IAMAI: IAMAI’s view on the Digital Bill is not shared by all voters: four members say MCA

Four members of the Internet and Mobile Association of India (IAMAI) have written to the Ministry of Corporate Affairs expressing opposing views on the association’s recent proposal opposing ex-ante regulations proposed in the draft Digital Competition Bill (DCB).

The companies – Bharat Matrimony, Match Group, Hoichoi and ShareChat – said the industry body’s statement did not reflect the entire digital startup ecosystem or IAMAI’s diverse membership of over 540 companies, and urged the ministry to adopt ex ante regulations as soon as possible to curb what they believed for anti-competitive practices of Big Tech companies.

“Only a small percentage of these members opposed the ex ante regulations introduced by the DCB, but the proposal overwhelmingly reflects this minority perspective,” the companies said in a joint letter dated May 30 to Manoj Govil, secretary in the Ministry of Corporate Affairs. ET has seen the letter.

Ex ante regulations are preventive measures intended to prevent or discourage certain practices. The current competition law, the Competition Act (2002), is based on an ex-post framework in which the Competition Commission of India (CCI) intervenes after an anti-competitive act has occurred.

“We believe that this pushback against ex ante regulation and the continuation of the ex post regime will maintain the status quo and enable entrenched players to continue to exploit regulatory loopholes to stifle competition and innovation,” the companies said.

The Digital Competition Law Commission released its report in March this year outlining the challenges of anti-competitive practices by digital companies such as anti-steering, opt-in, bundling and bundling in digital markets in India.

The report proposes a Digital Competition Bill to further regulate large digital businesses, including news aggregators, as part of efforts to ensure a level playing field and fair competition in the digital space. The draft bill proposes regulations on ex ante competition for Big Tech industry players, such as Amazon and Meta.

The report was subject to public consultations, and the deadline for submitting comments was May 15.

The industry association submitted comments to the report, opposing the proposed ex-ante regulations. It said ex-ante regulation could dry up venture investment in technology startups because the thresholds set out in the bill would put a ceiling on the potential scalability of companies.

However, these four companies said that claims opposing ex ante regulation ignored the fundamental reality underlying discussions on ex ante regulation both at home and abroad.

“We recognize the need for ex ante regulation in the digital sector and believe that India and its digital users would benefit from the provisions outlined in the draft DCB to enhance competition in the digital economy,” the letter said.

The basis for the bill is the EU’s Digital Markets Act (DMA), which entered into force in March this year after a four-year consultation process.

Businesses said that while the rest of the world takes steps to address market disruptions, India should not remain on the sidelines. They said that in addition to Western jurisdictions such as the EU and the UK, even jurisdictions in the Asia-Pacific region such as Japan, South Korea, Australia and several others are tightening regulations to curb the market power of digital gatekeepers.

The bill also imposes a number of obligations on systemically important digital enterprises (SSDEs) engaged in “essential digital services (CDS)” to act fairly towards end-users and business users. CDS will cover online intermediation services, including news aggregators.

While the four companies and IAMAI shared similar concerns about SSDE designation thresholds, the letter said the industry body’s statement on the rest of the DCB project raised “unreasonable concerns.”

“The thresholds for designating SSDEs may need to be revised to ensure that only those entities that are large enough and have a significant presence in digital markets in India are subject to the ex ante rules proposed in the DCB,” the companies said. “This will ensure that the financial strength and user spread thresholds set out in the DCB do not inadvertently cover startups and other digital enterprises that are not true digital gatekeepers.”

Companies said this issue could also be effectively addressed by advocating for higher thresholds so that emerging digital services/products remain protected. They said that by re-examining the thresholds, it could be ensured that only the largest digital gatekeepers (or Big Tech companies) that have benefited from network effects are included in the scope of the DCB.

“Accordingly, comments made during the consultation process that the thresholds for designating companies as SSDEs could potentially cover the entire Indian digital sector are alarmist as the DCB bill only intends to regulate large digital service providers. Therefore, viewed in this light, the Honorable Ministry may consider reassessing the financial and user thresholds necessary for SSDE designation,” the letter reads.