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    CCIA Submits Comments on India’s Draft Digital Competition Bill

    The Computer & Communications Industry Association (CCIA), a trade association representing communications and technology firms, in its comments on the ‘Draft Digital Competition Bill’, has asked policymakers to closely examine the impact of ex-ante regulations on consumers and the country’s thriving digital economy and startup ecosystem.

    Their submission comes as a response to the report released in March 2024 by the  Committee on Digital Competition Law (CDCL), which was set up by the Ministry of Corporate Affairs to examine and report on the need for a Digital Competition Bill, to address competition concerns in digital markets.

    The Vice President of Global Competition and Regulatory Policy of CCIA,  Krisztian Katona said,

     “India, as the third largest global hub for tech startups, should make sure that it clearly identifies any market problems it is trying to solve and then the costs versus benefits of potential digital regulation, as overly burdensome regulations could significantly hinder the country’s innovation ecosystem and economy.”

    Here are the principles the CCAI has asked policymakers to consider before introducing ex-ante regulations in India:

     The Changing Landscape of the “digital markets”

     The CCIA explained that, traditionally, businesses are usually classified as “digital” for adopting the use of technology and digital tools early on. However, with the ongoing digitalization across the economy, many physical businesses have also adopted similar digital tools. This has caused the lines to blur, and both “digital” and “physical” businesses compete in the market. Thus, the CCAI argued that a separate regulation for digital companies could “create asymmetric results in the market, leading to ambiguity and inconsistency.”

    Further, they argued that “overly burdensome and heavy-handed regulation” for digital markets could significantly hinder innovation and economic growth.  Instead, they suggested that any new regulation proposed must apply generally “at a principle level”, and not target particular companies. They also called for policymakers to take into account that any regulatory proposal for the digital market, will also affect other policy areas such as data privacy, national security, cybersecurity, and intellectual property, This “interconnectedness of policy areas in the digital space”, could have an adverse impact on businesses in India and thus if ex-ante regulations must be imposed, they must be imposed with careful consideration.

    Analyze the Costs and Benefits Before Implementing Any New Regulation

     The CCAI reminded policymakers that new regulations may have a monetary impact on businesses, especially given the dynamic and innovative nature of digital markets. Thus, they call to engage with stakeholders while developing the ex-ante regulatory framework and weigh the cost of the new regulations to its potential benefits.

    The ultimate objective of any new regulatory framework, they said, should be to promote and stimulate competition and innovation. If India must adopt ex-ante regulations, CCAI urged to consider the Organisation for Economic Cooperation and Development (OECD) and the International Competition Network (ICN) call to  “allow clearly procompetitive or competitively benign conducts, and recognize justifications for legitimate protections.” They also called to introduce adequate safeguards, to protect Indian consumers and businesses, especially SMEs that often rely on larger digital enterprises for their digital services.

    Balance Competition and Regulation in Digital Markets

     The CCAI stated that competition regulation should only be introduced to address particular market failures, which they emphasized is not the same as an enterprise having market power. They argued that introducing regulation in the absence of a specific market failure could hinder growth and harm innovation and competition. Additionally, the mere presence of a market failure does not equate to the need for regulatory intervention. They called instead to consider the competitive circumstances of the market. “Overly complex, intrusive, or broad regulatory regimes”, they added, could have detrimental effects on the industry as they are likely to deter entry and investment from innovative companies.

    Thus, they urge the policymakers to consider whether the existing ex-post framework to address competition, consumer protection, and data privacy was adequate to address these concerns. They said that ex-post regulations were far more flexible than ex-ante regulations, and may be more conducive to the dynamic digital markets. They noted that at present, India has the Competition Commission of India (CCI), and Digital Markets and Data Unit (DMDU). The Competition Law’s recent amendment to include digital markets, the Digital Personal Data Protection Act and the Information Technology Act, did an adequate job of addressing concerns as there is “no indication that the authority faces any new market problem.”

    Be Cautious in Relying on Untested International Regulatory Experiments

     The CCAI noted that only two jurisdictions had fully operational ex-ante digital regulatory frameworks: Germany and Europe. Europe’s Digital Markets Act needs plenty more time to be fairly assessed for efficacy, they said. The CCAI suggested that India must learn from other jurisdictions and wait for more concrete results. They said:

    “As such, it would be recommended for Indian policymakers to first gauge the effects of these international proposals and give some time for them, once actually enacted, to show if their benefits outweigh their very real costs on consumers and the economy.”

    They also noted that these legislations took a long time to be enforced, with the DMA taking 4 years. Thus, they urged India to also allow sufficient time for stakeholder consultation and for the designated companies to prepare themselves for compliance. They also acknowledged attempts from other countries like Brazil, the UK and the US which are considering ex-ante regulations for the digital markets. However, they also brought attention to the fact that these countries introduced regulations to address specific concerns of their markets and encouraged India to analyze the specific characteristics and necessities of its own markets.

    Consider the Potential Impact of Ex-Ante Digital Regulation on the Indian Economy

     The CCAI claimed that ex-ante regulations may have a major impact on consumers, entrepreneurs, and the broader economy. For this they analysed the DMA, arguing that studies had found that the EU’s DMA had ignored competition and innovation models and had caused an increase in compliance costs for its designated “gatekeepers” between $22 billion and $50 billion. Further, they cited studies that the DMA might significantly threaten workers in some of the largest job-creating industries – technology and e-commerce.

    Thus, they claimed that if ex-ante regulations were introduced in India, it would result in the over-enforcement of regulations and restriction of “procompetitive or at least competitively benign” business practices. These regulations would likely result in less investment in R&D, leading to a decrease in innovation expenditure in the country and subsequently set back India’s startup ecosystem and reduce job creation, they argued.

    They claimed that this would also have an impact on the entire business ecosystem in India as multiple businesses that depend on these “dominant” companies will be affected.

    Further, they stated that the current Digital Competition Bill designates companies as Systemically Significant Digital Enterprises (SSDEs) even when they fail to meet the established thresholds, as long as CCI considers that a particular company has a significant presence in a specific Core Digital Service. This lack of clarity CCAI argued, may cause multiple enterprises to be designated as SSDEs.  This lack of clarity can hinder business investment in India as companies need to have regulatory certainty before investing in the country.

    This is particularly harmful as there is global competition for technology investment. They argued that with companies looking to move from China, there is added interest in investing in jurisdictions with clear, fair, and principle-based regulatory environments, without extreme regulatory obligations with low operation costs and low supply chain risks.

    The Bill’s Low Designation Thresholds Would Create Higher Barriers to Entry and Hinder Competition

    The CCAI said that the DCB under its current criteria would cover at least 580 companies operating in India as SSDEs, just from the digital service and e-commerce sector. In comparison, the EU’s DMA has only 6 designated gatekeepers. They argue that these large number of designated companies would end up facing significant compliance burdens and barriers to introducing new services. This is likely to reduce the high investment in research and innovation (R&D) in the country’s digital markets.

    Thus, they recommend clarifying the concept of “SSDEs” and reviewing the thresholds for this designation, after considering the business realities of India’s digital markets. This analysis they said should be evidence-based and should take place for each one of the markets, products, and services, designated as SSDEs.

    Further, they also called to analyze if the factors that caused enterprises to be assigned as “gatekeepers” in other jurisdictions, should apply to India.

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    The post CCIA Submits Comments on India’s Draft Digital Competition Bill appeared first on MEDIANAMA.

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