As India prepares its digital competition law, inter-regulatory consultation mechanisms are the need of the hour, writes Saksham Malik
The Committee on Digital Competition Law (CDCL) recently released its report recommending a new digital competition legilsation and the Draft Digital Competition Bill (DCB) with stakeholders currently given until 15 May to provide their feedback. Recognising the advancement of the digital markets in India and the limitations of the existing competition regime, the committee emphasised the necessity of a new ex-ante framework. In its assessment, the committee scrutinised various statutory instruments governing digital enterprises, including the Foreign Direct Investment Policy, the Draft National E-commerce Policy, the proposed Digital India Act, and the recently enacted Digital Personal Data Protection Act, 2023, among others.
What did the committee say?
On identifying numerous statutory instruments and examining their overlaps and conflicts with the DCB, the committee concluded that the proliferation of disparate digital enterprise regulations creates a fragmented regulatory landscape. Additionally, the committee noted that specific instruments, such as the proposed Digital India Act, have not yet materialised, leading to uncertainty regarding their scope and implementation.
Likewise, the committee observed that the draft e-commerce policy addresses anti-competitive behaviours such as exclusive tie-ups and deep discounting practised by e-commerce platforms. However, its limitation to e-commerce entities, pending implementation status and the non-binding nature raise concerns about its enforceability in effectively regulating digital markets. Similar reservations were observed about the narrower scope of various policy instruments compared to the proposed scope of the DCB. For instance, the committee highlighted distinctions between regulatory frameworks such as the Digital Personal Data Protection Act and consumer protection laws, noting their distinct objectives from competition regulation law. Addressing overlaps between the Digital Personal Data Protection Act and the competition act, the committee emphasised the complementary nature of the Digital Personal Data Protection Act suggesting that it supports the goals of promoting competition rather than creating conflicts.
Notably, the committee made a critical recommendation to set up an inter-regulatory consultation mechanism. Unfortunately, the report provides no additional guidance on the shape and form this mechanism could take and how it could help in the resolution of various conflicts.
Questions remain
Despite the committee’s diligent efforts, several questions about resolving conflicts and overlaps between the DCB and other policy instruments remain unanswered. For instance, while the scope of the FDI policy may be narrow and limited to only certain foreign entities, the overlaps that do exist between the policy and the proposed DCB, i.e., regulating self-preferencing by foreign e-commerce platforms, were not addressed.
Further, the overlaps with the proposed Digital India Act were not considered in the absence of the draft Digital India Act. However, the report does not provide sufficient information on whether it considered the consultations organised on 23 May 2023 and 9 March 2023, where the Ministry of Electronics and Information Technology (MeitY) shed light on critical components of the proposed Digital India Act. These consultations highlighted significant overlaps between the objectives of the proposed Digital India Act and the draft Digtal Competition Bill, including regulating fair-trade practices, preventing market concentration, and addressing digital market distortions. It’s crucial to note that representatives from various government ministries, including the MeitY, participated in the committee. Ideally, this participation should have facilitated a more thorough examination of the potential overlaps between the proposed Digital India Act and the proposed DCB within the report.
Why is it essential to resolve overlaps, and conflicts?
Considering that the report does not sufficiently resolve the overlaps and conflicts between the proposed DCB and other policy instruments, this exercise must be done proactively and meaningfully. In the absence of a streamlined and predictable regulatory framework for the technology ecosystem in India, various issues may become a cause of concern.
Difference in interpretation by regulators. The DCB introduces novel concepts with limited prior jurisprudence in India. This may lead to line ministries and regulators having unintentional differences in interpretations of details or granular issues, such as varying definitions or principles. For instance, as highlighted in the report, the IT rules do not distinguish between end users and business users. However, the draft DCB defines them separately. This difference underscores the importance of establishing a mechanism for harmonised interpretation and application of the DCB across relevant ministries and regulatory bodies.
Challenges in regulatory co-ordination and jurisdictional overlaps. Regulators lack a systematic process to gain clarity on jurisdictional overlap and establish clear jurisdictional boundaries. For instance, regulator X may be required to consult with other regulators before acting on matters where overlaps exist. However, other regulators may have no reciprocal obligation to consult with regulator X. This increases the burden on regulator X to ensure harmonisation as there is no mutual commitment. As a result, conflicts, inconsistencies and inefficiencies may arise from overlapping regulatory actions or jurisdictional disputes.
Uncertainty for market players. The multiplicity of regulations creates uncertainty and compliance challenges for market players. When entities are subject to different rules for multiple functions, their compliance costs can potentially rise, which can be especially detrimental for startups. Additionally, in an uncertain landscape, entities may choose to comply only with regulations favouring their business, potentially evading other essential mandates. The lack of uniform understanding due to the uncertainty for entities can also result in incorrect interpretations of the law and catalyse litigation.
Demand-side constraints. Disparate grievance redressal mechanisms pose challenges for consumers and entities, with overlapping jurisdiction and inconsistent processes. Each regulator offers its own grievance redressal mechanisms. Different laws establish different mechanisms, such as the Cyber Appellate Tribunal under the IT Act, the Telecom Regulatory Authority of India under the Telecom Regulatory Authority of India Act, and the Competition Commission of India under the Competition Act. This may confuse consumers and businesses who find it challenging to navigate these existing channels, encountering differences in approaches and processes along the way. Further, this may also potentially lead to forum shopping.
What kind of mechanisms can be established?
The CDCL report recommends setting up inter-regulatory consultation mechanisms to effectively resolve the conflicts and overlaps between the proposed DCB and other policy instruments. A few mechanisms that could be considered include the following:
Increased ministerial co-ordination. There has recently been a noticeable increase in inter-ministerial co-ordination, reflecting a broader “whole of government” approach. A collaborative effort between the MeitY and the Ministry of Corporate Affairs serves as an example, which led to a clarification that the MCA would assume the responsibility for competition-related issues in the digital markets while the MeitY would focus on sector-specific and technical issues. However, there is a need for a structured approach towards the harmonisation of different allied laws. This structured process could assist in uncovering the opportunities for synergy and integration.
Forming committees. Co-ordination committees can facilitate collaboration among regulators, ensuring regulatory coherence and consistency. In India, we have several precedents, such as the Financial Stability and Development Council – which comprised the Reserve Bank of India governor and representatives from different financial sector regulators – aimed at enhancing inter-regulatory co-ordination. Similarly, the Forum of Indian Regulators, consisting of regulators in the electricity sector, further expanded to include representatives from the Telecom Regulatory Authority of India and the Competition Commission of India. This practice facilitates sharing best practices and strategies to address emerging regulatory issues.
Establishment of high-level committees. As a part of the Digital Markets Act, the European Commission has established a high-level group composed of representatives from different EU government stakeholders, which includes the European Data Protection Supervisor and the European Data Protection Board. Its objective is to gain expertise and advice for the coherent and complementary implementation of the DMA and other regulations. A similar framework may be considered to enhance harmonisation and avoid overlaps.
In conclusion, a comprehensive and collaborative approach is necessary for navigating the evolving landscape of digital regulation in India.
By facilitating co-ordination, harmonisation, effective grievance redressal and evaluating competition frameworks, policymakers can pave the way for robust regulations that address the unique challenges of digital markets while promoting innovation and protecting the welfare of consumers.
Saksham Malik is senior programme manager – competition law and policy at The Dialogue. Views expressed by the author are personal.
