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Digital Competition Act: ex-ante or its time has come?

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By Gaurav Sahay, Partner and Ashita Sahay, Associate from SNG & Partners

As the digital economy continues to grow and transform, the need for adaptive and forward-looking regulations has become a necessity to sustain the growth of new opportunities for the people. The mandate provided by the Finance Committee extends beyond mere compliance and has amplified the task of evaluating whether the provisions of the Competition Act,2002 are adequate to address the complex challenges arising in the digital market.

Concerns are raised about the resources and technical expertise when it comes to implementation. Those in favour of the Digital Competition Act feel that ex-post is not an option as unobstructed anti-competitive practices in the digital space will have larger ramifications.

The committee’s recommendations are eagerly awaited as the digital competition law is expected to have a significant impact on the rapidly evolving digital market in the country.

The committee has recommended identifying Systemically Important Digital Intermediaries (SIDIs) to recognize the monopolies of the big firms. The SIDIs are to be identified in the vision to develop anti-competition practices to ensure a fair, transparent, and contestable digital ecosystem. The government wants to tackle digital challenges holistically. Therefore, the Committee aims to focus on key players in the digital realm underlines with the intention to promote fair competition, curb anti-competitive practices, and safeguard consumer interests but the ambiguity over the mode of analysing the SIDIs can further widen the gap and possibly increase market downfall.

This raises the question of whether SIDIs being identified as “Big Tech Companies” through monitoring revenue and market capitalism will increase the competition between the already existing companies in the same domain that have created dominance in the market.

The Digital Markets Act (DMA) proposed by the European Union (EU) is a recent example of legislation that intends to create fair and stable digital markets by addressing challenges posed by the dominance existing on certain digital platforms. These big companies have a significant impact on the market, acting as intermediaries for millions of businesses and consumers, and often hold entrenched and durable positions that eliminate fair competition.

The DMA sets out the regulation aiming to ensure that the identified big companies perform in a fair manner and allow the entry and growth of small competitors. DMA provides the European Commission the power to conduct market investigations.

Similarly in India, to comply with anti-competitive practices the Committee intends to include an annual report to assess the position of the market. While they also suggested revamping the Competition Commission of India (CCI) and creating a specialised digital markets unit within it, which will be responsible for monitoring the competitive behaviour of big tech companies in advance. The CCI-established Digital Markets and Data Unit (DMDU) shall be a specialised interdisciplinary centre of expertise for Digital Markets, keeping in mind the growing number of cases and complexity in the digital sector.

According to the Parliamentary Committee, the role and functions of the DMDU include:

1) To provide support in data management and address the enforcement issues of digital markets.
2)To facilitate cross-divisional discussion on digital market matters.
3) To act as a point for stakeholder engagement across academia, regulators, international deliberations, and government on the digital market.
4) To head Market Studies into matters related to digital markets.

For the determination of all these factors in the digital market, the Committee is required to go through all the cases alleging abuse of dominance and anti-competitive mergers or combinations.

The CCI needs to address the inconsistency of whether online and offline markets are different or different channels in the same market. To conclude the authorities, need to understand the multi-sided aspect of digital markets as the report is expected to have a substantial impact on the rapidly developing digital market landscape in the country.

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