Competition law amendment deals with big tech companies

According to experts, if this proposal materialises, the amount of penalty imposed on tech firms will increase significantly.

Mint reported on February 8 that the upcoming Competition (Amendment) Bill is expected to include a revised penalty clause. Under this, companies abusing market dominance or strangling market competition will be fined on their consolidated revenue. Competition law is currently limited to penalizing firms on the basis of revenue earned from specific verticals deemed to be infringing, that too only from India.

For example, the Competition Commission of India (CCI) imposed a total fine on Google 2,273 crore ($280 million) in two cases of violations between October and November. In comparison, the European Commission (EC) said last September that Google would be fined a total of more than $4 billion for similar anti-competitive practices in Europe.

According to lawyers and industry experts, focusing only on one-time fines may not lead to a comprehensive regulation that prevents abuse of dominance. Instead, spoken orders that direct companies to correct themselves may play a greater role in reining in Big Tech dominance.

“It is important to understand that fines imposed by CCI on tech firms in India are not very small at this point of time. The expansion of the scope of this fine will be a major deterrent for tech companies, who are likely to find it a major hindrance in the context of India’s regulatory environment,” said Akshay S. Nanda, partner at Saraf Partners, a Delhi-based law firm.

To be sure, the proposed amendment is in line with Europe’s Digital Markets Act, which enables the EC to impose fines of up to 10% of a company’s global revenue, and 20% in case of repeat violations.

The Competition (Amendment) Bill, 2022 is expected to be introduced in Parliament in the current session. On 7 February, the government tabled its response to the Bill based on the submissions made by the JPC headed by Minister of State for Finance Jayant Sinha.

“It is important to understand the purpose of regulating competition. Fines have always been used as a deterrent, and unless they are large, they will not serve the purpose,” Isha Suri, policy think-tank, Center for said senior researcher at Internet and Society (CIS).

“While computing the penalty, it serves as a rationale for taking a percentage of the company’s total revenue from global markets. But, once the law comes into force, does it act as a sufficient deterrent or disciplinary factor” Well, that remains to be seen.”

However, Suri added that the mere factor of penalty may not be enough to compel companies abusing market dominance to correct their action and open up the areas for anti-competitive market practices.

“There are two things a country’s regulators can do – one, apply a pre-emptive approach that imposes excessive liability on a digital firm. Second, in case of a judgment of abusive market conduct, a substantial amount of fine is to be imposed. But, whether this will have the expected deterrent effect on the market remains to be seen. While enabling correction of market practices and not merely deterring companies from indulging in abusive practices, the behavioral measures under the Competition Bill actually have a more detrimental effect on a company’s business model, and are likely to correct the market.”

A senior industry executive dealing with policy issues related to Big Tech said that merely imposing penalties cannot be considered sufficient to regulate and compel compliance from Big Tech, and to closely monitor cases with clear orders. Which prohibits companies from certain industry practices would be a more important factor to consider.

“Most large tech companies that engage in anti-competitive practices have the large financial capacity to see through such penalties, and the main concern will be to ensure that the penalties are met with in order to maintain the sanity of the markets.” The orders given are to be obeyed,” the person said.