Sansad TV: Competition (Amendment) Bill, 2022 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Introduction

The Competition (Amendment) Bill 2023 has been approved by both houses of Parliament. The Rajya Sabha passed the Bill through a voice vote, following its clearance by the Lok Sabha. This legislation holds significant importance for the government's agenda in the current parliamentary session, aiming to modernize the competition law and align it with evolving economic practices and concerns. The amended law will grant enhanced powers to the Competition Commission of India (CCI), enabling it to penalize entities involved in anti-competitive behavior based on their global turnover.

Strengthening the CCI

• The CCI serves as the regulatory authority for market competition in India.
• There is a growing consensus that the CCI needs to be strengthened to effectively address anti-competitive practices in digital markets.
• To address this, a specialized unit focused on digital markets is proposed to be established within the CCI.

This unit would have the following responsibilities:

• Monitoring both established and emerging entities in the digital market space.
• Providing recommendations to the central government regarding the designation of Significant Digital Market Entities (SIDIs).
• Adjudicating cases related to digital markets and their impact on competition.

Analysis of the Bill

• The proposed amendments in the Bill aim to enhance the capabilities of the Competition Commission in addressing various aspects of the modern market and strengthening its overall functioning.
• While these amendments are necessary, their effectiveness will largely depend on the regulations that will be formulated by the Commission in the future.
• The implementation of these regulations will have a significant impact on the proposed amendments.
• Furthermore, it is crucial for the government to acknowledge the constantly evolving nature of market dynamics and ensure regular updates to the laws.

Regulating digital markets

• Digital markets encompass internet-based companies with a vast number of interconnected participants.
• The Committee has observed that digital markets, unlike physical markets, exhibit increasing returns to scale, driven by learning and network effects. This means that the larger the firm, the greater its business returns and utility for users on the platform.
• As a result, these markets may witness the emergence of dominant players within a short period, even before appropriate policies are formulated and anti-competitive practices are addressed.
• The Committee has recommended the need for evaluating competitive behavior proactively, rather than relying solely on ex-post evaluations, to prevent the monopolization of markets.

Digital Gatekeepers

• As per the Committee's recommendations, it is important for India to identify the dominant players in digital markets that have the potential to impact fair competition.
• These players should be classified as Systemically Important Digital Intermediaries (SIDIs) based on criteria such as revenue, market capitalization, and the number of active businesses and users.
• SIDIs should be required to submit annual reports to the Competition Commission of India (CCI), outlining the measures taken to comply with mandatory obligations.

Digital Competition Act

• Recognizing the unique requirements of the digital market, the Committee emphasized the need for India to strengthen its competition law.
• Given the dominance of a few players in the digital ecosystem, the Committee proposed the introduction of a Digital Competition Act to establish a fair, transparent, and competitive digital environment.

Self-preferencing

• In certain cases, a platform may have a dual role of being both a provider and a competitor on the same platform. Self-preferencing occurs when a platform gives preferential treatment to its own services or those of its subsidiaries.
• The Committee highlighted that a lack of platform neutrality can have a detrimental impact on downstream markets.
• To address this issue, the Committee recommended that SIDIs should not prioritize their own services over those of their competitors when facilitating access.

Data Usage

• The Committee highlighted that dominant market players with access to users' personal data tend to grow larger, while new entrants face challenges in acquiring users and their data.
• To address this, the Committee recommended that Systemically Important Digital Intermediaries (SIDIs) should refrain from processing the personal data of end users who utilize services from third parties if these parties also use the core services of the SIDI.
• The cross-utilization of personal data obtained from the SIDI's core service should not be allowed in other separately provided services by the platform.
• End users should not be automatically signed into other platform services without their explicit consent after being presented with a specific choice.

Bundling and Tying

• The practice of forcing consumers to purchase related services by digital firms was identified by the Committee.
• This practice creates pricing asymmetry and hampers competition in the market.
• It also enables dominant players to leverage their market power from one core platform to another.
• To address this concern, the Committee recommended that SIDIs should not compel businesses or end users to subscribe to additional services in order to access their core platform service.

Anti-steering

• Anti-steering provisions refer to clauses that prohibit platform users from directing customers to offers outside of the platform's offerings.
• To promote fair competition, the Committee recommended that SIDIs should not make access to their platform contingent on the purchase or use of unrelated products or services that are not essential to the platform.

Conclusion

• The implemented changes will enhance the Competition Commission's ability to handle various aspects of the modern market and strengthen its overall functioning.
• While the proposed amendments are undoubtedly essential, their effectiveness relies heavily on the regulations that will be subsequently issued by the Commission.
• It is crucial for the government to acknowledge that market dynamics are continuously evolving, necessitating regular updates to laws and regulations.