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Why are some industry bodies supporting ex-ante regulations in India

The CDCL has received positive responses in support of ex-ante regulations in India from different Indian bodies who want to root out anticompetitive measures practiced by some large digital platforms.

Source: Apple Press Release

The Committee on Digital Competition Law (CDCL) has released a draft of the Digital Competition Bill alongside its report on the need for ex-ante rules for digital markets in India. The report stated that large digital enterprises were able to use users’ data and economies of scale to gain a massive market advantage, making it difficult for smaller enterprises to compete with them. Ex-ante regulations, which would act as preemptive measures, are suggested as a solution by the committee.

CDCL had invited submissions from various industry stakeholders such as digital enterprises and industry associations, seeking to understand their perspectives. While large tech giants such as Apple and Amazon opposed ex-ante regulations,  various industry bodies wrote in support instead. Here is a summary of the positions of stakeholders that support ex-ante regulations: 

Alliance of Digital India Foundation (ADIF): 

  • Large app stores engage in anti-competitive practices like “bundling of products; mandatory usage of native payment systems; data hoarding and use of third-party data to improve own products; self-preferencing; forcing app developers to enter into arbitrary and unilateral agreements; infringement of trademarks; imposition of high commissions on revenue; anti-steering provisions including displaying warnings when a user attempts to install an app from a source other than the official app stores; pre-installation of apps on app stores; non-transparent advertising policies; lack of interoperability; and predatory pricing and deep discounting.”
  • Systemically Significant Digital Intermediaries (SIDI) be allowed to contest their status before regulatory bodies
  • A special wing of the CCI with adequate manpower must investigate complaints against digital entities

ADIF is leading the charge in the fight by startups against Google Play policies. The Alliance’s complaint to the Competition Commission of India (CCI)  in 2020 led to the 2022 antitrust order that mandated various changes to Google Play including allowing third-party billing systems. ADIF, however, has filed another complaint with CCI that Google is not fully compliant with the order.  

Along with ADIF, the All India Gaming Federation (AIGF) also expressed similar views as the above.

Confederation of All India Traders (CAIT):

  • Large digital platforms especially in the e-commerce sector “provide reduced commission or discounts and more favourable terms for preferred sellers; do not follow platform neutrality; influence search rankings for preferred sellers; enter into arrangements with brands for exclusive launches; launch private labels through preferred sellers; fund deep discounts themselves; and misuse data to gain control over the market, create private labels, etc.
  • Digital Markets Act (DMA) can be used as a reference point for ex-ante rules in India.
  • Ex-ante rules are  “essential to address the harm caused by large digital enterprises”, especially due to the CCI’s lengthy investigations.

CAIT has been vocal about complaints against Amazon and Flipkart and is among the industry bodies that have filed complaints with CCI, which is currently probing the two e-commerce platforms for anti-competitive conduct. Amazon and Flipkart have both opposed ex-ante rules in India. You can read more about Amazon’s and Flipkart’s submissions here.

Digital News Publishers Association (DNPA):

  • Alleged that large digital enterprises indulged in non-transparent data sharing and revenue sharing policies, search and ranking preferencing, allowing bidding on keywords leading to infringement of registered trademarks, and allowing crawling of publishers’ websites by search engines and using such data to power their own search results.
  • Asked for the CCI to have pre-factum (before a violation occurs) power of checking abuse by large digital enterprises before they enter into revenue-sharing agreements with newspaper publishers
  • Supported the establishment of a pre-facto bargaining code between large digital enterprises and newspaper publishers similar to France, Canada and Australia.
  • Wanted the CCI to be established independently as a statutory body similar to the Election Commission of India. The CCI should have an independently appointed Director General with a fixed tenure and enhanced powers to impose penalties. 

The DNPA had previously argued that Google used its market dominance unfairly, imposing “unfair and discriminatory conditions” on news publishers and denying them fair advertising revenue. The CCI has launched a probe into Google based on these allegations. 

National Restaurant Association of India (NRAI):

  • Accused dominant food service aggregators of preferential treatment of some sellers via platform-funded discounts, better commission rates, and minimum business guarantees. They also pointed out the lack of transparency in search rankings and listing practices, deep discounts, unfair contracts, exclusivity agreements, exorbitant commissions, potentially rigged search results and hiding data about customer preferences. 
  • Asked for “appropriate legislation to regulate such enterprises” and referred to the DMA as an example.

Previously the NRAI had asked the CCI to open an investigation into food service aggregators like Swiggy and Zomato, alleging anticompetitive practices like bundling of services, data masking, exorbitant commissions, deep discounting, and violation of platform neutrality. The CCI probe is currently underway. 

The Federation of Hotel & Restaurant Associations of India (FHRAI) also echoed similar views as NRAI.

National Association of Software and Service Companies (NASSCOM):

  • Stated that the designation of an entity as a SIDI should be made on both qualitative and quantitative grounds and that any ex-ante obligation imposed on a designated entity should have objective justification provided in the primary law. 
  • Stated that an ex-ante framework should focus on competition harms and not create overlaps with other obligations such as privacy or data protection. 
  • Suggested that the framework must also provide for a consultative mechanism where an entity can approach the CCI to clarify how a certain type of conduct falls within the purview of a given exemption. 
  • The ex-ante framework must carry a statutory obligation for the CCI to conduct market studies before identifying a Core Digital Service or specific conduct/obligation with respect to the identified digital service.

Other industry bodies that supported ex-ante regulations include the All India Gaming Federation (AIGF), Asia Travel and Technology Industry Association (ATTIA), Artha Global, AZB & Partners, Esya Center,  Indian Council for Research on International Economic Relations (ICRIER), and the Newspaper Association of India.

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