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)

  • It is the chief national competition regulator in India, and operates as a statutory body within the Ministry of Corporate Affairs and is responsible for enforcing the Competition Act, 2002.
  • Its primary objectives are to promote competition and prevent activities that have an appreciable adverse effect on competition in India.
  • Its vision includes inspiring businesses to be fair, competitive, and innovative, enhancing consumer welfare, and supporting economic growth.

Key Features

  • Antitrust Regulation: The CCI examines cases related to anti-competitive agreements, abuse of dominant position, and cartel behavior.
  • Regulation of Combinations: It reviews mergers, acquisitions, and other combinations to assess their impact on competition.
  • Competition Economics: The CCI analyzes economic aspects of competition and market dynamics.

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.

Source: https://www.thehindu.com/sci-tech/technology/what-is-the-draft-digital-competition-bill-explained/article68386341.ece