By Rupin Chopra and Shantam Sharma
In the realm of digital commerce, regulatory frameworks play a pivotal role in ensuring fair competition and safeguarding consumer interests. As digital markets continue to evolve, policymakers face the challenge of updating existing laws to address the unique dynamics of the digital economy. In India, the recent recommendations by the Committee on Digital Competition Law (CDCL) and the release of the Draft Digital Competition Bill, 2024[1], signal a paradigm shift in regulatory strategy. This article aims to explore and compare the threshold limits outlined in both the Draft Bill and the existing Competition Act, 2002, shedding light on the implications for businesses and competition in the digital sphere.
Key Aspects under Draft Bill and CDCL Report
The CDCL Report emphasizes the need for a dedicated Digital Competition Act to regulate large digital enterprises proactively. The proposed Act introduces ex-ante measures, enabling the Competition Commission of India (CCI) to monitor and regulate the behavior of digital firms before instances of anti-competitive conduct occur. This marks a departure from the ex-post model of the current Competition Act, which addresses violations after they have transpired.
The Draft Digital Competition Bill identifies various anti-competitive practices prevalent among digital giants, including exclusionary behavior, preferential treatment of in-house products, bundling services, data exploitation, predatory pricing, and algorithm manipulation. By bringing such practices under scrutiny, the Draft Bill aims to foster a more competitive and fairer digital ecosystem.
Comparing Threshold Limits
To compare the threshold limits outlined in both the Competition Act, 2002, and the Draft Digital Competition Bill, let’s examine the key financial criteria:
| Criteria | Competition Act, 2002[2] | Draft Digital Competition Bill[3] |
| Financial Thresholds for Indian Enterprises | ||
| Asset | More than Rs. 2500 crore | Turnover in India of not less than Rs. 4000 crore |
| Turnover | More than Rs. 7500 crore | |
| Financial Thresholds for Worldwide Enterprises | ||
| Asset of Foreign Enterprise | More than US $1.25 billion with at least more than Rs. 1250 crore in India | Global turnover of not less than USD 30 billion, or Gross merchandise value in India of not less than Rs. 16000 crore, or Global market capitalisation of not less than USD 75 billion |
| Turnover of Foreign Enterprise | More than US $3.75 billion with at least more than Rs. 3750 crore in India | |
| Financial Thresholds for Indian Groups | ||
| Asset of Companies within Group | More than Rs. 10,000 crore | |
| Turnover of Companies within Group | More than Rs. 30,000 crore | |
| Financial Thresholds for Groups of Worldwide Enterprises with India | ||
| Asset of Companies within Group | More than US $5 billion with at least more than Rs. 1250 crore in India | |
| Turnover of the Group | More than US $15 billion with at least more than Rs. 3750 crore in India | |
Additionally, apart from asset threshold, the Draft Digital Competition Bill introduces user thresholds for enterprises to qualify as ‘Systematically Significant Digital Enterprises’[4] based on the number of end users and business users. These thresholds are as follows:
- The core digital service provided by the enterprise has at least 1 crore end users, or
- The core digital service provided by the enterprise has at least 10,000 business users.
Moreover, the CCI retains the discretion to designate an enterprise as a ‘Systematically Significant Digital Enterprise’ in respect of a Core Digital Service[5] even if it does not meet the prescribed criteria. This designation may be based on various factors, including the size and resources of an enterprise, the number of business or end users, market structure and size, scale and scope of activities, and any other relevant factor deemed necessary by the Commission.
Example for Better Understanding:
To illustrate the implications of these threshold limits, let’s consider the case of a hypothetical digital giant, TechCorp, operating in India:
- If TechCorp’s turnover in India surpasses Rs. 4000 crore, or its global turnover exceeds USD 30 billion, or its gross merchandise value in India is not less than Rs. 16000 crore, it would qualify as a “Systematically Significant Digital Enterprise” under the Draft Digital Competition Bill. As a result, TechCorp would come under the purview of the CCI, subject to regulatory scrutiny and compliance with the provisions outlined in the Bill.
This example demonstrates how the Draft Digital Competition Bill introduces comprehensive criteria to capture the dominance of digital enterprises operating in India, ensuring a level playing field and fostering fair competition in the digital marketplace.
Conclusion
The comparison of threshold limits between the Competition Act, 2002, and the Draft Digital Competition Bill highlights the evolving nature of regulatory frameworks in response to the challenges posed by the digital economy. While the Competition Act provides a baseline for regulatory oversight, the Draft Bill introduces more nuanced criteria and ex-ante measures to address anti-competitive practices in digital markets. As India navigates the complexities of digital regulation, striking a balance between fostering innovation and ensuring fair competition remains paramount.
[1] Available at https://www.mca.gov.in/bin/dms/getdocument?mds=gzGtvSkE3zIVhAuBe2pbow%253D%253D&type=open
[2] Section 5 of the Competition Act, 2002
[3] Section 3 of the Draft Digital Competition Bill, 2024
[4] Section 3 of of the Draft Digital Competition Bill, 2024
[5] Section 2(6) “Core Digital Service” means any service specified in Schedule I of the Draft Digital Competition Bill, 2024
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