rd report on Anti-Competitive Practices by Big Tech Companies which discussed the network effects of large digital markets leading to a ‘winner takes most outcome’. It further identified ten Anti-Competitive Practices (‘ACPs’) undertaken by large digital enterprises abusing dominant positions. In response, the Ministry of Corporate Affairs (‘MCA’) created the Committee on Digital Competition Law (‘CDCL’) to suggest recommendations for regulating competition in digital markets. In March 2024, the CDCL released its report highlighting the fragmented and time-consuming legislative approaches under various legislations towards the digital economy, alongside unveiling the draft Digital Competition Bill, 2024 (the ‘Draft Bill’).

    II.      KEY FEATURES: REPORT OF THE COMMITTEE ON DIGITAL COMPETITION LAW, 2024
          1.         Ex-ante measures in Digital Competition Law:

    The Competition Law in India adopts an ex-post approach in addressing anti-competitive agreements and abuse of dominance, with investigations commencing after contraventions have occurred. However, ex-post investigations might take years to resolve and have proven to be too slow for the fast-evolving digital landscapes. By the time an investigation is underway, the market may irreversibly tilt in favour of the incumbent. Further, this approach provides only for specific claims and is thus unable to address repeat violations or similar conduct by different entities. For example, if an e-commerce giant, say, EcomTech forces suppliers into exclusive deals that harm smaller competitors, a smaller rival, ShopSmall, might file a complaint. This complaint would prompt an investigation by the Competition Commission of India (‘CCI’). However, the process takes years, allowing EcomTech to solidify its dominance in the meantime. By the time the investigation concludes, EcomTech’s market position is even stronger, and the approach only addresses ShopSmall’s specific complaint, not the broader issue. This highlights how the ex-post approach can be too slow and limited for fast-changing markets. 

    In contrast, Chapter III of the Draft Bill introduces ex-ante regulations that pre-emptively address issues by setting broad legal principles. Obligations will be tailored for various digital enterprises following expert consultations. The CCI is empowered to set specific conduct requirements for different business models within Core Digital Services (‘CDS’), which means means any service specified in Schedule I of the Draft Bill and includes major platforms like online search engines and social networks.

        2.         Regulation of Significant Enterprises in the Digital Economy: 

    Established enterprises benefit from larger, data-driven networks and user bases, giving them a competitive edge. New entrants face challenges not only in pricing and service quality but also in overcoming these established user bases. This creates a first-mover advantage for existing enterprises, which, even if not legally dominant, can influence the market similarly to dominant players. 

    The Draft Bill aims to regulate Systematically Significant Digital Enterprises (‘SSDEs’) that wield substantial influence in the digital economy and within the Indian Digital Market. The Draft Bill introduces two methods under Section 3 of the Draft Bill to determine the status of an enterprise as an SSDE. 

    Firstly, the ‘Significant Financial Strength’ test quantifies metrics such as turnover in India, global turnover, gross merchandise value, etc. to ascertain SSDE value. Secondly, the ‘Significant Spread’ test evaluates qualitative factors. The CDCL recommends adjusting these measures to suit Indian markets. Further, Section 3(3) grants the CCI discretion to designate an enterprise based on a set of qualitative criteria encompassing factors like enterprise resources, aggregated data volumes, direct and indirect network effects, and the entity’s bargaining position relative to its business users and consumers.

       3.         Exemptions:

    Chapter VIII of the Draft Bill provides the CCI and the Central Government power to exempt certain SSDEs from some obligations on grounds of national security and protection, economic viability, and other factors as may be prescribed. The committee recommends that such exemptions should be devised with regard to the uniqueness of each CDS, in a similar fashion as Section 54 of the Competition Act.

       4.         Enforcement and Remedies:

    The committee acknowledges concerns about potential overlapping proceedings under the Competition Act and the Draft Bill, which could lead to double or unfair penalties. However, it distinguishes between the regulatory interventions and procedures of both frameworks. The committee suggests that the CCI should handle overlaps on a case-by-case basis, ensuring enterprises are safeguarded from disproportionate penalties.

    The enforcement framework proposed in the Draft Bill draws heavily from the Competition Act, with the CCI being the enforcing authority for both legislations. It includes provisions mirroring the Competition Act, such as empowering the Director General, granting rights to seek compensation for damages caused by SSDEs, and the authority to issue interim orders. Moreover, recognizing the critical role of timelines in the digital economy, the committee has also integrated a settlements and commitments regime into the Draft Bill.

    III.      MAJOR CONCERNS AND CRITICISMS ALONG WITH SUGGESTIONS
          1.         The problem of ‘consent’:

    Section 12 of the Draft Bill prohibits SSDEs from using non-public user data to compete on their CDS, effectively outlawing practices like self-preferencing. However, an exception allows platforms to combine data from other sources with user consent. This implies that enterprises can still collect and utilize user data, including selling it to insurers or sharing it with interested third parties, as long as explicit consent is obtained and it doesn’t directly compete with the platform’s main business users.

    The Draft Bill employs an ‘opt-in’ model, wherein the user must provide express provision for the usage of data. Yet, amid consent fatigue, a consent-based approach may not effectively curb monopolistic behaviours. Moreover, enterprises may leverage tools like artificial intelligence and manipulative design (such as dark patterns) to micro-target and exploit the psychological vulnerabilities of people to give the creating the illusion of choice and consent. This can deceive consumers into making decisions they might not make if fully informed or aware of alternatives.

    The Chinese Antitrust Commission’s guidelines on Antitrust Regulations, which ban algorithms that “violate ethical and moral standards” by “inducing user addiction or excessive spending,” could effectively counteract the dark patterns and strategic models employed by digital platforms to collect consumer information for purposes beyond what is necessary.

        2.         Effect on Startups and Innovations

    The Internet and Mobile Association of India (‘IAMAI’) highlighted that regulations based on financial or size thresholds, might deter Indian tech firms from scaling up to avoid added regulatory burdens. This could impede their global competitiveness and profitability.  Critics also argue that such regulations could stifle digital start-ups and innovation, echoing IAMAI’s comparison to the pre-liberalization Monopolies and Restrictive Trade Practices (‘MRTP’) era. They suggest that the Bill could reintroduce restrictive policies that hinder growth, innovation, and investment in India’s digital sector.

    Further, it may be argued that it is difficult to gauge the effectiveness of ex-ante measures amid fears of economic loss, as there are only a handful of jurisdictions where such laws have been implemented. Comparisons cannot be drawn due to the novelty of these measures even in foreign nations like the EU (Digital Markets Act, 2024), the UK (Digital Markets, Competition and Consumers Act, 2024), and the US (American Innovation and Choice Online Act, 2023). 

       3.         Clarity is required on the exceptions:

    Due to uncertainty about defining the parameters and scope of this exemption, there is room for subjective interpretation during the act’s implementation. This oversight leaves powers arbitrarily with the Central Government, potentially affecting enterprise efficiency and harming consumers. To address these issues, the ‘countervailing benefits exemptions’ in the English Digital Markets, Competition, and Consumers Bill, 2023 (‘DMCC’), can be adopted.

    The “countervailing benefits exemption” in competition law permits practices that might seem to breach competition rules if they deliver substantial benefits that outweigh any potential harm. This exemption applies when the conduct provides clear advantages to users and these benefits exceed any negative impact on competition. Additionally, the conduct must be necessary and proportionate to achieving these benefits without undermining effective competition. Implementing this exemption would prevent arbitrary benefits for financially powerful companies and safeguard businesses from unintended consequences that could harm competition.

    IV.      CONCLUSION 

    Digital economies, benefit greatly from economies of scale and increasing returns. They can expand into related markets easily and utilize data to enhance their competitive edge, often assuming a “gatekeeper” role in the market. Addressing anti-competitive practices and monopolies posed by such technologies is difficult under traditional laws. In India, recent fragmented regulations have targeted big tech for data privacy issues. The Draft Bill, 2024 proposes new ex-ante obligations inspired by global standards to regulate anti-competitive behaviours of SSDEs. The bill’s potential impact on India’s Digital Ecosystem remains uncertain, but in a rapidly evolving industry, these proactive regulations could help align the law with digital innovation.

  • CCI Needs to Reconsider its Approach-Balancing Patent Rights and Public Welfare

    CCI Needs to Reconsider its Approach-Balancing Patent Rights and Public Welfare

    RAVNEET KAUR, THIRD-YEAR STUDENT AT RGNUL, PUNJAB

    Introduction

    Section 4 of the Competition Act, 2002 (‘Competition Act’) lays down the practices, which if undertaken by a dominant enterprise, would amount to abuse of dominant position. One of such practices is ‘unfair’ or ‘discriminatory’ pricing. Generally, unfair pricing of a commodity can have two connotations. It can either be unreasonably high or unreasonably low compared to the expenses incurred in its production.  

    While predatory pricing, dealing with the latter scenario, has been specifically included within the ambit of unfair pricing under section 4(2)(a) of the Competition Act, excessive pricing has neither been mentioned nor defined. Does that imply that an enterprise possessing a dominant position could conveniently impose unreasonably high prices on people, prices that have no rational nexus with the costs incurred? This is certainly not the case. In the Indian context, excessive price forms a subset of unfair price.

    However, this inclusion has not been able to yield any outcome so far. In reality, excessive pricing is rarely considered as an abuse of dominant position. This policy of non-intervention in case of excessive pricing stems from two reasons. Firstly, regulation of prices might cut incentives for new players; secondly, the self-regulatory mechanism is assumed to operate in the market. However, this approach tends to get problematic when applied in the pharmaceutical industry where the commodity in question is an on-patent drug, resulting in the failure of a self-regulatory mechanism.

    Approach Towards Pharmaceutical Industry

    This policy of non-intervention in case of excessive pricing has been time and again applied in the pharmaceutical industry as well. The Competition Commission of India (‘CCI’) has been rather reluctant in making a prima facie case of abuse of dominance against an enterprise where it is accused of charging excessive prices.

    The reluctance of the CCI in this regard could be attributed to two factors-

    1. Research and Development Costs

    In the pharmaceutical industry, particularly, enormous and unwarranted margins between manufacturing cost and market price often go unchecked. This is because there is a general perception that the manufacturing of drugs is preceded by years of research and expenditure that comes with it. Therefore, it is argued that using conventional benchmarks (such as price-cost comparison) could reduce the incentive for further research and development (‘R&D’). It is primarily because if firms expect price regulation to capture a sizable share of a market, their incentives for innovation and entry into new markets will be diminished, damaging consumer welfare in the long run. In the case of Biocon Ltd. v. F. Hoffmann-La Roche AG, the complaint against the ‘excessive pricing’ of the anti-cancer medicine Trastuzumab was dismissed. The grounds cited were that the original drug price increase was justified by the enormous expenditures invested in R&D and innovation.

    • Interface of Patent Rights and Maintenance of Competitive Environment

    The prime argument that is offered to pitch for non-intervention in case of excessive prices is that it is an exercise of lawful monopoly. In the Indian context, the Patents Act, 1970 (‘Patents Act’) guarantees a statutory and time-exclusive right to the patentee to decide upon the commercial exploitation of the patented drug. This right includes the determination of prices. Touching upon the aspect of excessive pricing, it is argued that monopoly prices are an accolade that enterprises get for making uncertain and risky investments. The US Supreme Court, in the context of monopoly pricing, observed that “mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free market system”. A situation like this generates a collision between two statutes. While the Competition Act seeks to maintain competitive conditions in the market, the Patents Act safeguards the rights of a patentee.

    Analysing the Problematic Approach

    Regarding the clash between the Competition Act and the Patents Act, it is worth pointing out that while section 3 of the Competition Act provides some sort of exemption under section 3(5) to the actions arising out of rights vested under the Patents Act, no such exemption has been granted under section 4. In simpler words, if a certain action attracts applicability under section 3 of the Competition Act but has arisen out of the rights guaranteed under the Patents Act, it would be exempted from the rigours of the Competition Act. However, an action which results in the abuse of a dominant position would not be exempted even if it stems from the rights guaranteed under the Patents Act. The intention of the legislature is unambiguously clear in not permitting the rights of a patentee to get in the way of a competitive environment. With particular reference to the pharmaceutical industry, this distinction indicates that if the prices imposed by an enterprise qualify as ‘unfair’ within the meaning of section 4, it would amount to an abuse of the dominant position irrespective of the fact that the enterprise has a statutory right to decide upon the determination of prices of an on-patent drug.

    Further, the opinion on non-interference in the cases of excessive pricing is mostly premised on the principle of self-regulation. In the absence of market failures, excessive prices motivate potential competitors to enter the market and are, therefore, self-correcting. However, the application of this principle presupposes the availability of alternatives for the commodity in question and the absence of entry barriers for new players to enter the market. As for the pharmaceutical industry, primary and secondary manufacturing are the two fundamental steps in the production of drugs. Producing a drug’s active pharmaceutical ingredient is known as primary manufacturing. The process of incorporating the active ingredient into a delivery system is called secondary manufacturing. Therefore, it is this Active Pharmaceutical Ingredient (‘API’) that has therapeutic qualities.

    When a new drug is invented, the manufacturing enterprise gets the API patented. Now, in order to manufacture the drug of the same efficiency, the API used in the formerly manufactured drug is a pre-requisite. By patenting the API, the enterprise successfully eliminates the possibility of a new player entering the market and selling the drug at a lower price. The problem aggravates when the drug in question does not have any comparable or reasonable substitutes. In the pharmaceutical industry, ‘therapeutic substitutability’ is a mandatory requirement for some other drug to have the potential to cause competitive constraints over the drug in question.

    This essentially questions if consumers, faced with a price increase, could easily switch to other alternatives without the therapeutic efficiency being compromised. In the case of critical diseases like cancer, the availability of therapeutically substitutable drugs is unlikely. Seeking to reap the benefits of a situation like this, in the absence of competitors or reasonable substitutes, enterprises hike the prices of their drugs manifold. Consequently, the self-regulatory mechanism escapes applicability in a case like such, with heavy entry barriers and no substitutes. A consumer, faced with this adversity of unreasonable prices, is made to choose between life or death. If he chooses life, the financial burden continues to grow heavier until it becomes impossible to endure and if he refuses to pay the exorbitant prices, his life is on the line. Top of FormBottom of Form This clearly flies in the face of the idea behind the recognition of providing access to essential medicines at affordable prices as a core obligation under the right to life in the constitutional context.

    To date, the Indian authorities do not have a developed jurisprudence pertaining to excessive pricing. Owing to this, the authorities tend to seek aid from the jurisprudence developed in foreign countries. United Brands Company and United Brands Continental BV v Commission of the European Communities Brands case, for instance, is the most cited precedent in this regard which has its shortcomings, one of them being the determination of benchmark price. CCI’s indifferent approach towards this lacuna is highly problematic. The only apparent and discernible solution to this problem is establishing an authority to fill the void of undeveloped jurisprudence. CCI should formulate guidelines to govern cases about excessive pricing with special reference to pharmaceutical industries. These guidelines must ensure that public welfare and patent rights co-exist harmoniously.

    Conclusion

    The challenge here is to strike a balance between the rights of a patentee and the obligation towards the public. Allowing the prices of life-saving drugs to go unregulated would mean denying people the right guaranteed to them by the makers of the constitution under Article 21. The enterprises, undoubtedly, enter the market with a vision to gain maximum profits but these profits should not be permitted to come in the way of larger public interest. Going by business wisdom, it is needless to say that the market price of a drug has to exceed the expenses incurred and that there has to be a margin between the cost of production and the market price but this margin should not go unchecked. It is for the CCI to ensure that this margin is reasonable and caters to the interests of both the enterprise and the general public. The regulatory guidelines are the need of the hour to inhibit big players from benefitting from the masses’ helplessness.

  • Telecom Titan: Interplay between Reliance Market Dominance and the CCI 

    Telecom Titan: Interplay between Reliance Market Dominance and the CCI 

    BY Raima and Amishi Jain, SECOND-YEAR STUDENTS AT RGNUL, PATIALA

    Introduction

    The Indian Telecom industry is an influx of service providers, each claiming to bring about a digital revolution while catering to the interests of the consumers. The ethos of competition in India, provided by the Competition Act, 2002(hereinafter, “the Act”),  often proves to be rigorous and rather malleable to the dynamic competition in the country. Creating a storm in the telecom industry is Jio, which recently cemented its position as a leader by gaining over three million users. It has often attracted scrutiny for its anti-competitive practices from various market players, inviting a greater need for better functioning of the Competition Commission of India (hereinafter “CCI”). This article aims to shed light on the working of the CCI, making it imperative to take a look at the decisions of the CCI, with respect to one of the biggest corporations in India; Reliance. 

    Reliance: A Mega Saga of the Market Player

     Reliance is known for employing market tactics to avoid scrutiny for ‘abuse of dominant position’, such as with Jio. However, as discernible in Shanmugam v. Reliance Jio Infocomm Ltd., it has often escaped the scrutiny of CCI. Such strategic measures to control the market are especially evident in this case. Through careful navigation of regulatory allegations, the tactical manoeuvring marks its journey from 2016, to the newly formed Disney+ Hotstar Reliance merger, which is now dominating the market. 

    Predatory behaviour: Reliance Jio 

    Reliance Jio dominates the allegations of predatory pricing in the ‘telecom sector’, a term linked to its entry in the market. Through the massive disruption brought in 2016, Jio reduced the number of competitors in the market from 11 to 3, and also brought huge changes in the price of internet. The entire trajectory of growth of the telecom sector changed with its introduction. Nonetheless, the predatory pricing allegations against the same were dismissed for it was a newcomer.

    Since its launch, other service providers have approached the Telecom Regulatory Authority of India (“TRAI”), with complaints dismissed due to lack of evidence or flexibility. With a latent pattern of growth, such predatory players function with policies based on cycles of sacrifice and recovery, through which they lower prices and eventually increase them to recover losses, thus, harming market competition. 

    Such motivations necessitate close scrutiny of the CCI along with developing a robust and flexible framework to address such problems at the optimal time. Since the merger signifies similar curated patterns of dominance, it becomes imperative to regulate potential threats to the telecom industry.

    The Telecom Titan

    The Disney+ Hotstar Reliance merger raises further concerns about antitrust violations. It would become a media behemoth which could account for over 30% of the market. The issues brought forward by such a merger may invite scrutiny from the CCI due to the stir it has caused in the OTT market of India. 

    Increased dominance and detriment to consumers 

    With the formation of an over $8.5 billion entity, the merger is bound to dominate the sports sector, important in Indian OTT, with a staggering consumer base. This sector, which was largely under the garb of Hotstar is bound to expand due to the wide consumer base of Jio Cinemas. The superiority of the merger, in both sports and cinema, proves to be detrimental to television players who stand at the risk of becoming obsolete. This will further affect price-sensitive consumers, who cannot afford other subscriptions.

    Underlying issues 

    Mergers often lead to a modest increase in price. This is substantiated by the Merger Review Policy laid out by the Federal Trade Commission of the US, as to how the merger of two firms with substituting products results in greater power to increase prices, reducing the alternatives available for the consumers in the market. This merger depicts a similar nature by reducing the alternatives available to consumers in the market and potentially driving the withdrawal of other players. It adds to the existing competition faced by international players in the OTT market, which triggers their removal, ultimately affecting the diversity of the content available to the audience. 

    Wave of further mergers 

    A similar pattern of hegemony was witnessed in 2016, when Jio stimulated a series of mergers in its wake. Vodafone Idea and Bharti Airtel merger in 2017, BSNL and MTNL merger proposed in 2019; all while it further strengthened its pre-eminence. 

    Reliance also sought approval from CCI for a merger of Viacom18 and Star India Pvt. Ltd. (SIPL). The merger can amount to over 40% of the total viewership in India, causing a serious imbalance in viewer distribution.  

    It can be juxtaposed to the Zee-Sony merger, wherein both had to comply with CCI’s action against the merger. CCI had given conditional approval that required the divestment of Zee from certain channels. Without this action, Zee-Sony would have taken charge of 75 channels. Star-Viacom merger is likely to amount to 115 channels as a combined entity, leading to a hegemonic position resulting in Appreciable Adverse Effect on Competition (“AAEC”).

    The Supreme Court of California in Continental Car case observed that an undertaking is in a dominant position when it has the power to behave independently without consideration of its competitors. The same has found relevance in Section 4(2) of the Act, which restricts actions done by dominant enterprises to deny or restrict market access, for abuse of dominance. When the Zee-Sony merger takes 115 channels with 35% of the viewership, other market entities will likely lose market access. Hence, it is probable for CCI to intervene in this merger, similar to Zee-Sony, and pose conditions for a divestment. 

    The Competition Act in the Realm of Development

    A major function of the CCI is elimination of anti-competitive practices that may impede healthy competition in the market. However, a drawback of the Act is that it is curative, rather than preventive. By the time the CCI penalises a firm, market dynamics  change. 

    Mergers are an alternative for firms to dominate the market other than the popular method of predatory pricing. It is regulated by Section 6 of the Act, by the term ‘Combinations’. Due to this, Competition (Amendment) Act, 2023stipulates that any merger needs to be notified to the CCI if it crosses a certain threshold or any of its transactions surpass it in terms of turnover. The threshold takes into account the geographical limits as to the operation of the business. In a hopeful tandem with the Act, Parliamentary Standing Committee presented a report to keep a check on the ‘winner-takes-most’ phenomenon, as a company that reaches a certain number of customers can gain an unfair advantage over other companies by indulging in anti-competitive practices.

    Practices of Reliance serve as a guide for the market on how to operate, and for CCI on how to do its utmost to prevent anti-competitive practices. However, due to overlapping jurisdictions and lenient policies, market dynamics remain at risk of being imbalanced, inviting a need for reforms. 

    The Way Forward

    Coordination between Sectoral Bodies

    The working of the CCI and sectoral authorities like TRAI should be in tandem, rather than promoting a situation of ‘CCI v. TRAI.’ This calls for an enhancement of coordination and interoperability. It is imperative to formulate a pro-consumer business-friendly model as CCI works towards ensuring ease of doing business and the telecom sector ensures service standards. Claiming a single industry as ‘turf’ will lead to overlapping issues between different sectors. To avoid failure of consultations in a situation of ‘CCI v. TRAI’, the regulatory bodies should not draw hard line boundaries and instead work in tandem to avoid deferring cases to further high-powered committees. 

    Cross-Border Benchmarking

    The situation calls for structural and behavioural remedies to be implemented by CCI. In the cases of Holcim v. Lafargeand Sun Pharmaceutical v. Ranbaxy Laboratories, CCI proposed divestment of a few plants to eliminate the anti-competitive element. Behavioural remedies including ‘hold separate provisions’, which ensure that the merger is run as separate from independent businesses,  may be desirable to reduce the anti-competitive concerns which may arise due to such a horizontal merger.

    The CCI is recommended to conduct market surveys, merger impact assessments, and pre and post-merger analysis to ensure fair competition to complement its regulatory framework.

    Complimentary Models

    In consonance with the non-performance of the CCI, a de novo bill such as the proposed Digital Competition Bill, 2023, which is ex-ante as opposed to the ex-post model of the Act, is imperative to implement a rigorous procedure. Instead of correcting, there should rather be prevention of market imbalance. Models should be employed to end monopolistic practices.

    Furthermore, borrowing from the US Model, CCI can use a program to disallow mergers with anti-competitive conduct, which creates an appreciable risk of materially lessening competition and ending platform monopoly. A similar legislation could help protect firms when Indian markets are highly susceptible to create AAEC when new mergers are created, such as the Star-Viacom merger. Monopolistic behaviour allows a company to disadvantage its competitors while hurting small businesses, consumers, and innovation. In a country with a number of upcoming small businesses, such a legislation could prevent them getting pushed out of the market due to platform monopoly. 

    Conclusion

    Reliance, being a widely known and dominating market player for its ensuing market strategies, suggests ways of improving the regulatory framework. Though the Act and its amendments curb misuse of the market, they often fall short or the compensation is not enough. 

    The impending Disney-Reliance and Star-Viacom merger exemplifies the risks of market concentration and consumer interests. In addition to greater coordination between different regulatory sectors, it is imperative to incorporate complimentary models to restrain market imbalances, rather than correcting them post-occurrence. Thus, it remains essential to enhance coordination and adaptability to standardise the actions of dominant players like Reliance. 

  • Examining Loopholes and Challenges in the Draft Digital Competition Bill

    Examining Loopholes and Challenges in the Draft Digital Competition Bill

    BY KASHVI SINGH SHEKHAWAT, SECOND-YEAR STUDENT AT NLU, ODISHA

    Digital platforms have significantly transformed the global economy and society and are central to 21st-century technological advancements. They have introduced innovative products and services that were unimaginable a few decades ago which break down borders to deliver these benefits worldwide. 

    The COVID-19 crisis has highlighted the importance of digital platforms, but also raised concerns about market dominance and anti-competitive practices. In response, the Ministry of Corporate Affairs proposed the Draft Digital Competition Bill (‘the Bill’) on March 12 to curb these practices, promote fair competition, and improve market transparency.

    This Bill, which aims to regulate digital markets and curb anti-competitive practices contains potential loopholes that could undermine its effectiveness. This might impact the Bill’s ability to effectively curb anti-competitive practices, ensure fair competition, and promote market transparency. Thus, there is a crucial need to identify and address areas where the Bill may fall short ensuring a more robust and comprehensive regulatory approach.

    Ex-Ante Regulation

    Ex-ante regulation involves setting rules and guidelines in advance to prevent market issues before they arise, as opposed to addressing problems after they occur (which is ex-post regulation). It’s a proactive approach aimed at maintaining fair competition and preventing market failures from the outset. This is typically used to address market failure but this is not the case with India. As per the ITIF’s Hamilton Index Report, India is a top producer in key industries with a thriving digital market and the third-largest startup ecosystem. However, concerns about market power in digital markets persist with claims that consumer data feedback loops, network effects, and economies of scale favor incumbents, potentially leading to market concentration. While network effects can benefit consumers, market concentration is not an inevitable outcome. Digital markets often exhibit multi-homing, where consumers use multiple platforms, enhancing competition. Market power in dynamic markets can drive innovation, reflecting Schumpeterian “gales of creative destruction” where firms continually innovate to compete.

    Even if market failure exists, ex-ante bans as proposed by the Bill must demonstrate that they improve the current system. The ITIF report suggests that ex-ante regulation might hinder market forces essential for correcting failures and enhancing consumer welfare. The report also highlights that the current ex-post enforcement model has limitations but that does not prove that ex-ante regulation would be better. The complementarity between ex-ante and ex-post regimes does not necessarily enhance consumer welfare and could maintain administrative costs while risking false positives. Thus, the questions arise that whether the benefits of an ex-ante regime outweigh the potential harms.

    Tailored Regulatory Approach

    The approach of implementing more tailored, company-specific rules, as seen in the Bill following the UK’s Digital Markets, Competition and Consumers model aims to mitigate false positives in theory. This strategy gives regulators the discretion to craft individualized conduct codes for each company rather than imposing blanket rules across entire industries. However, this strategy poses challenges. Firstly, it runs the risk of generating high administrative costs that the ex-ante regime was meant to avoid. For instance, the Bill anticipates extensive non-compliance inquiries involving costly processes like discovery, detailed fact-finding, and potentially adversarial proceedings. Secondly, as noted previously, such an approach could lead to concerns about regulatory capture, where regulatory decisions might favor established players over new entrants. This could result in disparate treatment within the digital market ecosystem. Thirdly, the government’s ex-ante regulatory approach could impose significant burdens on digital companies, potentially making operations untenable and stifling venture investments in tech startups. High regulatory risks can deter investors by affecting returns and business conditions, with increased compliance costs and scrutiny especially challenging for resource-limited startups. 

    In essence, instead of effectively addressing market failures, the Bill could potentially create a regulatory framework that escalates administrative expenses and selectively benefits certain digital entities while disadvantaging others.

    Systematically Significant Digital Enterprises

    The Bill’s definition of Systematically Significant Digital Enterprises (‘SSDE’) is problematic. Firstly, its quantitative threshold targets companies solely based on their size, without considering whether they possess market power—a necessary though not sufficient condition for market failure. Additionally, the Bill includes a vague and ambiguous qualitative test for identifying SSDEs if quantitative criteria are not met. This test vague because it involves assessing broad and subjective factors, such as a company’s influence on digital markets or its potential effect on competition, without clearly outlining how these factors should be measured. The absence of precise definitions makes it difficult for companies to understand the criteria they must meet, leading to inconsistent application by regulators. This uncertainty can result in varying interpretations, leaving digital firms unsure of how they will be classified.

    This could lead to an ad hoc regulatory regime, granting excessive discretion to regulators and creating uncertainty for many digital firms. This uncertainty is further compounded by the Bill’s company-specific approach to rulemaking, which raises concerns about regulatory capture and the potential for the Bill to be used to pick digital winners and losers in India.

    According to the Competition Commission of India, at least 580 companies from the digital service and e-commerce sectors alone would qualify as SSDEs in India. This contrasts sharply with the European Union’s Digital Markets Act (‘DMA’), which designates only 6 gatekeepers. Thus, this large number of designated SSDEs would impose significant compliance burdens on these companies, potentially hindering their ability to introduce new services and innovate. 

    Innovation

    The Bill proposed in India raises significant concerns regarding its potential impact on innovation. Firstly, unlike the EU’s DMA and the UK’s Digital Markets, Competition and Consumers Bill, the Indian Bill does not mandate a finding of market power as a prerequisite for applying its quantitative tests. This omission suggests that the Bill could target companies purely based on their size, rather than addressing genuine market failures, which regulation should ideally target. Moreover, the Bill’s provision for a three-year designation period with automatic renewal, coupled with limited opportunities for revocation, fails to account for the dynamic nature of market power in digital markets, potentially leading to regulatory overreach. Secondly, while the Bill proposes company-specific restrictions, its approach of imposing per se bans on various common business practices is likely to stifle pro-competitive behavior. For instance, prohibitions on practices like self-preferencing, where digital platforms prioritize their own products over third-party offerings could hamper innovation and reduce consumer choice. Such practices often enhance user experience and foster competition among digital platforms, as seen in cases where companies like Google leverage scale to improve search quality and compete effectively with rivals.

    Thus, the lack of clear market power criteria, broad SSDE designation criteria, and per se bans on common business practices raise significant concerns about the Bill’s potential negative impact on innovation in India’s digital economy.

    Cost- Benefit Analysis 

    The Bill in India raises critical questions about its potential impact and necessity in the digital sector. One fundamental concern is whether the costs and benefits of digital competition regulation have been adequately assessed. As it currently stands, the objectives of the Bill appear to diverge from traditional competition law principles, which aim primarily to safeguard consumer welfare. Instead, akin to the EU’s DMA, the Bill seems more focused on assisting competitors rather than directly benefiting consumers. This shift could open the door to rent-seeking behaviors from private entities with vested interests, potentially leading to demands for extensive product-design changes that may not align with consumer preferences. Thus, the costs of the Bill are palpable. In the EU, similar regulations have delayed products like Meta’s Threads due to compliance uncertainties. Consumer experiences have also been impacted, such as Google’s changes to search result functionalities under DMA rules, which affect user convenience and business outcomes.

    While proponents argue the Bill addresses digital market risks, India already has robust competition laws and sector-specific regulations under the Competition Commission of India (‘CCI’). Introducing the Bill would mark a departure by using size-based criteria reminiscent of older regulatory regimes which could potentially disrupt India’s current approach aligned with international best practices.

    Enforcing the Bill would demand significant resources and expertise across multiple domains, similar to challenges faced by the European Commission with the DMA. There are grounds for revisiting or reevaluating the proposed legislation unless the benefits of the Bill clearly outweigh its costs in enhancing public welfare. This includes ensuring regulatory interventions support innovation and do not unduly burden digital businesses in India’s dynamic market landscape.

    Conclusion

    There is a need to enhance the collaborative nature of enforcement by establishing regulatory dialogues involving gatekeepers, business users, end-users, and external stakeholders such as experts and auditors as designating SDSE’s will lead to more litigations. This inclusive approach aims to encourage gatekeepers to comply with regulations without allowing regulatory capture. Such dialogues are seen as essential for improving compliance monitoring. This dialogue should be meaningful and not merely procedural, ensuring that the obligations outlined by the CCI are genuinely developed through these interactions. CCI should also take a more proactive role in assisting and resolving complaints from businesses. This proactive stance would enable quicker and more effective resolution of issues, strengthening overall compliance with the Bill Furthermore, alongside enforcement efforts by the CCI and national authorities, there is a call for greater private enforcement. This would allow businesses using gatekeeper services to initiate legal actions in courts, seeking injunctions and damages for bill violations. Private enforcement mechanisms can swiftly identify infringements and act as a robust deterrent, thereby bolstering overall Bill compliance.