Committee Report Summary

Digital Competition Law

▪ The Committee on Digital Competition Law was designate them as SSDEs. The quantitative threshold
constituted to evaluate the need for an ex-ante may not cover all digital enterprises that may have a
competition framework for digital markets in India. In significant presence in Indian digital markets. The
its report, the Committee also published a draft Bill to Committee recommended that a set of qualitative
give effect to its recommendations. The report was criteria may be used to designate such enterprises as
released on March 12, 2024. Key observations and SSDEs. These criteria include resources of the
recommendations of the Committee include: enterprise and volume of data aggregated by them.
▪ Need for ex-ante regulation of digital competition: ▪ Associate Digital Enterprises (ADEs): The
The Committee noted that the current ex-post Committee noted that in some cases, compliance may
framework (intervening after an event occurs) under be required from multiple digital enterprises in a group
the Competition Act, 2002, does not facilitate timely that are engaged in providing a core digital service.
redressal of anti-competitive conduct by digital The Committee recommended that notifying
enterprises. It observed that the present framework enterprises should identify all other enterprises within
may not be effective to address the irreversible tipping its group involved in the provision of a core digital
of markets in favour of large digital enterprises service. These enterprises should be designated as
(permanent dominance of a firm in relevant market). ADEs under the proposed framework.
The Committee recommended enacting the Digital
Competition Act to enable the Competition
▪ Obligations of SSDEs: The draft Digital Competition
Commission of India (CCI) to selectively regulate large Bill, 2024, as recommended by the Committee,
digital enterprises in an ex-ante manner (intervening prohibits SSDEs from carrying out certain practices.
before an event occurs). The proposed legislation These include: (i) favouring their own products and
should regulate only those enterprises that have a services or those of related parties, (ii) use non-public
significant presence and the ability to influence Indian data of business users operating on their core digital
service to compete with those users, (iii) restrict users
digital market.
from using third-party applications on their core digital
▪ Systemically Significant Digital Enterprises services, and (iv) requiring or incentivising users of an
(SSDEs): The Committee noted that certain features of identified core digital service to use other products or
digital markets allow digital enterprises to swiftly gain services offered by the SSDE. Regulations may allow
influence. These features include: (i) collection of user differential obligations for different SSDEs and ADEs
data which can allow large incumbent enterprises to based on factors like business models and user base.
enter related markets, (ii) network effects where utility
of a service increases when number of users consuming
▪ Enforcement of provisions: The draft Bill empowers
the service increases, and (iii) economies of scale the Director General, appointed under the 2002 Act, to
investigate any contraventions when directed by the
wherein incumbents can offer digital services at lower
costs as compared to new entrants. The Committee CCI. The Committee recommended that CCI should
recommended designating entities offering certain core bolster its technical capacity including within the
digital services as SSDEs for ex-ante regulation, which Director General’s office for early detection and
are susceptible to market concentration. These include disposal of cases. It also recommended constituting a
search engines, social networking services, operating separate bench of the National Company Law
systems, and web browsers. Appellate Tribunal for timely disposal of appeals.

▪ Thresholds for classification of SSDEs: The

▪ Penalties: The 2002 Act provides for behavioural
Committee recommended using both quantitative remedies and high monetary penalties to address anti-
competitive practices. The Committee noted that the
thresholds and qualitative criteria to designate
enterprises as SSDEs. The quantitative threshold can central government has decriminalised various
be based on a dual test of: (i) significant financial corporate offences to promote ease of doing business.
strength, gauged from parameters such as turnover, It recommended that contraventions under the draft Bill
gross merchandise value, and market capitalisation and should be addressed by imposing civil penalties. For
(ii) significant spread based on the number of business calculating the ceiling on penalties, the Committee
recommended the use of global turnover of enterprises.
and end users of the core digital service in India.
Digital enterprises fulfilling the quantitative thresholds The Committee also recommended capping the penalty
would have to report the same to CCI, which will then at 10% of global turnover of SSDEs.
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Tushar Chakrabarty
March 20, 2024
[email protected]
PRS Legislative Research ◼ Institute for Policy Research Studies
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