Digital Competition Bill opens room for parallel probe against firms

Big tech companies could face parallel inquiries for similar contraventions under the proposed Digital Competition Bill and the existing Competition Act, according to legal experts.

The expert response comes after a government-appointed panel proposed ex-ante competition regulations for big tech players to ensure proactive monitoring of their behavior and curb any possible unfair business practices.

 

The proposed Bill, under its Section 24, empowers the Director General with wide-ranging powers to “assist the Competition Commission of India (CCI), when directed by the Commission, in investigating into any contravention of the provisions of this (Digital Competition) Act or any rules or regulations made thereunder.”

“Big tech may face parallel inquiries and potentially divergent ruling which could lead to chaos in the regulatory cosmos. It will not be conducive for business,” said a senior competition law expert who did not wish to be named.

 

While the investigation under the Digital Competition Act would be for contravention of the ex-ante regulations set aside for the Systemically Significant Digital Enterprise (SSDE), under the Competition Act the same firms could be subjected to inquiries based on complaints for anti-competitive behaviour such as abuse of dominant position.

“Under the Competition Act, the CCI needs to show the effect of the conduct on the market, while in the Digital Competition Act, there is no such requirement. However, if found guilty, will the SSDE be penalised twice for the same conduct under both legislations? This ambiguity requires clarification from the government as it may lead to double jeopardy,” said Vaibhav Choukse, Partner & Head of Practice - Competition Law at JSA.

Salman Waris, partner at TechLegis said, "The objective here is to regulate big tech and hence the use of the term Significant Digital Enterprises as opposed to ‘intermediaries’ as here only entities that self-designate themselves as SSDEs would be covered and these ideally would be big tech companies as opposed to any other service provider covered under the definition of ‘intermediaries’”.

He believes that there will be a major impact on big tech enterprises like Google, Apple, and Amazon, among others as they will now also be subjected to a separate regulatory regime as far as competition law is concerned. Besides, what rules would apply to SSDEs that have not been specified in the report, which simply says that the same shall be notified after public consultations are held.

"This is quite perplexing as proposing an ex-ante regulation without specifying what the actual obligations would be will only create confusion and defeat the objectives of the proposed legislation specially when it’s applicable to fast-evolving digital space. Hence, such a move if implemented hurriedly could potentially stifle innovation by imposing burdensome regulations on tech companies,” Waris said. 

Ex-ante provisions under the new law provide that the SSDEs are prohibited from certain specified activities such as self-preferencing, anti-steering provisions, and restriction on third-party apps. On the other hand, the ex-post provisions under the current competition regime require a prior assessment and investigation on a case-to-case basis of whether such specified activities cause or are likely to cause an appreciable adverse effect on competition prior to passing any order prohibiting such companies from indulging in the identified anti-competitive or abusive conduct. 

ALSO READ: The Digital Competition Law: Big Tech firms opposed to ex-ante norms
 

“The new law being proposed prohibits certain activities without any investigation into whether such activities are anti or pro-competitive. The underlying assumption being that such activities are unequivocally anti-competitive and are unlikely to have any pro-competitive effects,” said Akshayy S Nanda, Partner at Saraf and Partners.

The Draft Digital Competition Bill has set out a process for investigation of the contraventions listed in the Bill in line with the similar process in the parent Competition Act.

“The difference between ex-ante and ex-post is essentially pre-distortion and post-distortion, meaning before distortion of the market practice, if the CCI steps in, then it would amount to an ex-ante approach. If the market is distorted and for instance, a complaint is filed before the CCI, then all decisions taken by the CCI post such distortion will be ex-post,” said Prashanth Shivadass, Partner, Shivadass & Shivadass Law Chambers.

The expert committee on digital competition, headed by Ministry of Corporate Affairs secretary Manoj Govil, in its report, said, “New tools that strengthen and supplement the CCI’s existing ex-post powers are the need of the hour. Although the ex-ante framework may still be subjected to judicial interventions, it will be a much more efficient market correction mechanism compared to Sections 3 and 4 of the Competition Act which are essentially ex-post interventions.”

It said that the powers of the CCI under the present ex-post model may not sufficiently enable the early detection and intervention required to prevent digital markets from irreversible tipping. The Committee in its report took note of CCI’s time-consuming nature of investigation and enforcement proceedings. Citing an example, the committee said that for information that was filed in 2012, CCI adjudicated the matter in 2012 and found the digital enterprise concerned to be abusing its dominant position and thus, imposed a penalty.

“However, even after 11 years, the matter has not reached finality and the same is currently sub-judice before the NCLAT,” it said.

Proposed guidelines
 

Obligations for systemically significant digital firms 
 

Should establish transparent complaint handling and compliance mechanisms

Shouldn't directly or indirectly favour own products, services, or lines of business

Should not restrict third-party apps

Shouldn't restrict business users from communicating with, or promoting offers to their end users


With inputs from Shivani Shinde