Date: 19/01/2023

Relevance: GS-2: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Relevance: GS-3: Effects of Liberalization on the Economy, Ease of Doing Business, Digital Market, CCI.

Key Phrases: The Parliamentary Standing Committee on Finance, LPG Reforms, Competition Commission of India, Digital Competition Law, Systemically Important Digital Intermediaries (SIDIs), Institutional Setup, Regulatory Framework, Policy stability, Ease of Doing Business, The Competition Act, 2002.

Context:

• Recently, The Parliamentary Standing Committee on Finance made a series of suggestions to control big tech corporations by enacting a digital competition law which will regulate anti-competitive behavior on their respective platforms.

Key Highlights:

• Prepared within such a limited time after discussions with stakeholders, the report ‘Anti-competitive practices by BigTech’ (53rd Report of PSCF) came on the heels of its earlier recommendation on the Competition Amendment Bill, 2022 (52nd Report), also now before Parliament.
• Digital markets are internet based (digital) companies with millions of interacting participants.
• The Competition Commission of India (CCI) regulates market competition in India.

Concerns identified in the Report:

• It identifies several concerns in the digital economy on mergers and acquisitions, deep discounting, data usage, bundling and tying, search and ranking, exclusive tie-ups, etc.
• It also cautioned against the possible misuse of personal data of the end-users, self-preferencing, search biases or a pre-installation requirement of its own apps (maintaining platform neutrality), offers fair and non-discriminatory terms to ensure organic search results, and offers transparency on advertising revenues, etc.

Key Recommendations:

• Regulation of Digital Markets:
  • The Committee noted that, unlike physical markets, digital markets have increasing returns to size (returns of business increasing with size of the firm) driven by learning and network effects (utility of users growing with number of users on the platform).
    • As a result, such markets may be dominated with a few leading players emerging in a short period.
    • This happens even before policies can be formulated and anti-competitive practices are adjudicated.
  • The Committee recommended that competitive behavior needs to be evaluated before markets end up monopolized instead of the ex-post evaluation done presently.
• Formulation of Digital Competition Act:
  • The Committee observed that India needs to enhance its competition law to address the needs of the digital market.
    • Economic drivers of this market facilitate a few players in dominating the ecosystem.
  • The Committee recommended that the government should introduce a Digital Competition Act to ensure a fair, transparent, and contestable digital ecosystem.
• Identification of Digital Gatekeepers:
  • The Committee recommended that India must identify the leading players in digital markets that can negatively influence competitive conduct.
    • They should be categorized as Systemically Important Digital Intermediaries (SIDIs) based on their revenue, market capitalisation, and the number of active businesses and end users.
    • SIDIs should annually submit a report to the Competition Commission of India (CCI) detailing the measures taken to comply with various mandatory obligations.
• Security of Data:
  • The Committee noted that market leaders who have access to the personal data of users tend to get bigger while new entrants struggle to acquire users and user data.
    • It recommended that SIDIs should not process the personal data of end users who use services of third parties, if such parties use the core services of the SIDI.
    • They should also not combine personal data from the relevant core service of the platform with personal data from any other core services of the platform.
    • Personal data from the relevant core service of the SIDI should not be cross-utilised in other services provided separately by the platform.
  • End users should not be signed into other services of the platform unless he has been presented with a specific choice to which he has consented.
• Revamping CCI:
  • The Committee opined that CCI should be strengthened to address anti-competitive behavior in digital markets.
  • It suggested the creation of a specialized digital markets unit in CCI.
    • This unit would: (i) monitor established and emerging SIDIs, (ii) give recommendations to the central government on designating SIDIs, and (iii) adjudicate on cases related to digital markets.
• Anti-steering:
  • Anti-steering provisions are clauses wherein a platform prevents its business users from steering its customers to offers other than those provided by the platform.
  • The Committee recommended that SIDIs should not make access to their platform conditional on the purchase/use of other products or services that are not part of or intrinsic to the platform.

Need of Hour:

• India has attributed high priority to the issue of developing digital platforms, and has positioned it as one of the key themes in G20.
  • It needs to be seen if introduction of another legislation with such wide-ranging controls would indeed be helpful in achieving the objectives.
• As it is, there are several other legislation on the anvil, like Telecom Bill, Digital Personal Data Protection Bill and Digital India Bill, which will be enacted within 14-16 months, besides the amendments on the table in competition law.
  • All these are expected to make it a comprehensive legal regulatory framework.
• The values of justice and equity which are the cornerstones of our Constitution should determine the rule of law as it applies to business.
  • That will ensure an environment of vishwas and invoke the animal spirits needed for a high-octane growth.

Conclusion:

• As a nation inching towards a $5-trillion economy, it is high time that laws are continually examined, amended and fine-tuned.

Source: Business Line

Mains Question:

Q. Why is it necessary to formulate a new law to regulate big tech companies in our country? Also, discuss the recommendations highlighted by the Parliamentary Standing Committee on Finance. (150 Words).