Should India adopt an ex-ante regulation to reign in Big Tech?

However, in doing so, legislators are likely to face a host of challenges, such as creating a law to accommodate different tiers of the market, considering the nature of digital markets and the diversity of India.

This, however, may not lead to the DCA substituting India’s existing competition regulations, which too are expected to be strengthened further by the impending Competition (Amendment) Bill, 2022, they added.

Tabled in the Parliament on 22 December, the report, titled ‘Anti-competitive Practices by Big Tech Companies’ listed 10 “undesirable practices” among tech firms, and recommended an ex-ante approach or a “code of conduct-based approach” to regulate Big Tech in India.

On August 18, Mint reported that the draft was in the works, and could seek to establish a regulation similar to the European Union (EU)’s Digital Markets Act (DMA).

Industry stakeholders and lawyers said India’s approach to regulate Big Tech is in line with global trends, but comes with its own challenges. “The new Act may seek to lay down restrictions regarding fairness, transparency and more, and could be a set of regulations, rather than a law that deals in anticompetitive conduct. But, taking the approach means that the current provisions of the Competition Act are inadequate to deal with digital competition. This may not be entirely correct, since the Competition Commission of India (CCI) has been passing orders against tech firms and investigating them already,” said Akshayy S Nanda, competition lawyer and partner at law firm Saraf & Partners.

“If these actions are being taken, it’s not clear if there is a clear need to bring an ex-ante regulation without properly evaluating the existing legal infrastructure,” he added.

The EU’s DMA was adopted “as the European Parliament felt that their existing legal infrastructure was inadequate to address competition among tech companies”, he said.

Industry insiders agreed that India’s approach to regulating Big Tech is in line with not just EU’s DMA, but other competition regulations such as that of the UK, the US, Korea and Germany. However, that may not imply that the legislation is a step in the right direction.

“Digital inherently is a winner-takes-all market, and it’s a competition for, and not in the market— known as network effects. The more the number of users on a platform, the greater its impact on the overall industry. EU’s DMA has come after legislators spent much more time in studying the effects of competition, but given how different the Indian market is from many global counterparts, and the number of tiers and segments there are in this market, it’s not clear if enough time has been spent on studying the effects of competition, such as that of network effects in every segment of the market,” said Isha Suri, senior researcher at policy thinktank Center for Internet and Society.

The DCA could, therefore, take a tiered approach to dealing with competition — an approach that may potentially move away from the DMA in the EU as the model law. Anisha Chand, partner at law firm Khaitan & Co., said that going by the recommendation of the parliamentary committee, “not all” tech companies may be put under the same bracket.

“Only those who qualify as systemically important digital intermediaries (SIDI) would be burdened with compliance requirements. However, for smaller tech companies looking to sell out to Big Tech, a reporting requirement to the CCI could get in the way,” Chand said, underlining how the provisions of the Competition (Amendment) Bill, 2022 could interplay with India’s DCA.

Manjushree RM, senior resident fellow at policy thinktank Vidhi Center for Legal Policy, added that another issue is the amount of time it takes for India to adopt a legislation — which is key since tech regulation and digital markets are typically very fast-moving in nature .

“The 2019 Competition Law Review Committee (CLRC) suggestions are already outdated in terms of the thinking required to regulate tech. Especially in digital markets, solving problems through statutory legislations may not be feasible, since the process of framing a law is naturally slow in India, and takes 5-6 years from idea to reform to law,” she said.

This, according to Manjushree, poses concern regarding whether the DCA “is an implementable model or not.”

“By the time a competition law tries to remedy a conduct, it is almost always too late. The market is always in a dominant position with comparatively little regulation, and any stringent law put in place after that would not give an optimal outcome,” she said.

Khaitan’s Chand added that one optimal approach would be for India to see how EU’s DMA implementation plays out.

“The EU DMA has just gone live, and maybe India could consider waiting to see how the DMA plays out, before jumping onto the bandwagon,” she said.