By considering cloud services in scope of regulation, the draft Digital Competition Bill already reflects lessons learned from the EU’s Digital Markets Act
Committee debuts draft Digital Competition Bill
On 12 March 2024, India’s Ministry of Corporate Affairs released the Report of the Committee on Digital Competition Law (CDCL), which included recommendations to enact a new Digital Competition Act. The CDCL was formed in February 2023 following parliamentary recommendations to develop ex-ante regulation for digital markets. Similar to the structure of other pieces of legislation around the world, the CDCL recommends obligations be placed on firms identified as Systemically Significant Digital Enterprises (SSDEs) which operate core platform services within India. As in the case of the EU’s Digital Markets Act (DMA), SSDEs would be designated on the basis of their user base and turnover, although the Competition Commission of India (CCI) would be empowered to designate additional firms at their discretion, even if they do not meet the numeric thresholds. Despite India’s significantly larger population than the EU, the CDCL only recommends a user base threshold of 10m end users in India to designate a SSDE, which is less than one quarter of the threshold applied to designated gatekeepers under the DMA. The CDCL does adopt a similar financial threshold to the EU, however, recommending the designation of firms with a market capitalisation of at least $75bn (£59bn). Interested stakeholders can comment on the draft bill until 15 April 2024.
Indian framework already shows lessons learned from the DMA
In addition to designating SSDEs, the CCI would also be empowered to identify Associate Digital Enterprises (ADEs). Firms can be designated as ADEs if they are part of a group or system that supports the delivery of the SSDE’s core platform service, even if the firm itself doesn’t warrant designation as a SSDE. The CCI would therefore be able to address anti-competitive behaviour between platforms, such as data advantages or lock-in effects, that span multiple markets. Additionally, the CDCL specifies that cloud services should be eligible for designation as a SSDE. Since a number of regulators around the world have begun investigations on the dominance of hyperscalers in the cloud market, the EC and the DMA have been repeatedly criticised for failing to designate these services to date despite the highly concentrated nature of the market. The eligible services under the draft Digital Competition Bill are otherwise very similar to the DMA and include search engines, social networking sites, e-commerce marketplaces, operating systems and interpersonal communication services, among other types of platforms.
Obligations would be specific to each designated SSDE
Again similar to the DMA, the CDCL recommends a series of general obligations for designated SSDEs, including prohibitions on self-preferencing, tying or bundling services, restricting the use of third-party apps and using non-public data for a competitive advantage. However, the framework would empower the CCI to direct these and other obligations to each SSDE individually. The regulator could consider factors including the nature of the market for the core platform service, the prevention of infringement on intellectual property, the prevention of fraud and cybersecurity protection when assigning obligations to a SSDE. If SSDEs are found to be non-compliant, the CCI could impose penalties up to 10% of the firm’s global turnover. Additionally, individual employees, including managers, directors or other officers responsible for the non-compliant conduct, could face personal liabilities up to 10% of their average income for the three preceding years. Under the proposed Digital Competition Act, consumers negatively impacted by the non-compliant behaviour of a SSDE could file with the National Company Law Appellate Tribunal or the Supreme Court for compensation. While the CCI would be granted significant powers to enforce the law, the central Government would still retain the power to exempt or amend the designations of SSDEs and issue directions to the regulator. Given the recent and repeated forays of the Government into the regulation of digital platforms in India, these powers should not be discounted.
