In a bid to refine the proposed Digital Competition Bill, the Corporate Affairs Ministry (MCA) is likely to consider significant changes including raising the thresholds for deciding the large digital enterprises that would be regulated in an ex-ante manner (intervening before an event occurs).
Additionally, the MCA is now contemplating introduction of vertical-wise thresholds in large digital enterprises and subjecting them to ex-ante competition regulation instead of entire enterprise as a whole, sources said.
The initial draft Digital Competition Bill — exposed for stakeholder comments— had provided that entities offering certain “core digital services” and satisfying certain thresholds would be designated as Systemically Significant Digital Enterprises (SSDEs) for ex-ante regulation. Ten core digital services include online search engines, social networking services, web browsers and video sharing platform
The Bill, initially crafted to regulate large digital enterprises through an ex-ante framework, is now under review post-stakeholder feedback to ensure it strikes a balance between fostering competition and promoting innovation in the digital marketplace.
The draft Bill seeks to supplement CCI’s enforcement powers such that it allows to pre-empt and prevent certain identified large digital players from indulging in anti-competitive conduct in the first place.
Narrowing the Scope of SSDEs
One of the key changes under consideration is raising the thresholds that determine which companies qualify as SSDEs for ex-ante regulation.
Stakeholders have voiced concerns that the current criteria could inadvertently encompass not only the large global tech giants but also emerging domestic start-ups, sources added.
These start-ups, while scaling rapidly, may not yet possess the market power or gatekeeper status that the Bill aims to regulate.
By elevating the thresholds, the government hopes to focus the regulatory framework on only the most influential digital gatekeepers, thereby avoiding unnecessary regulatory burdens on smaller, innovative firms, they added.
The draft Bill prohibits SSDEs from favouring its own products on its platform over those of third parties (self -preferencing); restricting business users of the service from directly communicating with their end users (anti-steering) and tying or bundling of non-essential services to the service being demanded by the user.
Also SSDEs cannot prohibit users from changing the default settings, nor can they cross utilise user data collected from the core digital service for another service.
Vertical-Specific Thresholds
In addition to modifying the general thresholds, the government is exploring the possibility of implementing different thresholds for different verticals within the digital economy.
The current uniform approach may not account for the varying dynamics and scales of digital services, such as online marketplaces, social networking services, and cloud services, sources said.
Stakeholders have suggested that a one-size-fits-all threshold might be unfair and impractical, potentially stifling growth in certain sectors while being lenient in others. Adopting vertical-specific thresholds would allow for a more nuanced regulatory approach that better aligns with the unique characteristics of each digital service, they said.
Monitoring ‘Killer Acquisitions’
Another major point of feedback has been the need to monitor ‘killer acquisitions’—acquisitions by large digital platforms aimed at eliminating potential future competitors before they can grow. While the current Competition Act focuses on mergers and acquisitions that significantly alter market structure, many smaller transactions fly under the radar, escaping scrutiny due to their size. To address this, the government is considering a provision that would require SSDEs to report all acquisitions to the Competition Commission of India (CCI), regardless of size. This reporting requirement, however, would not necessitate prior approval but would enable the CCI to maintain a comprehensive database and identify patterns that might indicate anti-competitive behaviour.
By narrowing the focus on true gatekeepers, creating tailored thresholds, and keeping a close watch on acquisitions, India aims to create a fair and competitive digital marketplace that encourages both innovation and consumer protection, sources said.
The MCA is expected to release a revised draft of the Bill for further public consultation before moving forward with the legislative process that would require inter-ministerial consultations. Stakeholders and industry experts eagerly await these changes, which could significantly impact India’s digital economy landscape.
These proposed adjustments, if incorporated, could make the Digital Competition Bill a more targeted and effective tool for regulating India’s rapidly evolving digital market.