What is the draft Digital Competition Bill?

What is the draft Digital Competition Bill?

Sub: Polity

Sec: Legislation in news

Context:

• India’s proposed Digital Competition Bill, 2024 aims to prevent tech giants like Google, Facebook, and Amazon from engaging in anti-competitive practices.

More on news:

• In February 2023, the Ministry of Corporate Affairs (MCA) constituted a Committee on Digital Competition Law (CDCL) to examine the need for a separate law on competition in digital markets.
• The CDCL suggested  a need to supplement the current ex-post framework under the Competition Act, 2002 with an ex-ante framework. 
• It laid out this ex-ante framework in the draft Digital Competition Bill.

What is an ex-ante framework?

• The Competition Act, 2002 is based on an ex-post framework which means that the CCI can use its powers of enforcement only after the anti-competitive conduct has occurred.
• However in the case of digital markets, the CDCL has advocated for an ex-ante competition
• This means that the CCI’s enforcement powers to be supplemented such that it allows it to pre-empt and prevent digital enterprises from indulging in anti-competitive conduct in the first place.
• The European Union is the only jurisdiction where a comprehensive ex-ante competition framework, under the Digital Markets Act, is currently in force.

Key provisions of India’s Digital Competition Bill, 2024.

• Inspired by the EU:
  • The draft Bill follows the template of the EU’s Digital Markets Act.
  • It does not intend to regulate all digital enterprises, and places obligations only on those that are “dominant” in digital market segments.
• Identifying Core Digital Services:
  • At present, the draft Bill identifies ten ‘core digital services’ such as online search engines, social networking services, video sharing platform services etc.
  • The quantitative standards for the CCI to identify dominance of digital enterprises are based on the ‘significant financial strength’ test which looks at financial parameters and ‘significant spread’ test based on the number of users in India.
  • These core core digital services will be designated as Systemically Significant Digital Enterprises (SSDEs).
• Provisions for SSDEs:
  • The primary obligation of SSDEs is to not indulge in anti-competitive practices.
  • The draft Bill prohibits SSDEs from favoring its own products on its platform over those of third parties (self-preferencing).
  • It imposes restrictions on  availability of third party applications and does not allow users to change default settings.
  • It provides for restricting businesses users of the service from directly communicating with their end users (anti-steering) and tying or bundling of non-essential services to the service being demanded by the user.
• Designation of Associate Digital Enterprises (ADE):
  • If an enterprise being designated as an SSDE is part of a group, and one or more other enterprises within such a group are directly or indirectly involved in the provision of the Core Digital Service in India, the CCI may designate these enterprises as ADEs.
  • Entities benefiting from data shared by a major tech group will be designated as ADEs.
  • ADEs will have the same obligations as SSDEs.