The Competition Amendment Bill, 2022: Another salient step towards regulation of Big Tech

On July 26, 2019, the Competition Law Review Committee submitted its report recommending certain amendments to the Competition Act, 2002 to the Union Ministry of Corporate Affairs. A pandemic and some months later, many of these recommendations have fructified into the Competition Amendment Bill, 2022.

First published for public consultation in February 2022, the Bill was finally tabled before Parliament on August 5, 2022 and will now be debated in the Winter Session.

The Bill makes a few salient changes to the anti-trust regime in India:

a. Lowering the threshold of ‘control’ to broaden the scope of transaction that must be notified under merger control: Under the extant statutory scheme, ‘control’ means exercising a degree of decisive control influence over the affairs and management of entities. However, the Bill lowers this threshold to the broader test of ‘material influence’ over management, affairs or strategic commercial decisions.

b. Non–adversarial resolution of competition concerns: The Bill allows entities under investigation to make commitments or opt for settlements with the Competition Commission, broadening the array of non-adversarial mechanisms to resolve competition concerns in a timely manner that aids in swift market corrections, without the looming threat of protracted litigation.

c. Widening the scope of enforcement of anti–competitive agreements: The Bill brings enterprises or persons not engaged in identical or similar businesses within the ambit of anti–competitive agreement enforcement, if they actively participate in the furtherance of such agreements. This creates a consolidated statutory foundation for the Competition Commission to tackle anti–competitive ‘hub and spoke’ arrangements. Under the present scheme, such arrangements are quite onerous to establish because the Commission must establish horizontal agreements among the ‘spokes’ as well as vertical agreements between the ‘hub and spokes’.

d. Definition of ‘Relevant Product Market’: The Bill widens the definition of ‘Relevant Product Market’, which is the contextual setting in which anti–competitive conduct, appreciable adverse effect of proposed combinations and dominance of a firm are all determined. The Bill proposes substitutability from a supplier’s perspective as the determining factor, in addition to the existing scheme where substitutability is gauged from a consumer’s perspective.

e. Qualification criteria for CCI Chairperson and members: Perhaps most interestingly, the amendments have introduced experience in the field of technology to the eligibility criteria for Members/Chairperson of the Commission. This is a welcome and telling addition to the myriad existing categories of professional experience such as (i) economics, (ii) competition law, (iii) law, (iv) management and (v) business.

f. Combination regulation as per transaction value: The Bill adds ‘transaction value’ threshold to the existing turnover and asset-based thresholds, which trigger a requirement to notify the Competition Commission about proposed combinations (i.e. mergers, acquisitions and amalgamations). It adds mergers, acquisitions and amalgamations with a transaction value above ₹2,000 crore as notifiable proposed combinations.

Evidently, there are some sweeping changes to the anti-trust regime that will impact regulation across many markets. However, this piece will focus on the final two amendments outlined above, seeing as they are principally aimed at augmenting anti-trust regulation of Big Tech firms.

Regulation of Big Tech firms

It is common knowledge that practices of Big Tech firms that potentially threaten fair competition conditions in several markets – such as imposing restrictions on multi-homing, non-neutrality in the form of biased searches, exclusivity clauses with sellers and killer acquisitions – are increasingly under the scanner of anti-trust regulators globally. The European Commission and the United States Federal Trade Commission have both acknowledged the immense adverse impact that Big Tech can have on competition in all manner of markets that it seeks to ‘disrupt’.

Given India’s burgeoning digital citizenry and the fact that its vast e-commerce market is widely regarded as the most attractive jewel to be had in the Big Tech crown, the Competition Commission of India has been thrust at the forefront of this global regulatory exercise – increasingly focusing its attention and resources on the potential damage caused to market competition by technology firms. It has various investigations open into Big Tech practices, covering various markets and alignments preferred by technology companies, ranging from an investigation into licensing of the Google Play Store, to an investigation into Google Pay & Google Play Store’s payment system, to an investigation into Google vis-à-vis news publishers, to an investigation into Apple mandating use of its proprietary payment. These are just to name a few. Many investigations stand concluded and several, especially in the realm of merger control, are yet to sound a blip on the Commission’s radar due to the existing statutory scheme.

However, by introducing transaction value thresholds to the merger control regime, the Legislature has ensured that mergers, acquisitions, amalgamations or other subtle forms of control and consolidation driven by the value of data will no longer escape the Commission’s scrutiny merely because the target entity involved – or all involved entities put together – fail to meet asset and turnover thresholds. Addressing this enforcement gap was the need of the hour, especially considering the fact that most technology/data driven firms provide their services ‘for free’ with an eye to a future where data gathered from end-users is lucratively monetised.

Given legacy accounting standards, there is little such technology firms possess in the way of significant assets or annual turnover. For this reason, many acquisitions, mergers and amalgamations among such firms fail to meet and trigger reporting thresholds, and such deals escape ex-ante anti-trust scrutiny. The amendment brings the Indian regime in line with the ‘deal value’ thresholds introduced by competition law regulators in Germany and Austria: legal sites at the forefront of developing statutory and jurisprudential tools to scrutinise rapidly evolving incentives and threats that underpin the technology market.

Additionally, by adding technologists and an allied professional class to the array of persons eligible to take on membership of the Commission, the Legislature has made its desire and expectation clear – the Commission must expand its membership to reflect the priority of effectively regulating Big Tech behaviour and balancing the same against the market-wide ‘Ease of Doing Business’ objective touted by the government. Taken together, these amendments ensure that the Commission will not only have the requisite powers to tackle potential concerns emerging at the behest of Big Tech, but also the expertise and experience to do so in a manner that doesn’t sacrifice the compounding gains of tech innovation in various markets.

Regulation of competition in digital markets remains a steep challenge for regulators throughout the world – one that is exacerbated by the power wielded by technology companies and the unprecedented speed and often opaque nature of tech innovation. This often leaves swift regulatory responses resembling a messy, reactive palimpsest. Seen in this light, the Indian Legislature and the Competition Commission should be lauded for making measured and timely strides in this regard, despite the relatively young age of anti-trust jurisprudence in India.

While many investigations and cases against Big Tech practices will invariably end up in our slow-moving judicial setup for a long time to come, the Amendment Bill is a handy heuristic in the Commission’s efforts take on the task of protecting and promoting competition in digital markets. It is to be seen as a vote confidence by the Legislature in the Commission’s expanding role in regulation of competition in digital markets.

The regulatory message is clear – notwithstanding the frequent presentation of anti-competitive tendencies as a fait accompli of technological innovation, both ‘protection of fair competition’ and ‘ease of doing business’ remain crucial axioms driving the regulator.

Manu Chaturvedi and Malhar Desai are advocates practicing in Delhi.