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    40 Indian startups sign a letter supporting the draft Digital Competition Bill

    40 Indian startups including Matrimony.com, TrulyMadly, MagicBricks, and HoiChoi have signed a letter addressed to the Ministry of Corporate Affairs showing support for the draft Digital Competition Bill (DCB). “We perceive it as a forward-thinking piece of legislation that directly addresses our long-standing concerns regarding monopolistic practices by dominant digital platforms,” the letter says, adding that these monopolistic practices have often stifled innovation, limited consumer choice and hindered the growth of young businesses. It commends the “ex-ante” approach (pre-emptive regulatory approach) to digital market regulation, and points out that the current ex-post approach (where intervention happens after harm occurs) is insufficient to address the unique challenges posed by anti-competitive practices in fast moving digital markets.

    This letter is particularly interesting, when we consider that startups like Matrimony.com, TrulyMadly and HoiChoi are also members of the Internet and Mobile Association of India (IAMAI). As previously reported, IAMAI’s submission on the draft Digital Competition Bill opposes ex-ante regulation and suggests that the current Competition Act should be amended to solve Indian startups’ problems. This letter suggests that not all members of the association are happy with its position.

    Some context:

    IAMAI has maintained this anti-ex-ante stance, both in its current submission and also in the submission it gave to the Committee on Digital Competition Law (CDCL). However, when its draft submission to the CDCL first began circulating last year, many of its members, including MapmyIndia CEO Rohan Varma, Matrimony.com CEO Murugavel Janakiraman, and People Group Founder and Shark Tank investor Anupam Mittal were among those who voiced their concerns about IAMAI publicly.

    The members had accused IAMAI leadership of being dominated by representatives of foreign tech companies who acted against the interest of Indian consumers and companies. Soon after, the association’s leadership ended up changing, with all key positions now going to Indian companies. However, despite the changed leadership, IAMAI has continued to oppose ex-ante regulation.

    Key arguments presented in the letter:

    Need for change in thresholds for Systematically Significant Digital Enterprises (SSDEs):

    “Our concern is that the current thresholds are low, and they are likely to – perhaps, inadvertently – encompass startups and other digital enterprises which are not gatekeepers,” the letter states. It argues that the gatekeepers being targeted by the bill are companies that have long enjoyed dominant positions and by contrast startups (even if they meet the thresholds) are “fundamentally different.” Startups are still establishing their products, and user bases and navigating a complex market landscape shaped by the gatekeeper companies. As such, designating startups as SSDEs could impose an unwarranted regulatory burden on them and hinder their growth and competitiveness.

    The letter notably points to the end-user thresholds set by the bill and says that the current end-user threshold of 1 crore (10 million) would capture digital platforms used by around 1 in every 80 Indian users. Given that India has approximately 759 million internet users, the current DCB threshold represents a significantly smaller user base, it explains. Similarly, the thresholds for business users should also be revised since many startups already meet the threshold.

    The thresholds should be revised to 10% of India’s population which would be approximately 75-80 million (7.5 – 8 crore) end-users. The threshold for business users should be increased to 100,000. It points to the competition legislation of the European Union, the Digital Markets Act (DMA), which also sets the threshold of 10% of the EU’s population.

    Tech giants misuse their power over Indian startups:

    The letter contextualizes the prohibitions set out by the bill with real-life to demonstrate their need. This includes—

    • Discriminatory and non-transparent practices: An example of this is Google Playstore treating apps differently based on whether they sell digital or physical goods, wherein the sale of physical goods is charged a commission. The distinction between physical and digital goods is also arbitrary. For example, cab aggregators are categorized as physical goods despite their online matching system. Conversely, dating apps that facilitate online connections that transition into real-life meetings are classified as digital services. Even the Competition Commission of India (CCI) has found merit in the argument that the Google Play store is indiscriminately applying its commission structure between digital and physical services and has ordered an investigation into the same.
    • Self-preferencing: CCI discovered that Google exploited its dominant position in the Android mobile OS and app store market to unfairly promote its digital payment app, Google Pay, in the UPI-enabled payment market. This was done by making it the “intent flow technology” for in-app purchases.
    • Data usage: The CCI has also identified problematic practices by Google concerning data collection on its platform. To address this, CCI has asked Google to develop a clear and transparent policy on how data is collected, used, and potentially shared with app developers, other entities, and Google’s own affiliated businesses. The company has also been prohibited from competitive use of sensitive data acquired through the Google Play Billing System. Besides data appropriation, the current compliance burden is placed on startups because of Google’s User Choice Billing (UCB) policy. These policies can require vast amounts of data disclosure, creating a significant administrative burden for start-ups.
    • Restricting third-party apps: Google has imposed restrictions on functionalities for apps downloaded outside the Play Store, diminishing user-friendliness. This poses challenges for startups as they not only have to compete with Google’s own apps but also face additional hurdles due to restrictions on non-Play Store apps.
    • Anti-steering: CCI in a recent order had held that Google not only forces app developers to use its Google Play Billing System, but also restricts them from informing users within the app about alternative purchase options elsewhere. Apple also restricts developers from informing users about alternative purchase options and the CCI has also prima facie found fault with Apple for these practices.
    • Tying and bundling: In 2020, Slack accused Microsoft of anti-competitive practices by tying Teams to its dominant Office suite, forcing users to adopt Teams or forego other essential productivity tools. The company has recently decided to unbundle Teams from its Microsoft 265 and Office suites.

    Impact of DMA in Europe:

    The need for the draft DCB is amplified by the positive effects of similar legislation in other jurisdictions. The Digital Markets Act (DMA) which came into force in March 2024 has forced big tech giants like Google, Meta, and Apple to make significant changes to their practices. Some of the key changes implemented include—

    Google: It has revamped its search results to prioritize independent websites that provide comparison services for flights, hotels and shopping, dismantling the advantage held by its own aggregator products. There have also been over 20 updates to Google Search which allow users to select their preferred default browser and search engine. Google Play is enhancing advertising consent processes giving users greater control over how their data is used for advertising purposes.

    Apple: It has allowed alternative app stores on iPads and iPhones, dismantling the company’s monopoly over app distribution. The DMA has forced Apple to display a new default browser choice screen, which has resulted in an increased number of downloads of third-party browsers like Firefox, Aloha and Brave. Apple is preparing to allow EU users to uninstall the Safari browser by the end of 2024. The company is also preparing a more user-friendly method for transferring data between iPhones and non-Apple devices by the fall of 2025.

    Meta: Meta’s WhatsApp has been compelled to allow interoperability between itself and other messaging platforms.

    You can read the full letter here.

    Also read:

     

    The post 40 Indian startups sign a letter supporting the draft Digital Competition Bill appeared first on MEDIANAMA.

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