New competition law faces a litmus test in Google Play billing case

Last week, Google Play  billing policy came under the scanner of the Competition Commission of India (CCI) for allegedly imposing unfair service fees on app developers. This, perhaps, is one of the first investigations ordered by the antitrust watchdog since the Competition Amendment Act 2023 was notified on February 20, with one of its highlights being the incentives to a cartel under investigation to tell on other cartels.

But we will come to that in a moment.
 

India’s competition law was originally designed for brick-and-mortar companies. It was not in tune with the digital revolution that swept across the business landscape during the last decade or so. But the law made do by what some might call the Jugaad way to deal with the gig and the digital economy. Now, though, the law seems to have caught up with the times. 
 

The litmus test of how well it has caught up, say experts, is how the provisions of the amended Act are applied in the matter of Google Play Store. Whether the search and software giant opts for the settlement and commitment scheme — one of the new facets of the law — in the days to come would be closely watched by competition law practitioners and digital companies alike. 
 

“The proof of the pudding is in the eating. How the CCI implements the new provisions and ensures that the legislative intent is not compromised would be of utmost importance. The CCI now has to build trust among stakeholders,” says an industry expert. 

 

Turning point
 

From introducing the leniency plus and settlement and commitment mechanisms for companies flouting the rules, the competition law for the first time is also including a deal-value threshold, instead of just asset value, for approving mergers and acquisitions. Add to this the latest Digital Competition Bill and the legal framework for competition law is now poised for a historic turning point. 
 

“These are all very progressive steps and in line with international best practices. It is a sign that the law and regulator are more mature and prepared to undertake scrutiny of intricate and complex market issues. Also, everything is no longer black or white, there are several shades of grey in terms of anti-competitive behaviour and remedies,” says Neelambera Sandeepan, Partner at Lakshmikumaran & Sridharan Attorneys.
 

Experts say though the Competition Law amendments have drawn on the more mature jurisdictions, such as the European Union and the United Kingdom, the competition regime in India is based on the specific requirements and challenges of the 

domestic markets. 
 

“This is the very reason why, unlike an arbitration convention, it is next to impossible to have a global competition treaty or convention. Rather than comparing our regime with any other frameworks, we must adapt to determining the successes and failures of our competition regime on its ability to truly grapple with the changing Indian scenarios,” says Sukrit Kapoor, Partner, King Stubb & Kasiva, Advocates and Attorneys. 
 

Most experts agree that many of the recent changes are business-friendly and realistic. For instance, companies can, without admission of guilt, opt for the settlement or commitment option and provide a full and true disclosure of facts in respect of the alleged contraventions of the Act. 
 

Similarly, under ‘Leniency Plus’, a cartelist who is cooperating with the CCI for leniency can disclose the existence of another cartel in an unrelated market. The cartelist can do so in the course of the original leniency proceedings in exchange for an additional reduction in penalty. 
 

“There is now flexibility for the CCI as well as the market participants to correct anti-competitive practices, instead of expending time and resources in protracted proceedings,” says Unnati Agrawal, Partner, IndusLaw. 

 

Balancing innovation and regulation
 

The recent Digital Competition Bill has not received the full support of all stakeholders, 
 

with many of the so-called Big Tech companies calling for light-touch regulation that does not stifle innovation. 
 

When the Ministry of Corporate Affairs invited comments on the expert committee report and the draft Digital Competition Bill, Google, Apple, Flipkart, Amazon, and Uber opposed ex-ante regulation. 
 

Ex-ante regulations are pre-emptive measures that prohibit companies from restricting third-party apps, imposing anti-steering provisions, engaging in self preferencing, or misusing business users’ data. The Digital Competition Bill has proposed that Systemically Significant Digital Enterprises, which will be identified on the basis of the number of their users in India, turnover in the country, global turnover, global market capitalisation, or other equivalent parameters, must declare themselves as such 

to the CCI.
 

While Twitter and Paytm were in favour, the latter said it was in favour as long as only large digital enterprises with a critical mass were subject to the regulations.
 

Finance Minister Nirmala Sitharaman, when she recently met financial sector regulators and fintech companies and startups, encouraged new-age firms to continue to innovate while keeping a close watch on the regulatory norms.

 

Some experts sound a note of caution.
 

“Lawmakers would need to be nimble-footed and quickly address any changes that may be required to ensure that India remains on the technology and innovation bandwagon and regulatory oversight does not become burdensome for the industry,” says Anshuman Sakle, Partner, Khaitan & Co.
 

However, balancing innovation and regulation is not the only challenge for the CCI. It is staring at a triple mandate of implementing the existing Competition Act, cases under the National Anti-profiteering Act, and the proposed Digital Competition Bill. Its sanctioned strength, however, has remained the same and 70 of 195 places are vacant, according to a parliamentary panel’s report. 
 

“One challenge that both companies and lawmakers might face in the future is ensuring effective enforcement of the Competition Law across all sectors, including emerging digital markets, since the ex-ante regulation requires companies and lawmakers to be on a continuous vigil to ensure that non-compliance does not go scot-free,” says Sucharita Basu, Managing Partner, Aquilaw. 
 

Meanwhile the CCI itself is going to have a review by the Ministry of Corporate Affairs over its state of affairs, amid concerns over inaction on pending complaints and regulations that are yet to be notified.
 

The latest report by the expert committee on digital competition law also noted the time-consuming nature of investigation and enforcement proceedings by the CCI. It cited the case of Matrimony.com Limited vs Google LLC, where the CCI took six years to adjudicate on the matter, but found that even after a period of 11 years, the matter had not reached finality and was still sub-judice before the National Competition Law Appellate Tribunal.