The Future of Competition Law – II: Digital Markets

A while back, the Competition Commission of India ("CCI"), came down heavily on ‘Online Platforms’, by way of its two decisions involving Google. Much water has flown since, with the Central Government potentially mooting the idea of a ‘Digital India Act’ (‘DIA’). A recent bulletin released on March 9, 2023, culls out some key features of the DIA. One aspect that is notably being considered is another round of amendments to the Competition Act, 2002 (‘Act’) considering the DIA.

The DIA envisages an ‘open internet’ which should have choice, competition, fair market access among others. Specifically, fair trade practices include prevention of concentration of market power and gate keeping, distortion through regulation of dominant Ad-Tech platforms, App stores and interoperable platforms.

The bulletin also cites various examples of how big tech has been targeted by various antitrust authorities across the world, including the CCI’s decisions in the two Google cases.

In continuation of our previous article, ‘The Future of Competition Law in India’, we strive to see what has transpired between then and the present article – the Google decisions, the Standing Committee Report on ‘Anti-Competitive Practices by Big Tech Companies’, dated December 22, 2022 (‘Report 1’), and the bulletin dated March 9, 2023.  

It may also be pertinent to note that basis Report 1, the Central Government has setup a Committee on Digital Competition Law which will review whether the existing provisions of the Act are sufficient to deal with the challenges that have emerged from the digital economy. The Committee will also examine the need for ex-ante regulatory mechanism for digital markets through separate legislation.

Scores of commentators have both lauded and criticized the two CCI decisions of Google. As a matter of fact, the National Company Law Appellate Tribunal (NCLAT) refused to grant a stay of the decision of the CCI which meant that Google had to necessarily carry out changes as part of the orders. As on March 29, 2023, NCLAT upheld the order of the CCI to the tune of ₹1,337.76 Crore on account of abuse of dominant position but set aside some directions of the CCI including:

A) Google does not prohibit distribution of App developed by any App developer through its Play Store. This was against the backdrop that the CCI themselves did not find Google abusing its dominant position in play store market by imposing unfair and discriminating terms and conditions on App developers, there was no reason to direct Google to distribute the App Store of third-party app developers, without accepting the terms and conditions of Google;

B) Google does not prohibit or restrict any users from sideloading of the app and Google only displays appropriate warnings to the users about the risk. Therefore, directions regarding restrictions on sideloading of apps, was unwarranted;

C) APIs and Google Play Services, which are proprietary items of Google cannot be given in through unhindered access to App developers, OEMs and Google’s existing and potential competitors. Additionally, proprietary software such as APIs, which are developed through scientific and technical innovation should fetch value to Google, and therefore, remain an incentive for a technological company to further carry out such development and monetize through its commercial use;

D) Pre-installed apps are at the choice of the OEMs and they are not obliged to preinstall the entire bouquet of apps. All apps that are preinstalled can be disabled as per the user’s choice, disabling all the apps by user.

Ironically, these decisions are in line with the Report 1’s observations including Self-Preferencing, Third Party applications and Bundling and Tying, among others.

The Act, recently went through an amendment with both houses of the Parliament passing the Amendment Bill, 2022 (‘Bill’). These were basis the previous Parliamentary Standing Committee on Finance’ Report, back on December 13, 2022 (‘Report 2’), some of which were discussed in our previous article. The amendments are largely focused on combinations and leniency regimes but does not include recommendations from Report 1.

However, and as mentioned hereinbefore, a fresh committee has been setup to determine if the existing provisions of the Act are sufficient to handle the fast-growing digital economy including setting up a specialized digital markets unit within the CCI that will:

a) Monitor established and emerging Systemically Important Digital Intermediaries;

b) Give recommendations to the Central Government on designating Systemically Important Digital Intermediaries;

c) Adjudicate on cases related to digital markets.

Report 1 also suggests that to address the evolving digital market, the Act will need to be enhanced and therefore, recommended the introduction of a new Digital Competition Act.

The Bill, which is now law, does not make a mention of any of these recommendations of Report 1. Thus, it may be assumed that the Act will undergo another round of amendments, to include ‘new age’ developments in technology and digital markets.

In our previous article, we had discussed the intersection of digital markets, data protection and competition law spheres and how they have been dealt with in the EU, considering DSA and DMA. Report 1 gives key insights on ‘Regulating Digital Markets’ which involve ex ante regulations since digital markets have the tendency of a small number of players becoming dominant in a short period, given the increasing returns to size. The Report also recommended that key ‘Digital Gatekeepers’ are identified by the Central Government and that each of these intermediaries should annually submit a report to the CCI detailing the measures taken to comply with various mandatory obligations.

While Report 1 suggests reforms to the CCI, most of the amendments carried out in the Bill, are ex post, placing a larger emphasis on M&A and combinations. This therefore begs the question – is there a need to specifically legislate a Digital Competition Act or can the present enactment be modified and structured in such a way to include digital competition?

There have been views on both sides of the spectrum. We believe however, given the gains made by CCI over the last few years and the fantastic ability for a regulator like CCI to understand the broad spectrum of digital transactions, it is possible that the present enactment itself be modified to analyze digital competition. Furthermore, CCI can borrow learnings from the EU (even though there is a separate Digital Markets Act, which is currently under scrutiny) and sustain its stature in the competition sphere.

The Committee that has now been set up post Report 1, is tasked with studying the international practices across the globe in so far as digital markets is concerned. The concern however arises if, under the garb of ex ante regulations, the CCI itself restricts / prevents innovation or fails to protect the interests of consumers. One of the most crucial aspects however is that the infrastructure of the CCI must improve leaps and bounds – setting up of offices pan India, filling vacancies and to a certain extent, give more teeth to the CCI in its legislative mandate.

One question that we may ask ourselves is – is there a one size fits all approach when it comes to Digital Competition Act? The answer will be an overwhelming no – the digital economy has the power to outweigh any possible recommendations or amendments and leave them obsolete within a very short span of time. Amendments to the Act may be brought about to bring in key changes with respect to the digital market and a possible self-regulation / dos and don’ts manuals / best practices, is released to enable companies to ascertain their position in the market.

Given where India stands in terms of its digital economy, it would appear rather prudent to streamline the aforesaid multiple legislations into fewer and perhaps, a more targeted legislation. And a possible way to execute the same would be to amend the existing Competition Act, as already suggested above. This would in turn result in accounting for the digital economy resulting in addressal of the ongoing issues arising out of the transactions, comprising of the Big Techs.

Prashanth Shivadass is a Partner & Nandini Nair is an Associate at Shivadass & Shivadass (Law Chambers).

The contents and comments of this document do not necessarily reflect the views/position of Shivadass and Shivadass (Law Chambers) but remain solely of the author(s).