Indian economy needs accelerators and an optimal competition law regime

The CDCL is expected to submit its report and a draft Digital Competition Bill by May 2023. This signals a new era of an ex-ante framework, meant to cover only SIDIs in digital markets, marking a significant exit from the existing sector-agnostic framework which covers all market players.

The Indian economy has been able to attract investments and maintain its position as one of the most promising economies largely due to the opportunities. The growing importance of competition law in the growth of the Indian economy and the policy landscape is at an inflection point with an increased emphasis on the role of the law in regulating India’s business and tech ecosystem. In December 2022, the Finance Committee came out with its 53rd report titled ‘Anti-competitive practices by big tech companies’ suggesting an ex-ante framework to regulate ‘Systemically Important Digital Intermediaries’ (SIDIs) under a new Digital Competition Act (DCA). The Ministry of Corporate Affairs (MCA), consequently, constituted a Committee on Digital Competition Law (CDCL) to study the need for an ex-ante framework in the country, international practices on the subject, and the existing legal framework.

The CDCL is expected to submit its report and a draft Digital Competition Bill by May 2023. This signals a new era of an ex-ante framework, meant to cover only SIDIs in digital markets, marking a significant exit from the existing sector-agnostic framework which covers all market players. It is crucial to analyse the objectives that policymakers seek to achieve by introducing ex-ante regimes, the challenges that may be associated with these frameworks and international guidance on the subject. Further, it is necessary to discuss the implications of these frameworks for the startup economy, facilitation of competition at downstream levels, catalyzing innovation, and ensuring the protection of consumer interests.

In this context, The Dialogue, a public policy think-tank, hosted a round-table discussion titled, ‘Future of
Competition Policy in Digital Markets’ moderated by Dr Frédéric Jenny, Chairman of the OECD Competition Committee. The discussion witnessed participation by Dr Amar Patnaik, Member of Parliament, Rajya Sabha, Dr Aurelien Portuese, Director of The Schumpeter Project on Competition Policy, and Ms. Shruti Aji Murali, Counsel at Axiom5 Law Chambers. The panelists discussed the manner in which ex-ante regulations in competition law have developed across the world and the limited lessons they provide for the Indian landscape. It was discussed that international frameworks on the subject have only been recently introduced and there is not sufficient evidence of their efficiency at the moment. It may be prudent, therefore, that a cautious and patient approach is deployed by India as it explores similar regimes. At the same time, the differences between Indian and international market and policy realities have to be kept in mind while analyzing the proposed legislation. For instance, the significance of the startup economy and its growth prospects in India have to be given due consideration while considering the need and feasibility of ex-ante regimes.
The significance of achieving a balance between regulating anti-competitive conduct in digital markets and preventing over-regulation and harm to innovation and consumer interests was highlighted in the round-table. It was discussed that all potential issues pertaining to the impending DCA should be analysed in the context of the effects that the regulations will have on crucial stakeholders such as startups, consumers, and investors through extensive consultation. For instance, an excessively controlled regime may impact the ease of doing business and dissuade international investments in Indian companies. A restrictive implementation of ex-ante regulations can affect other critical business factors such as price points for consumers, quality and incentives for larger companies to invest in innovation. Therefore, a balanced and nuanced approach based on the inputs of all stakeholders needs to be taken.

As India looks to usher in a new competitive landscape, it is prudent to follow a wait-and-watch approach that prioritizes improvement and monitoring of existing regimes, including the Competition Act, 2002 which is soon expected to be updated through the Competition (Amendment) Bill, 2022. There is also a need to ensure that ex- ante frameworks do not overlap or conflict with other areas of policy, for instance the proposed Digital India Act and the Digital Personal Data Protection Bill, 2022. Additionally, discussions of impact on consumers, investors and innovators can be conducted and the capacity of the regulator can be built before coming out with an entirely new framework. To avoid potential conflicts, extensive inter-ministerial discussions may be undertaken to ensure consensus on the manner of regulating competition concerns in digital markets.