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Is ex-ante regulation of digital markets a bad idea for India? #NAMA

“the reasoning behind ex-ante regulations is that investigations take time, and there is a possibility that by the time some decision is made on competition-related issues, it is no longer applicable”

On February 6, this year, the Indian government set up a Committee on Digital Competition Law (CDCL) to examine the need for a separate law on competition in digital markets. This committee was tasked with studying whether India needed ex-ante regulations that would preemptively prevent larger e-commerce platforms and digital markets from engaging in conduct that hinders market competition. As of May, the CDCL is yet to submit its report on the issue and there has been an ongoing conversation around the idea of ex-ante regulation. 

“If you want to protect consumers, I personally believe that the way to do that is through the Consumer Protection Act. If you have security concerns, then perhaps, The IT Act or the Digital India Act is the way to go, right? With marketplaces, it becomes a bit tricky because you’re trying to balance all of these factors,” said Shruti Aji Murali, legal counsel at Axiom5 Law Chambers, joining this conversation during the “Regulating Marketplaces: E-commerce and App Stores” panel at MediaNama’s MarketsNama conference last Friday. 

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Pre-establishes obligation 

One of the panelists, Abir Roy, the co-founder of Sarvada Legal and a competition law expert, says that the reasoning behind ex-ante regulations is that investigations take time, and there is a possibility that by the time some decision is made on competition-related issues, it is no longer applicable. “It’s operation successful patient dead kind of a situation. If that is the case, shouldn’t some obligations be there?” 

MediaNama hosted this discussion with support from Salesforce, Google and Mozilla. Internet Freedom Foundation, and our community partners, the Centre for Internet and Society and Alliance of Digital India Foundation.

Does not cater to individual business needs

Another panelist, Gowree Gokhale, a legal associate at Nishith Desai Associates, mentioned that ex-ante regulation assumes that every business is identical. She said that an ex-ante regulation could ban tie-ins (these are products/services that are part of a digital market and have to be compulsorily used when accessing the market) when in fact, such tie-ins could be an important part of someone’s business model and could be something they are offering for free. “When you say ex-ante, you are stopping innovation. You are stopping new business models. You are stopping new ecosystems,” she added.

Her idea was that companies should be able to approach the Competition Commission of India (CCI) and explain their market ecosystem and that their tie-ins will not harm the market.

Is ex-ante creating an India vs foreign companies narrative?

Recently, Indian startup founders have been critical of the Internet And Mobile Association of India (IAMAI, a tech industry with members like Google, Meta, and Amazon) saying that the organization favors the interests of foreign companies. This was a response to IAMAI voicing its opinions against ex-ante regulations saying that “the current regulatory framework provides ample room for CCI to intervene swiftly as and when necessary, without over-regulating the sector.” 

Nikhil Pahwa, the founder of MediaNama, brought the IAMAI vs Indian startup founder debate to the discussion by suggesting that Indian tech founders are being myopic towards how ex-ante will impact them in the future. “It’s [the discussion on ex-ante] fixated only on the situation with Google and Indian founders. I mean, there are other monopolies in play, like Naukri.com has a known monopoly for the largest job aggregator in the country, right? Policy Bazaar, again, is the largest insurance aggregator in the country. The same ex-ante regulations are also going to apply to them as well.”

This post is released under a CC-BY-SA 4.0 license. Please feel free to republish on your site, with attribution and a link. Adaptation and rewriting, though allowed, should be true to the original.

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