Can global Big Tech companies afford to ignore the Indian market?

New battle lines are being drawn in the world of technology. On one side are the global Big Tech companies: Google, Apple, Meta, and Amazon, who oppose the draft Digital Competition Bill, an ex-ante legislation to control the growing concentration of market power, and supplement the Competition Act.
 

The ex-ante provision means the Competition Commission of India (CCI) can intervene before anyone indulges in anticompetitive practices. This would be a contrast from the current framework, in which the CCI scrutinises or acts against anticompetitive practices after they have occurred. Numerous such disputes are already pending before the courts.  
 

The draft Digital Competition Bill by the ministry of corporate affairs (MCA) has, for the first time, introduced the ex-ante provision.
 

India’s startups are divided on this. Some of the bigger ones, such as online food delivery companies Zomato and Swiggy, and hotels aggregator Oyo, have endorsed the Big Tech’s position, saying the existing competition laws are sufficient. Experts say this may be because they have grown in size, customers, and revenues, are dominant in their sectors, and might sooner or later come within the purview of the proposed law.

A senior executive of a global tech firm says: “Frankly, we wonder who is supporting the Bill.”
 

A large group is. This group is made up of mostly small and medium startups -- not unicorns. They support the draft bill because they are concerned with the policy of app stores (mostly Google’s, but also Apple Inc’s) and the high commissions they charge. As many as 40 of these startups — including Matrimony.com, Magicbricks, QuackQuack, Hoichoi, TrulyMadly, and Thyrocare — recently wrote a joint letter to the MCA in support of the draft Bill, saying it would address long-standing concerns of startups and rein in the Big Tech, on whose platforms these startups depend.
 

Several online gaming firms, many of whom are big but have to fork out large commissions to app stores, support the Bill. So do hotels and restaurant associations, which complain of discrimination by online delivery players.
 

Those opposing the ex-ante legislation wanted the deadline for submitting responses, which was May 15, to be extended by two to six months. But the MCA has not agreed.
 

Europe vs India
 

The Bill has identified “systematically significant digital enterprises” (SSDE), which will come under the ambit of the law, based on thresholds. The thresholds include Indian turnover (base value of Rs 4,000 crore), global turnover ($30 billion), gross merchandise value (Rs 16,500 crore), number of customers (base of 10 million end users and 10,000 business users), and others.  
 

The stakes are high. The government must promote innovation and growth of startups while ensuring they do not face anticompetitive practices. It must also protect consumers. And it must also be careful not to hamper India’s digital drive, in which Big Tech has a critical dual role of technology as well as investments.
 

Big Tech’s big take is that the draft Bill, which draws heavily on a similar legislation in Europe – the Digital Markets Act — must not replicate the DMA in India. India, they say, is at a different stage of digitisation than Europe. For instance, the internet penetration in Europe is already at 92 per cent, while in India it is 54 per cent.
 

Countries such as Vietnam, Indonesia, Mexico, and Thailand, with which India competes, are not looking to impose Europe-like legislation.
 

Europe implemented the DMA in November last year after four years of discussions. So, Big Tech wants to see how it pans out in the next 18 to 24 months so its unintended consequences can be avoided.
 

Yet, the reality is that it is not only India; the United States, United Kingdom, South Korea, China, and Japan are also deliberating on ex-ante legislations as a way to rein in Big Tech. But can India follow their path?
 

Big Tech players also say more time could have been given for consultations in view of the ongoing elections. The draft Bill is a critical legislation that will require inter-ministerial consultations, which can probably happen only after the new government is in place.
 

However, a government official says the fear that no more consultations will happen is completely unwarranted.

 
Qualitative threshold
 

Big Tech has more concerns. For instance, the draft Bill imposes an open-ended qualitative threshold, which gives the CCI powers for designating SSDEs. Digital companies will face many overlaps between the new Bill and the existing legislation, such as the Digital Personal Data Protection Act, and various consumer protection laws, which could subject enterprises to double penalties. 
 

However, the 40 startups say they have no choice but to depend on app stores for their business and want the draft Bill to quickly become law. Matrimony.com’s founder, Murugavel Janakiraman, says Google charges 15 to 30 per cent commission on paid transactions, compared to only 1 per cent charged by other payment gateways. He estimates that app developers spend 20 to 50 per cent of their revenues on advertising on Google.
 

Sources close to Google, however, say they are not forcing anyone — apps are not removed and do not have to pay the commission if they do not want to use the payment gateway.
 

Janakiraman says many startups do not have the wherewithal to respond to the draft Bill and have preferred to keep silent. A governing council member in the Internet and Mobile Association of India (IAMAI ), which opposed the ex-ante legislation,  says that while the association has 550 members, only 12 responded on the Bill: Eight against, two (including this council member) in favour. Two others were neutral.
 

The IAMAI did not respond to Business Standard’s queries.
 

The group of 40 startups has asked for increasing the threshold levels suggested under the draft Bill for a company for becoming an SSDE. A low threshold, they say, might bring many Indian companies into the fold which do not have the ability or role in manipulating the market. For instance, the Rs 4,000 crore India turnover threshold is lower than the revenues of companies such as Zomato and Swiggy.
 

This group also wants the customer threshold raised from 10 million to 60-70 million, which would be about 10 per cent of India's 700 million total internet users. It plans to suggest to the government that the revenue threshold should be just one and that should be a combined global and Indian turnover of $30 billion.
 

That will probably net only the Big Tech companies.

Competition law: The timeline

2002: Competition Act enacted

2019: Competition Law review committee says still premature to carry legislative interventions to the Competition Act for digital entities, suggests periodic review

2022: Parliamentary Standing Committee places report on “Anti competitive practices by Big tech companies” and suggests need for a competition law framework

2023: Competition Act amended, widening its scope to include all types of anti-competitive restraints particularly to those pertinent to digital markets

2023: Constitution of a committee on digital competition law by the ministry of corporate affairs, it recommends ex ante legislation to control big digital enterprises