House Panel seeks update on Digital Competition Bill amid delay in passage

The Parliamentary Standing Committee on Finance headed by Bhartruhari Mahtab has sought an update on the status of the Digital Competition Bill (DCB) from the Ministry of Corporate Affairs (MCA), official sources said. 

A communication to this effect had been sent by the House Panel to the MCA, they added.

This move by the Standing Committee on Finance comes amid a perceived delay on part of the MCA in firming up a final version of the Bill to be taken for Cabinet approval and its eventual enactment on account of strong pushback from the Big Tech. 

The House Panel move to seek MCA views has also come amidst reports that Centre has decided to table the DCB in Parliament only next year. 

The seeds for India’s digital competition law were infact sown  by the Standing Committee of Finance in December 2022 when the then Chairman of this House panel Jayant Sinha recommended the enactment of a separate Digital Competition Act.  

Based on the House Panel’s recommendation, a separate 16-member Committee was set up in February 2023 to frame a draft Digital Competition Bill and submit a report on the Digital Competition law. 

Despite a 16-member inter-Ministerial Panel framing a draft DCB, there is still no consensus on the scope, approach to regulation and measures that need to be adopted in the proposed legislation.

‘No predefined rules’

Policymakers at the Centre do not want to introduce any predefined rules (like ex-ante framework) on market behaviour of Big Tech that would end up hindering innovation or stifle creative disruption in digital markets. 

It is felt that regulations must tread carefully, as overly rigid frameworks may stifle the very innovation that drives the growth of digital markets.

MCA not having finalised the draft Bill yet is a clear pointer that India may not rush into framing a regulatory framework that rides on an ex-ante provisions as the main instrument for tackling the monopolistic behaviour of Big Tech in digital markets, said economy watchers. 

Innovation vs compliance

One of the primary concerns of policymakers is that ex-ante provisions, if overly restrictive, may create an environment of caution where companies focus more on compliance than on innovation. This risk is particularly acute in the digital economy, where the pace of technological change is rapid, and flexibility is often required to adapt to new challenges.

The Ministry of Electronics and Information Technology (MeitY), which recently took stakeholder views on Draft Digital Competition Bill, is yet to finalise its note that it intends sending to MCA.

MCA, after it receives MeitY comments, is expected to steer the process by firming up a new draft of the Bill and release it for public comments before preparing a Cabinet note, it is learnt.

Ex-ante regulations are seen to be crucial in addressing anti-competitive practices before they cause irreparable harm to smaller players and the overall market, 

Over the last 18 months, there has been an intense debate in India on whether to go in for an ex-ante framework or not to prevent monopolistic behaviour in digital markets. This has gained more traction with India’s digital market estimated to touch $ 1 trillion by 2025-26. 

On their part, digital startups in India are very much in favour of inclusion of ex-ante provisions in Digital Competion Law contending that this is the only effective way to protect Indian Digtal startups from the abuse of dominance by global big tech firms.

What are Ex-Ante Provisions?

Ex-ante regulation refers to rules set in place before problems happen. In the context of digital markets, it means creating guidelines to prevent big companies from unfairly dominating or harming competition, ensuring a fair playing field for all. These rules aim to prevent issues such as monopolies or unfair practices before they occur, rather than fixing them after the damage is done.

In digital markets, where a few dominant players often control significant portions of market share, these regulations can be crucial in preventing abuse of power, ensuring fair competition, and protecting smaller players from being crowded out.

India’s digital economy has grown at frenetic pace in recent years and is expected to touch $ 1 trillion mark by 2025-26, according to Government estimates.