The committee, formed on February 6, 2023, has suggested forming a separate Digital Competition Law with an ex-ante regulatory strategy specifically tailored for large digital enterprises.
The much awaited report by the Committee on Digital Competition Law (CDCL) has finally been submitted to the finance minister. The committee, formed on February 6, 2023, has suggested forming a separate Digital Competition Law with an ex-ante regulatory strategy specifically tailored for large digital enterprises.
The proposed legislation aims to ensure proactive monitoring of these enterprises, empowering the Competition Commission of India (CCI) to intervene preemptively.
India’s current regulatory structure for competition issues follows the ‘ex-post’ approach, meaning that the regulator, the Competition Commission of India, can only take action against an entity once anti-competitive practice has been established. However, under the ‘ex-ante’ framework, companies will have to put in place mechanisms to prevent any abusive anti-competitive practices.
Start-ups in India are still pinning their hopes on the government putting in place an ex-ante framework for addressing the anti-competitive conduct of Big Tech in a pre-emptive way that would give them a level-playing field.
The Committee recommends the designation of "Systemically Significant Digital Enterprises" (SSDEs) based on quantitative and qualitative criteria, ensuring that only big tech enterprises with a significant presence in core digital services are subject to regulation.
The Committee suggests that if companies providing Core Digital Services belong to a larger group, not only one company should be designated.
Depending on how different companies within the group are involved in providing these services, the Committee envisions two scenarios:
1) the main company is designated as an SSDE and other companies in the group involved in providing the same services are designated as Associate Digital Enterprises (ADEs);
2) a different company within the group that is more directly involved in providing the services is designated as an SSDE, and its parent company and other group companies involved in providing the same services are designated as its ADEs.
The Committee recommends that the CCI should have the flexibility to decide which companies should be designated as SSDEs and ADEs.
To enforce compliance with ex-ante obligations, the Committee proposes monetary penalties of up to 10% of the global turnover of SSDEs, along with additional penalties for incorrect reporting and vicarious liability of key managerial persons.
Furthermore, if the SSDE is part of a group of companies, the Committee suggests that the maximum penalty should be based on the total turnover of the entire group. The Committee also recommends that the exact amount of the penalty should be decided by the CCI.
The Parliamentary Standing Committee on Finance proposed recommendations to regulate the digital market effectively in 2022. The committee's report, presented before the Lok Sabha on December 22, 2022, highlighted ten prevalent anti-competitive practices observed among big tech companies and emphasised the need to bolster India's competition framework to address these issues.
Source: CNBC-TV18
