Govt panel moots ex-ante regulation of Big Tech firms

 Observing that these marketplaces tend to "tip swiftly in favour of an incumbent," the Committee proposed monetary penalties in addition to ex-ante restrictions for participating in anti-competitive activity in this rapidly growing digital sector. (Reuters)

In order to maintain fair competition, a government-appointed committee on digital competition legislation has suggested imposing ex-ante conditions on Big Tech companies that possess the capacity to impact the Indian digital market.

The Committee suggested imposing monetary penalties together with ex-ante requirements for engaging in anti-competitive conduct in this rapidly expanding digital market, given its observation that these markets tend to "tip swiftly in favour of an incumbent."

It said that the fine may be limited to no more than 10% of the companies' worldwide revenue that would be classified as "Systemically Significant Digital Enterprises" (SSDEs). When an SSDE is a member of a group of businesses, the "global turnover" cap is determined by taking the group's total turnover into account.

The Parliamentary Standing Committee on Finance's report, which suggested a different digital competition statute, was followed by the panel's report.

A pre-identified list of Core Digital Services that are susceptible to concentration is where the new rule should "apply," according to the government committee led by Manoj Govil, secretary of the ministry of corporate affairs.

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An organization is considered an SSDE if it passes a twin test, according to the panel, which also recommended the thresholds and requirements for classification as such. One of these is the "significant financial strength" test, which consists of quantitative measures of economic power such as gross merchandise value, worldwide market capitalization, turnover particular to India, and turnover globally. According to the quantity of end users and business users, the second test, known as the "significant spread" test, assesses how much a company has been involved in the delivery of a Core Digital Service in India.

The panel stated that in situations where businesses offering Core Digital Services are a member of a group, the designation could not be restricted to just one business within the group; instead, group businesses might be subject to regulation as associate digital businesses (ADGs).

It was suggested that the regulations might impose varying obligations on various SSDEs and ADEs based on variables like their business models and user bases, given that not all ADGs and SSDEs offering the same Core Digital Service have the same level of influence on the market in which they operate.

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