Draft
Digital Competition Bill - POLITY
News: Recently,
the Committee on Digital Competition Law (under the Ministry
of Corporate Affairs) came to the conclusion that there was a need to
supplement the current ex-post framework under the Competition
Act, 2002 with an ex-ante framework in the
draft Digital Competition Bill.
What’s in the news?
About the Draft Digital Competition Bill
·
It emerges against the backdrop of the Competition
Act, 2002, and subsequent amendments and recommendations aimed at updating
India’s competition framework to better address the digital economy.
Ex-Post vs. Ex-Ante Framework
·
Ex-Post Framework: The Competition Act, 2002 currently operates on
an ex-post basis, which means that the Competition Commission of India
(CCI) can take enforcement actions only after anti-competitive
conduct has occurred.
·
In digital markets, this approach can be
time-consuming and allows offending actors to escape timely scrutiny.
·
Ex-Ante Framework: The CDCL advocates for an ex-ante competition regulation for
digital enterprises. This approach allows the CCI to pre-empt and prevent
anti-competitive behavior before it happens.
·
Notably, the European Union is the
only jurisdiction with a comprehensive ex-ante competition framework
(Digital Markets Act) currently in force.
Competition
Commission of India (CCI)
Key Features
Advocacy: It promotes competition
awareness and educates stakeholders.
Unique Characteristics of Digital Markets
·
Economies of Scale and
Scope: Digital enterprises benefit from economies of
scale (reduction in cost per unit as production increases) and economies of
scope (reduction in total costs with an increase in services).
o
These factors drive rapid growth compared to
traditional markets.
·
Network Effects: The utility of digital services increases with the number of users
(network effects).
o
Rapid growth, combined with network effects, can
tip markets in favor of incumbents.
Key Features of the Draft Bill
·
Quantitative Standards for
Dominance: The draft Bill outlines quantitative criteria
for identifying dominance among digital enterprises.
o
It uses the ‘significant financial strength’ test
to assess dominance.
·
Preventative
Obligations: To address the unique challenges of digital
markets, the CDCL proposes preventative obligations.
o
These obligations supplement the ex-post
enforcement framework, allowing timely intervention.