Following the intense pushback from several quarters, the Centre is reportedly mulling to withdraw the draft Digital Competition Bill (DCB). While the government is yet to confirm it, several key stakeholders of the industry are already endorsing the withdrawal of the draft quoting ambiguities and potential impact on the digital businesses for many.
Primarily proposed to prevent anti-competitive practices in the digital space, the draft DCB was released on March 12, and has been under the scanner ever since, mostly because of the proposed ex-ante regulatory framework.
“We strongly believe that the current draft of the Bill should be withdrawn and have full faith in the PM Narendra Modi-led government that they will not enact legislation that is counterproductive to MSMEs (micro, small, medium enterprises) in India,” Vinod Kumar, President, India SME Forum tells Storyboard18.
He believes that India should not copy-paste legislations from other geographies that are much different from ours – especially those legislations that have not proved to be successful.
“Indian MSMEs need support to grow and which is possible by creating an enabling policy regime. DCB fails to do these and hence is not an appropriate law of Indian MSMEs,” he adds.
MSMEs do not support several proposals in the DCB – especially those that impact their ability to lower customer acquisition costs through targeted advertising, single-sign-on, etc., visibility into cross-service metrics, and the ability to offer exclusive deals.
Natasha Treasurywala, Partner at Desai & Diwanji, says this is not a surprising turn of events.
According to Treasurywala, some of the provisions of the Bill would lead to a negative impact not only on big tech firms but on users as well.
The restriction on bundling core platform services affects many large apps as well as users of those apps.
For example, a Swiggy would not have Instamart as part of the same app, it would need to be separated. This affects not only Swiggy but also the seamless user experience of one app for all food and grocery needs.
“There is also a huge lobby against the ex-ante provisions of the Bill with many tech players stating that these are onerous and will affect innovation and growth. Ultimately, Indian lawmakers need to tailor the legislation to the needs of Indian innovators and customers alike as opposed to using the one size fits all approach,” she says.
It is to be noted that the draft has rattled the big tech including Google, Facebook, Microsoft, and Amazon— who are said to come under scrutiny as the DCB takes shape and could stop them from self-preferencing their services.
These companies, globally, have been accused of anti-competitive practices for several years and are locked in legal cases with governments in the US and the EU. The proposed draft bill for India, which has taken a cue from the European regulatory handbook, has provisions to set presumptive norms to curb anti-competitive practices before they take place, and promises to impose heavy penalties for violations— which could go in billions of dollars.
So, if this were to go into force, it could require these tech companies to make fundamental changes to their various platforms. Similar to the EU’s Digital Markets Act (DMA)— which went into complete effect earlier this year—requires large tech firms to open their services, and not favour their own at the expense of rivals.
Read more: Indian start-ups back Digital Competition Bill, while Big Tech continues to oppose
Bombay High Court Advocate Siddharth Chandrashekhar says that a potential withdrawal of the DCB signals an important recalibration in India’s regulatory approach towards the digital economy. This move reflects the need for a more cohesive framework that balances regulatory oversight with industry growth.
“With the stakes higher than ever, a reworked Digital Competition Bill may be the key to ensuring India’s digital marketplace doesn’t turn into a regulatory minefield,” he shares.
The bill’s ex-ante framework imposes strict regulations on Systemically Significant Digital Enterprises (SSDEs). According to the draft, an enterprise can be declared SSDE, if its India turnover is not less than Rs 4,000 crore or its global turnover is not below $30 billion/ or a company if its gross merchandise value (GMV) in India is not less than Rs 16,000 crore or if its global market capitalisation is not below $75 billion- to which stakeholders opposed saying taking into account global market capitalisation does not make sense.
Stakeholders have also opined that this imposes overregulation, capturing smaller players, shifting focus from research and development to ensuring compliance and could lead to arbitrary decision-making and unfair regulatory actions.
Associations like the Internet and Mobile Association of India (IAMAI) have suggested a relook at the thresholds for designating a company as SSDE in the draft bill.
“A fresh bill may be drafted, incorporating inputs from various ministries and stakeholders. This move acknowledges the need for a more nuanced approach, balancing regulatory objectives with industry concerns,” adds Akshay Garkel, Partner, Grant Thornton Bharat.
The Divergence
Recently, nearly 40 Indian start-ups joined forces to pledge support to the draft DCB in May while describing its proposed ‘ex-ante’ regulations as potential ‘game-changer’ in tackling the anti-competitive practices of big tech companies.
Prominent names including Matrimony.com, TrulyMadly, Innov8, QuackQuack, Magicbricks, Hoichoi, and Medibuddy had also written to the Ministry of Corporate Affairs (MCA) on the issue. The companies have urged the MCA to move forward with the bill at the earliest even as they accused the big tech players of often indulging in delay tactics.
Read more: MeitY meets industry think tanks on concerns over Digital Competition Bill
Meanwhile, group members of IAMAI have voiced their dissent and exhorted the MCA move to go ahead with ex-ante regulations.
The association, along with other stakeholders opposing the draft, have opined that the criteria for the designation of SSDEs under the Bill requires reconsideration from the point of view of its impact on Indian startups. They have suggested revising the thresholds upwards to make sure that nascent digital products and services remain protected and only the real gatekeepers of the internet are targeted under the Bill.
Given the opposition and objections, the Ministry of Electronics and Information Technology (Meity) has convened multiple meetings in the last four months with the MCA, and peers from the Competition Commission of India (CCI), Federation of Indian Fantasy Sports (FIFS), Digital News Publishers Association (DNPA), Alliance of Digital India Foundation (ADIF), and Indian Newspaper Society (INS).