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Sansad TV: Perspective- Competition (Amendment) Bill, 2022

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Introduction:

The Competition (Amendment) Bill 2023 has been cleared by both the houses of Parliament. The Rajya Sabha passed the Bill by a voice vote. The Lok Sabha had cleared the Bill. This was a key legislative agenda of the government for the current session of Parliament as it seeks to revamp the competition law and bring it in sync with the new economic practices and issues. The new law will empower the Competition Commission of India, giving it the ability to penalise entities found engaging in anti-competitive behaviour based on their global turnover

Revamping CCI: 

  • The CCI regulates market competition in India.
  • The opinion is that CCI should be strengthened to address anti-competitve behaviour in digital markets.
  • The creation of a specialied digital markets unit in CCI.
  • This unit would:
    • monitor established and emerging SIDIs
    • give recommendations to the central government on designating SIDIs
    • adjudicate on cases related to digital markets.

Analysis of the Bill:

  • By implementing these amendments, the Competition Commission should be better equipped to handle certain aspects of the new-age market and transform its functioning to be more robust.
  • The proposed amendments are undoubtedly needed; however, these are heavily dependent on regulations that will be notified by the Commission later.
  • These regulations will influence the proposals.
  • Also, the government needs to recognize that market dynamics change constantly, so it is necessary to update laws regularly.

Regulating digital markets: 

  • Digital markets comprise of internet based (digital) companies with millions of interacting participants.
  • The Committee noted that, unlike physical markets, digital markets have increasing returns to size (returns of business increasing with size of the firm) driven by learning and network effects (utility of users growing with number of users on the platform).
  • As a result, such markets may be dominated with a few leading players emerging in a short period.  This happens even before policies can be formulated and anti-competitive practices are adjudicated.
  • The Committee recommended that competitive behaviour needs to be evaluated before markets end up monopolised instead of the ex-post evaluation done presently.

Digital Gatekeepers: 

  • The Committee recommended that India must identify the leading players in digital markets that can negatively influence competitive conduct.
  • They should be categorised as Systemically Important Digital Intermediaries (SIDIs) based on their revenue, market capitalisation, and the number of active businesses and end users.
  • SIDIs should annually submit a report to the Competition Commission of India (CCI) detailing the measures taken to comply with various mandatory obligations.

Digital Competition Act: 

Self-preferencing: 

  • An entity may have the dual role of providing the platform and competing on the same platform.  Self-preferencing is a practice wherein a platform favours its own services or the services of its subsidiaries.
  • The Committee noted that a lack of platform neutrality can lead to a negative effect on downstream markets.  It recommended that SIDIs must not favour their own services over those of their competitors when mediating access.

Data Usage: 

  • The Committee noted that market leaders who have access to the personal data of users tend to get bigger while new entrants struggle to acquire users and user data.
  • It recommended that SIDIs should not process the personal data of end users who use services of third parties, if such parties use the core services of the SIDI.
  • Personal data from the relevant core service of the SIDI should not be cross-utilised in other services provided separately by the platform.  End users should not be signed into other services of the platform unless he has been presented with a specific choice to which he has consented.

Bundling and tying: 

  • Many digital firms force consumers to buy related services.
  • The Committee noted that this creates asymmetry in pricing and leads to the removal of competition from the market.
  • It also enables leading players to leverage their market power in one core platform to another.  It opined that SIDIs should not force businesses or end users to subscribe to any further services for being able to use their core platform service.

Anti-steering: 

  • Anti-steering provisions are clauses wherein a platform prevents its business users from steering its customers to offers other than those provided by the platform.
  • The Committee recommended that SIDIs should not make access to their platform conditional on the purchase/use of other products or services that are not part of or intrinsic to the platform.

Conclusion

  • With the new changes, the Commission should be better able to manage certain aspects of the New Age market and make its operation more robust.
  • The proposed changes are undoubtedly necessary; however, these are highly dependent on regulations subsequently notified by the Commission.In addition, the government must recognize that market dynamics are constantly changing, so laws need to be updated regularly