A group of top internet companies including Paytm, Bharat Matrimony, Shaadi.com, Tinder-owner Match Group, ShareChat, and Spotify have written to the Committee on Digital Competition Law (CDCL), against the submission made by the industry body Internet and Mobile Association of India (IAMAI) on the digital competition bill.

In the dissent note, the collective has said that they don’t agree with IAMAI’s earlier submission on the digital competition bill, adding it does not reflect the views of many of the apex body’s member companies.

CDCL was set up by the Indian government in February 2023 to explore a separate law on competition in digital markets. In its submission to CDCL, IAMAI argued against the need for a separate digital competition law. IAMAI, which counts Indian arms of Google, Microsoft, Twitter, Meta, and others as its key members, claimed that this would stifle innovation, competition, and the benefit that accrues to markets and users.

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Startup founders including Bharat Matrimony's Murugavel Janakiraman, Mapmyindia's Rohan Verma, and Shaadi.com's Anupam Mittal amongst others had argued that IAMAI is protecting the interests of the big tech and failing to represent home-grown tech players.

“Our experience in operating innovative companies at various stages of growth tells us that a “status quo” approach to dominant digital gatekeeper platforms is not the best path to foster innovation. Regrettably, IAMAI’s recent submission ignores the fundamental reality of why these discussions about ex-ante regulation are taking place both here and around the world: the status quo has failed, and is failing, to adequately constrain the power and conduct of the dominant digital gatekeepers that now control so many aspects of commerce and our lives,” the note accessed by CNBC-TV18 read.

“We understand that ex-ante regulation is needed in the digital sector and India would benefit from a new regulatory framework to improve the competition in the digital economy. Currently, the protracted nature of traditional antitrust litigation is expensive and extensive,” the note added.

The group also wrote in the letter that case-by-case adjudication of violations by a limited number of gatekeepers in the digital markets has created a system that encourages uncertainty, privileges incumbents, and deprives individuals/ digital companies of participating in the digital markets fairly. The members have recommended designating systemically important digital intermediaries (SIDIs) to identify such gatekeepers.

Read the full note here:

The below signatories, all members of the Internet and Mobile Association of India (IAMAI) write to express our dissent from IAMAI’s recent submission to the Committee on Digital Competition Law. The submission does not reflect the views of many IAMAI member companies. We believe the submission does not represent a policy that will advance investment, innovation, diversity, or consumer welfare in India.

Our experience in operating innovative companies at various stages of growth tells us that a “status quo” approach to dominant digital gatekeeper platforms is not the best path to foster innovation. Regrettably, IAMAI’s recent submission ignores the fundamental reality of why these discussions about ex-ante regulation are taking place both here and around the world: the status quo has failed, and is failing, to adequately constrain the power and conduct of the dominant digital gatekeepers that now control so many aspects of commerce and our lives.

We understand that ex-ante regulation is needed in the digital sector and India would benefit from a new regulatory framework to improve the competition in the digital economy. Currently, the protracted nature of traditional antitrust litigation is expensive and extensive. Case-by-case adjudication of violations by a limited number of gatekeepers in the digital markets has created a system that encourages uncertainty, privileges incumbents, and deprives individuals/ digital companies of participating in the digital markets fairly. Considering the financial prowess of the digital companies involved, antitrust enforcement and fines, in many cases, have become a cost of doing business. This is abundantly visible in India, across international geographies and was also noted by this esteemed Committee.

Therefore, to limit the power and constrain the behavior of this generation of dominant digital platforms there is a building consensus that a different, certain, and faster solution is needed. As the power of digital gatekeeper platforms has increased so rapidly, we say without hyperbole, that many of the digital companies filing these comments would not have been able to get off the ground in today’s environment.

A new framework will particularly open mobile application distribution to competition. The app distribution economy is currently cloistered between two major players which leads to severely one-sided agreements, unfair policies, and anti-competitive practices. Further, mobile devices and operating systems are the predominant (and increasingly exclusive) gateway to the Internet for consumers and businesses alike. In the past 15 years, mobile operating systems have also become increasingly dominated by the afore-stated parallel monopolies. These companies now act as gatekeepers to mobile internet services and have control over the relationship between most digital businesses and their customers. The time is ripe, therefore, for antitrust enforcement to be complemented by ex-ante regulation as applicable to other parts of the economy (e.g., energy, telecommunications).

An ex-ante approach, like that being implemented in the European Union, and currently being considered with broad support in the United Kingdom, the United States, and other countries around the world, promises to bring certainty to market participants, deliver well-understood benefits to consumers and innovators and overcome the recognized limitations of traditional competition law enforcement against unilateral conduct by dominant firms.

The Digital Market Act in Europe provides a good framework to approach ex-ante regulation that addresses recognized abuses of true gatekeeping platforms while allowing innovation and business from all developers to flourish. To take the example of gatekeeper app stores, an appropriate regulation could entail the following:

(i) Disallowing anti-steering policies which restrict developers from using/promoting payment methods of their choice on and off their app.

(ii) Disallowing “tying” of/mandatory acceptance of unrelated one-sided obligations for distributing the app through app stores.

(iii) Disallowing self-preferencing by gatekeepers when providing access to the supply and sales market.

(iii) limiting the risk of gatekeepers circumventing ex-ante regime, by consistent monitoring and updating; and

(iv) breaking the distribution monopoly, the gatekeepers currently hold for mobile applications through their operating systems, marketplaces, and app stores.

Finally, we have three recommendations for the Committee’s consideration:

● When in doubt, compliance first: One of the key delaying tactics the gatekeepers are expected to implement is litigation. Thus, if any compliance is challenged, the principles for the provision of stay should be codified. Additionally, the supersession of the regulations over other laws should be prescribed in detail. This will restrict gatekeepers from vexatious litigation tactics and forum shopping.

● Market testing: Implementing ex-ante regulation will require continuous regulatory dialogue between the regulator and the regulated firms, especially given the technical complexity in designing digital remedies (as antitrust cases have amply demonstrated). At the same time, compliance measures proposed by gatekeepers should be heavily market tested, by bringing into the process the types of third parties (e.g., customers, rivals) whom the regulatory provisions are meant to protect. This would also be a protective mechanism against the risk of regulatory capture or the perception thereof.

● Designating SIDIs: The correct designation of Systemically Important Digital Intermediaries (SIDIs) is crucial for effective regulatory frameworks, according to the Committee. Applying new competition laws uniformly without considering market dynamics could reinforce the market power of dominant companies, to the detriment of the wider market. International examples, such as the EU and German Governments, have recognized the need for a combination of quantitative and qualitative criteria to designate companies as gatekeepers or SIDIs. The 10th Amendment to the German Competition Act emphasizes the significance of companies with substantial power across multiple activities or verticals, as leveraging dominance in one market can unfairly influence adjacent markets. Enduring and entrenched dominance over relevant markets, for a period of 3-5 years, should also be considered. The Committee proposes using various quantitative factors, including revenues, market capitalization, and the number of active business and end users, as important criteria for designation. However, these quantitative factors should not be evaluated in isolation. It is essential to conduct a holistic review of evidence to determine the systemic significance of a company, especially in smaller or secondary markets where specific nuances may exist. Qualitative assessment, alongside quantitative metrics, is necessary to accurately identify gatekeepers or SIDIs. Caution is advised against adopting market capitalization as a sole criterion for SIDI status. Market cap is subjective, volatile, and influenced by external factors beyond the control of the company in question. The government and the Competition Commission of India (CCI) should avoid being swayed by this criterion and focus on a comprehensive evaluation of both qualitative and quantitative measures.

● Material (not just monetary) penalties for non-compliance: While monetary penalties are an important deterrent, digital giants often treat them as an unavoidable but inconsequential “cost of doing business”. Thus, not only must monetary penalties be considerable but they should be accompanied by non-monetary penalties that would be serious enough to serve as real deterrents, such as, for instance, a temporary moratorium on M&A activity, structural remedies (forced break-ups or divestments), personal consequences for corporate executives and disgorgement of data gained through anti-competitive practices.

The status quo was good for dominant digital gatekeeper platforms all these years and has led to severe harm to the market, its players, and consumers at large. We believe the approach contemplated by the Committee on Digital Competition Law rightfully prioritizes the interests of Indian consumers and independent innovators and entrepreneurs.

India should not stand aside as the rest of the world moves towards addressing the market failures in areas like App Stores and mobile devices.

IAMAI’s submission to CDCL was made prior to the election, however the dissent note was sent to the panel on June 16. The heat faced by the industry body for its stance also shaped the body's governing council election, which was held last month.

IAMAI has appointed Harsh Jain, co-founder, and CEO of Dream Sports, as the chairman of the association. Jain replaced replacing Sanjay Gupta, vice president and country manager, Google India. Apart from Jain, Rajesh Magow of MakeMyTrip became the vice chairperson and Satyan Gajwani of Times Internet the Treasurer, forming the 4-member executive council of the industry body, replacing Shivnath Thukral, WhatsApp’s India public policy director and Razorpay CEO Harshil Mathur, respectively. Shubho Ray will serve as president ex-officio on the executive council.

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(Edited by : Sangam Singh)

First Published:Jun 20, 2023 6:16 PM IST