The Draft Digital Competition Bill looks to check Big Tech from creating market monopolies. But lawyers and policymakers fear it may scare away global investors, and stifle innovation by breaking up apps that work with each other. Here’s how the bill may work.
What does the draft bill propose?
It proposes an ‘ex-ante’ approach to regulating Big Tech and large Indian tech firms. These “systemically significant digital enterprises” are defined as firms with domestic revenue of over ₹4,000 crore or global revenue of over $30 billion, and with over 10 million end-users or 10,000 business users in India. Nine ‘core’ services have been identified, including search engines, social networks, browsers and e-commerce aggregators. The bill does not allow for bundling of services, self-preferencing, restricting third-party apps or data cross-sharing, among other mandates.
How does the bill affect Big Tech?
This bill suggests that a new law is needed because the existing Competition Act, 2002 could not “imagine the current scale of digitalization.” As a result, while Big Tech firms fall directly under the bill’s ambit, large India-based startups too will have to comply. Legal experts say Big Tech will struggle to function with restrictions in cross-sharing of data, as well as unbundling of services. Currently, popular tech platforms work as ecosystems of services. Mandating unbundling with penalties may dilute user-experiences of most apps that right now work seamlessly. Breaking this up could affect innovation.
What’s the problem with unbundling?
Unbundling services by a tech firm may lead to users having to grant permission for every single feature. Experts say the proposal could lead to regulatory confusion in terms of how such services are defined. Non-compliance penalties are as high as 10% of a firm’s global revenue, while incorrect submission penalties are up to 1% of a company’s global revenue.
Will the bill dent investor confidence?
The draft bill has raised questions among legal and policy experts on whether the regulations are workable. Most digital services come from firms with successful tech products, so multiple apps fall under one tech umbrella. The bill forbids this. Global investors feel such a law could go against the ability of firms, even Indian ones, to innovate. Lawyers also believe such a bill may keep India a consumption economy—and not an innovation-first one. The mandate on cloud providers may limit startups’ access to global tech.
Could this point at a global consensus?
Legal experts believe that while the draft bill competition is largely drawn from the European Union’s Digital Markets Act (DMA), further consultations will lead to India-specific proposals that would relax certain restrictions. Experts who have worked on writing the draft believe India needs more flexible regulations, as India is also seeking global investments in order to present itself as an innovation ecosystem. There is some talk of a potential global principles-based model. Geopolitics makes this a pipe-dream.