ADIF Hails Digital Competition Law as Game Changer for Startups!

The Alliance of Digital India Foundation (ADIF), a prominent digital startup advocacy group, has lauded the Indian government's proposal for a new regulatory framework, the Draft Digital Competition Bill, 2024. ADIF views this legislation as a pivotal step towards fostering a fair and competitive digital marketplace in India.

What is Digital Competition Bill?

The proposed law marks a significant shift in India's approach to regulating its digital economy. It introduces an "ex-ante" regulatory framework, which proactively addresses anti-competitive practices before they harm the market. This is seen as a departure from the existing "ex-post" system, which relies on reactive measures after harm has already occurred.

ADIF believes the new bill will curb the dominance of big tech companies and create a more level playing field for Indian startups. The organization has identified several anti-competitive practices by big tech firms, including self-preferencing, unilateral policy changes, and high pricing for essential services.

ADIF Recommends Strengthening the Bill

While commending the government's initiative, ADIF has proposed a set of recommendations to further strengthen the bill's effectiveness. These recommendations focus on preventing big tech companies from circumventing the law, setting calibrated thresholds for designating dominant digital firms, and establishing a specialized unit within the Competition Commission of India (CCI) to oversee the new framework.

“The digital acceleration has opened up enormous economic opportunities for Indian startups. However, a handful of big tech behemoths have leveraged the unique characteristics of digital markets to entrench their dominance through anti-competitive tactics such as self-preferencing, unilateral policy-making, sky-high pricing for essential services and erecting prohibitive entry barriers,” said Animesh, Policy Manager, ADIF.

“Existing ex-post competition laws have proved woefully inadequate to deal with the winner-take-all dynamics where network effects and data asymmetries enable these gatekeepers to cement monopolistic practices. The proposed ex-ante law proactively addresses this regulatory vacuum and will be a game changer in unleashing the true potential of India's digital economy,” he added.

Guided by an overarching mission to create an enabling environment for Indian startups to scale and compete on merit, ADIF has proposed a comprehensive roadmap with the following key recommendations:

Iron-Clad Anti-Circumvention Provisions: Learning from the European Union's experience with the Digital Markets Act, where big tech firms attempted to circumvent compliance through contractual, technical or design loopholes, India's law must incorporate robust anti-circumvention rules. This will prevent such firms from undermining the law's core objectives through covert measures.

Calibrated Designation Thresholds Based on Ground Realities: The quantitative criteria used to designate 'Systemically Significant Digital Enterprises' (SSDEs) must be carefully calibrated based on a nuanced understanding of Indian market dynamics. ADIF has raised concerns that the current thresholds of 1 crore end-users and 10,000 business users appear disproportionate and could potentially overreach, burdening growth-stage startups. A fine-tuning aligned with market realities is crucial.

Specialized Digital Markets Unit Within CCI: To ensure effective regulation keeping pace with the rapidly evolving digital landscape, ADIF recommends constituting a dedicated unit with multi-disciplinary technical expertise within the Competition Commission of India to oversee implementation and compliance of the new framework.

Consistent Obligations Across Digital Services: While the Bill allows separate regulation of diverse internet verticals, ADIF emphasizes that identified anti-competitive practices must be consistently prohibited across all digital services to maintain a level playing field devoid of ambiguities or regulatory arbitrage.

Swift Rollout Within Defined Timelines: Digital markets are susceptible to rapidly tipping towards dominance. Hence, obligations for each regulated digital service must be formulated within strict timelines to prevent further consolidation and abuse of market power during protracted decision-making.

“Our recommendations aim to construct a modern regulatory paradigm that catalyzes Indian innovation while checking exploitative conduct by incumbents. The Digital Competition Bill represents a quintessential rights-based economic intervention to protect India's digital sovereignty and uphold democratic values of fair competition,” said Animesh.

India's Digital Sovereignty at Stake

ADIF emphasizes that the proposed law is not merely imitating similar regulations in other countries, but is driven by India's specific needs. The organization highlights the negative impact of big tech's monopolistic practices on Indian startups and the broader digital ecosystem.

The think tank believes that the Digital Competition Bill, if implemented effectively, can usher in a new era of equitable growth and technological self-reliance for India. This will empower Indian startups to compete on a fair ground and contribute to shaping the future of the digital economy.