MeitY may propose removing ex-ante from the draft Digital Competition Bill

The Ministry of Electronics and Information Technology (MeitY) is planning to propose the exclusion of ex-ante regulation from the draft Digital Competition Bill (DCB) to the Ministry of Corporate Affairs (MCA), as per a report in the Economic Times. Ex-ante regulation is a pre-emptive measure that aims to prevent or discourage certain practices. Currently, the Competition Commission of India (CCI) has adopted an ex-post framework, where the commission intervenes only after an anti-competitive act has occurred under the Competition Act (2002). The IT ministry may also suggest another round of consultations with the industry, startups and other stakeholders on the bill before finalising the draft, the report said.

What is the Digital Competition Act and why are ex ante regulations proposed?

The Digital Competition Bill (DCB), 2024 was issued in March this year by the MCA. Its purpose is to prevent anti-competitive conduct in digital markets by preemptively preventing large platforms from engaging in anti-competitive conduct. It prohibits large digital platforms, identified as Systemically Significant Digital Enterprises (SSDEs), from engaging in self-serving, restricting third-party applications, imposing anti-steering policies, misusing business user data, and bundling products and services.

The report, published by the Digital Competition Law Committee (CDCL), established by the MCA, found that the current ex post framework was time-consuming and narrow in its scope for investigating anti-competitive practices in the digital sector. The committee also noted that digital markets had unique features that required separate regulation. It found that large digital firms had access to large amounts of data and had a significant competitive advantage because this data could be used to improve targeted advertising and increase revenues. It also found that the “network effects” and “economies of scale” of large technology firms made it difficult for smaller firms to compete effectively in the digital marketplace.”

Startups’ Different Perspectives on the Effectiveness of Ex-Ante Regulation

The effectiveness of ex-ante regulation has been questioned by various stakeholders in their submissions on the Bill. The Internet and Mobile Association of India (IAMAI) has particularly opposed ex-ante regulation to regulate digital markets, saying it could adversely affect startups.

The industry body said that with the introduction of ex-ante regulation, technology companies will have to comply with new regulations in addition to existing ex-post regulations. It also said that existing thresholds for qualifying as SSDEs could negatively impact start-ups. It further said that ex-ante regulation could discourage larger companies from funding technology start-ups due to excessive legal uncertainty and overly broad and subjective criteria for designating companies as SSDEs.

However, a letter signed by 40 Indian startups said the DCB “resonates deeply with the startup community.” The letter said startups see the bill as “a modern piece of legislation that directly addresses our long-standing concerns about monopolistic practices by dominant digital platforms.”

While the letter reiterated IAMAI’s position that low thresholds for designation of SSDEs could adversely affect emerging startups and asked CDCL to raise the thresholds, it stated that “the Digital Competition Act, with its focus on ex-ante regulation, has the potential to be a game-changer for the Indian startup ecosystem.”

Read also:

STAY UP TO DATE WITH TECHNOLOGICAL NEWS: Our daily newsletter with the most important information of the day from MediaNama, delivered to your inbox before 9am. Click here to sign up today!