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Why are some Indian startup founders criticizing tech industry body IAMAI?

IAMAI is a tech industry body that has over 550+ members ranging from multinationals like Google, Apple, Amazon, and Meta to Indian companies like Airtel, Ola, Cred, and MakeMyTrip.

Indian startup founders took to Twitter earlier this week to criticize the Internet And Mobile Association of India (IAMAI) for furthering the interests of foreign tech companies to the detriment of Indian startups.

MapmyIndia CEO Rohan Varma, Matrimony.com CEO Murugavel Janakiraman, and People Group Founder and Shark Tank investor Anupam Mittal are among those who voiced their concerns about IAMAI publicly.

“IAMAI views and submissions to govt and media on digital policies, regulations, laws, etc are completely wrong and antithetical to what Indians—consumers, industry, government—need.” — MapmyIndia CEO Rohan Varma

IAMAI is a tech industry body that has over 550+ members ranging from multinationals like Google, Apple, Amazon, and Meta to Indian companies like Airtel, Ola, Cred, and MakeMyTrip. The industry body regularly submits its feedback to the Indian government on proposed regulations and represents Indian startups in discussions with the government.

Varma pointed out that the leadership of IAMAI is dominated by representatives of foreign tech companies, which must change, or the industry body should be given no credence in its representation of Indian startups. Notably, IAMAI’s executive council is up for elections this month.

“Unfortunately today, a Google employee is the chairperson [of IAMAI] and a Meta employee is the vice chairperson. So, it is largely influenced by the interests of the global big tech companies.” — Murugavel Janakiraman, CEO of BharatMatrimony, told Moneycontrol.

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Why are Indian startups criticizing IAMAI now?

While there are probably multiple events that led to the frustration against IAMAI, two of the most recent events include:

  1. IAMAI’s draft submission to the competition law committee: The backlash from Indian startup founders comes a few days after IAMAI’s draft submission to the Committee on Digital Competition Law began circulating. CDCL was set up by the Indian government in February to explore a separate law on competition in digital markets. In IAMAI’s draft submission to CDCL, reviewed by MediaNama, the body criticizes the Parliamentary Standing Committee on Finance’s report on anti-competitive practices by the Big Tech companies, which calls for stricter regulations for big tech companies and a new law for competition in digital markets. We have summarised IAMAI’s arguments below, although the final submission to CDCL could differ. IAMAI, however, has responded to the criticism stating that an overwhelming number of its members are opposed to ex-ante regulations and separate competition law for digital companies, The Economic Times reported.
  2. IAMAI not taking up the fight against Google Play Store’s billing policy: Google’s new billing policy, which requires Play Store developers to pay an 11 to 30 percent commission to the company on all in-app purchases, is receiving strong pushback from Indian startups, who have filed a complaint with the Competition Commission of India arguing that the billing policy is not in compliance with the antitrust directive issued by the competition regulator last October. Separately, Matrimony.com has challenged the billing policy on different grounds at the Madras High Court and won an injunction. Notably, IAMAI has not taken up this issue and Indian startups are being represented by the Alliance of Digital India Foundation (ADIF) in their fight against Google.

“For the Google in-app purchase billing issue, IAMAI did not take any steps.” — Matrimony.com CEO Murugavel Janakiraman told Economic Times

What does IAMAI’s draft submission to the Committee on Digital Competition Law say?

The Parliamentary Standing Committee on Finance’s report on anti-competitive practices by the Big Tech companies (henceforth Big Tech Report), has two main proposals:

  1. Ex-ante regulations for the digital markets called the Digital Competition Act
  2. Designation of large players as Systemically Important Digital Intermediaries (SIDIs) and subjecting them to additional regulations

Read: Summary of Parliament Panel Report On Big Tech’s Unfair Practices In Digital Markets

IAMAI criticizes both these proposals arguing:

“IAMAI is concerned that the recommendations in the Report are neither targeted nor proportionate. Lack of a well-articulated policy objective, failure to adopt an evidence-based approach to identify the need for the regulation, has led to ambiguous, broad recommendations which will stifle innovation, competition and the benefit that accrues to markets and users.”

1. Report doesn’t follow an evidence-based approach to its proposals: IAMAI noted that it is “concerned with the lack of clarity, underlying assumptions, and absence of an evidence-based approach in the Big Tech Report.”

2. Does India need an ex-ante digital competition law? IAMAI argues that India already has the Competition Act, 2000, and other regulations that look at the anti-competitive practices identified by the Big Tech Report. Furthermore, the report’s proposal for a Digital Competition Act “does not discuss or examine, the necessity of ex-ante regulation for the digital sector or define any policy objective driving their recommendations,” IAMAI stated. The report doesn’t review or explain the failures of the current regulatory framework, fails to incorporate the recommendations made by the Competition Law Review Committee (CLRC) in 2018-2019 and CCI’s market study on e-commerce, does not carry out an impact-based assessment, etc.

“The current regulatory framework provides ample room for CCI to intervene swiftly as and when necessary, without over-regulating the sector.” — IAMAI

3. There is no global consensus on following the EU DMA model: Arguing that the Big Tech report’s proposals are heavily influenced by the EU’s Digital Markets Act, IAMAI noted that “there is no global consensus among competition law and economics experts or among policymakers for following the EU DMA approach or whether ex-ante regulation is necessary or it is the right path to regulate digital platforms.” The industry pointed out that countries like the US shelved some DMA-inspired antitrust bills because “there were deep concerns about unintended consequences on consumers, growth, and innovation.” IAMAI also argues that DMA has been criticized within Europe and elsewhere and other countries that have explored ex-ante regulations like the UK, Taiwan, Singapore, Japan, Australia, and South Korea have carried out in-depth studies, unlike India, which has not examined the need of ex-ante regulations in the context of the Indian market.

“The EU’s DMA itself has not lived its full life to show its effectiveness, not to mention that the implementation has not even begun yet. […] Not only are approaches such as the DMA tailored to the specific policy priorities of the European political leadership, and the peculiarities of the European common market, they remain untested as of date.” — IAMAI

4. Unintended consequences of “inflexible and disproportionate regulations”: IAMAI pointed out that ex-ante regulations have an impact on investment, innovation, diversity, and consumer welfare, and these impacts should be considered before coming up with any regulations. For example, classifying large firms as SIDIs and subjecting them to additional regulation will discourage startups from scaling, and regulations that prevent companies from monetizing their innovations can directly impact the incentives to innovate, IAMAI pointed out.

“At a time when India, despite economic headwinds, is looking to capitalize on the evolving geopolitical landscape of diversification of global investments away from China and prioritize inbound investments towards a USD 1 trillion digital market –over-regulation can stymie the growth momentum for Indian markets.” — IAMAI

5. No need to regulate data through competition regime: The report makes various recommendations about the collection and use of data by SIDIs, but this is not needed as the government is working on the Digital Personal Data Protection Bill, “which provides for an overarching framework for regulating the processing of personal data,” IAMAI opined. The industry body further added that the “recommendations are premised on the assumption that mere possession of data creates exclusionary effects. […] Data collected by entities may not be unique, non-replicable, rivalrous and excludable.”

6. Restrictions on advertising services are based on a flawed premise: The report finds the adverting businesses of Big Tech companies to be a “monopolistic threat,” but does not present any evidence to support this assertion, IAMAI stated. The report also calls for the prohibition of targeted advertising by SIDIs when even the DPDP Bill does not do so, IAMAI added.

“Advertisers specially small and medium businesses (including other digital startups) which have finite funding and need to spend carefully, are able to advertise more effectively and get recognition and are able to compete with much larger global companies with lower and efficient spends.” — IAMAI

7. Evaluate new deal value threshold before mandating SIDIs to notify all mergers and acquisitions: The report requires SIDIs to notify CCI about merger and acquisition transactions even when they do not require approval under the Competition Act if the other entity provides services in the digital sector or enables collection of data. IAMAI noted that the recently notified Competition (Amendment) Bill, 2022, already has a deal value threshold for notifying transactions. “It is accordingly imperative to first gauge the impact of deal value thresholds before the introduction of any further legislations to capture transactions in the digital market,” IAMAI stated.

8. Self-preferencing is not always bad: The report calls for a prohibition of self-preferencing even though “it may (not always) result in foreclosure, consumer harm, or both,” IAMAI stated, explaining that all business models engage in some form of self-preferencing as it can be efficient and maximize consumer benefit. “Hence, there should be a strong record showing which particular types of self-preferencing are harmful and why before applying any narrowly tailored restrictions on the particular form of self-preferencing identified,” IAMAI stated.

“By requiring designated SIDIs to not give preference to their own products over competitors’, the Big Tech Report aims to protect every single competitor, whether efficient or not, and not the competitive process. There may be instances where an e-commerce platform’s own product or service offerings are better than its competitors’. Even in such cases, the platform will not be able to display its own products.” — IAMAI

9. Are the anti-competitive practices highlighted really anti-competitive? The Big Tech report lists certain anti-competitive practices (ACPs), but this is based on the assumption that these practices are “anti-competitive without any assessment which would merit such a designation,” IAMAI noted. “More specifically, the Report failed to conduct any analysis to demonstrate the harm caused to competition by the alleged ACPs. The findings, observations, and recommendations in the Report are not supported by any empirical or factual evidence,” IAMAI added. Additionally, the report fails to balance the pro-competitive and anti-competitive effects of the identified practices.

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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