Analysis of the 53rd Report of the Parliamentary Standing Committee on Finance

on
“Anti-competitive Practices by Big Tech Companies”

PRELIMINARY: The Parliament Standing Committee on Finance (“Committee”) proposed a set of recommendations regarding the anti-
competitive practices by the Big Tech Companies in digital market. This Committee proposed the classification of Big Tech Companies as
Systematically Important Digital Intermediaries (“SIDIs”) and recommended to introduce a new law to regulate such SIDIs. Please see below a
short overview of the changes proposed and the implication thereof.

Sl. Recommendation of the Discussion by the Committee Similar regulation in other Implications
No. Committee jurisdictions
1. Traditional Physical Markets vs Committee points that digital Digital Markets Act (“DMA”), Ex-ante regulation is a
Digital Markets and Need for businesses tend to have rapidly European Union, Proposed welcome move, which may be
ex-ante Regulation: diminishing marginal costs as they American Innovation and Choice beneficial for the competitive
Competitive behaviour needs to be grow. Further, as scaling quickly is Online Bill (AICO), USA, landscape of digital market in
evaluated ex ante before markets the best strategy, the same often Proposed Open Markets Act, USA India. As rightly noted by the
end up monopolized instead of results in winner-take all market promote ex ante regulation. Report, the digital markets tend
the ex-post evaluation being outcomes. Hence, the digital to 'tip' quickly, which
carried out at present markets ‘tip’ quickly and on or two eventually makes the market
prone to anti-competitive
 winners or leading players emerge behaviour by the leading
in a short span of time. players. It is often seen that due
to several barriers to entry, it is
difficult for a new entrant to
compete effectively. Hence, ex
ante regulations, which would
promote competitive
behavorial remedies, are
desirable.
Defining Systemically In order to impose ex DMA, European Union: DMA The proposal for identification
2. Important Digital ante regulations, the committee defines such entities as SIDIs, based on objective
Intermediaries/Digital suggests that the stakeholders, ‘gatekeepers’ and sets criteria for criteria will assist in effective
Gatekeepers: working with the Competition defining the same. Similarly, regulation over ‘big techs’. It is
India must identify a small number Commission of India (CCI) and the proposed AICO Act and Open important to note the concept
of leading players or market Central Government must arrive at a Markets Act define ‘covered of “SIDIs” is not the same as
winners that can negatively reasonable definition of SIDIs. platform’ “dominant enterprise”, and
influence competitive conduct in there may be more than one
the digital ecosystem, as SIDIs in the same relevant
Systematically Important Digital market. As noted in the Report,
Intermediaries (SIDIs) based on there may be more than one
their revenues, market platform, which may act as a
 capitalization, and number of gateway for business users.
active business and end users. Often, their conducts may not
Further, behaviour of such SIDIs be considered abusive under
should be regulated ex ante. the existing regime as the
interpretation given by the
Courts till now is that there can
be only one dominant
enterprise. The proposal by the
Committee aims to bridge the
gap in the tech space by
imposing ex ante regulation.
Defining SIDIs would also
ensure that the regulations are
not imposed on the enterprises
arbitrarily, and the same is
minimal and only where it is
necessary. A similar kind of
approach can also be seen in
the proposed Digital Personal
Data Protection Bill, 20221 to

1
Available here: The Digital Personal Data Potection Bill, 2022_0.pdf (meity.gov.in)
 define significant data
fiduciary and put special
compliance-related obligations
on them.
3. Anti-Steering Provision: Anti-steering provisions are clauses DMA, European Union: Chapter 3, Anti-steering provisions by
SIDIs should not impose Anti- whereby a platform prevents the Article 5 and clause 7 prohibits such enterprises which act as a
Steering Provisions business users of the platform from anti-steering by a ‘gatekeeper’ gateway for business users
‘steering’ its customers to offer platform. have significant anti-
other than those provided by the competitive impacts.
platform that may be cheaper or Proposed AICO Act, USA: Restricting anti-steering
otherwise potentially attractive Section 3, clause 5 Makes it provisions would ensure
alternative in terms of a better unlawful for a ‘covered platform’ unlocking of market and
interface. to condition access to the platform. opening the competition. The
same is in the line of the
Proposed Open Markets Act, USA decisions of the CCI, which
under its Section 3, clause (a) recently, in the Google Play
restricts anti-steering by such Store order, Case No. 7 of
covered companies 2020, has categorically
observed that Google’s anti-
Telecommunication Act, South steering provisions have anti-
Korea restricts app market competitive effect in the
 business operators forcing a market. Such regulation, in line
specific method of payment onto with the objectives of the
business provides on such app Competition Act, 2002, will
market. ensure ‘freedom to choose’.
The same would also increase
efficiency and innovation.
4. Self- Preferencing/ Platform The Committee observed that self- DMA, European Union: In The views expressed by the
Neutrality: A SIDI must not preferencing is a practice whereby a Chapter III, Article 6, Clause 5 it Committee echoes the notion
favour its own offers over the platform favours its own services or prohibits favourable ranking and of promoting free and fair
offers of its competitors when its subsidiaries directly or indirectly related indexing of services and competition in the platform
mediating access to supply and in situations when it has a dual role products offered by the gatekeeper market wherein the control is in
sales markets, specifically when of providing the platform and itself. the hands of the platform, and
presenting its own offers in a more competing on the same platform. they have vertical integration in
favourable manner; and when The Committee opined that platform Proposed AICO Act, USA: similar lines of products/
exclusively pre-installing its own neutrality must be ensured at all Section 3, Clause (a) (1); Section services. This also remedies the
offers on devices or integrating costs as otherwise it can lead to a 3, Clause (a) (2)); Section 3, concern of eliminating
them in any other way in offers negative effect on downstream Clause (a) (3); Section 3, Clause consumer bias and thus
provided by the platform. markets, and an unfair advantage is (a)(5): It shall be unlawful for a offering them a free and fair
provided to leading player i.e. the person operating a covered choice. Even the CCI in its final
platform itself. platform in or affecting commerce order in Case No. 14 of 2021
to self-preference its own or has opined that Platforms with
 related party lines of products or gatekeeper power can engage
services and discriminate others in in ‘self-preferencing’ to
a manner that would materially leverage their position into
harm competition. vertically related markets.
Their ability to do this may be
Open App Markets Act, USA: enhanced by consumer
Section 3, Clause (e) (1)), says a behavioural biases, which
Covered Company shall not increase the ability of platforms
provide unequal treatment of Apps to guide their activity towards
in an App Store through their own vertically related
unreasonably preferencing or services, through carefully
ranking the Apps of the Covered designed choice architecture.
Company or any of its business The CCI in its market study
partners over those of other Apps report on e-commerce in India
in organic search results. (“E-commerce Report”)2 has
also rightly pointed out that the
10th amendment of the German concern regarding platform
Competition Act: Section 19(a), neutrality emanates from
Clause 2 says the situations where the online
Bundeskartellamt may also platforms serve as both a

2
Market study on e-commerce in India, Competition Commission of India, 8th January, 2020. Available here
 prohibit undertakings of marketplace and a competitor
paramount significance from on that marketplace and the
favouring its own offers and three elements, which
indulging in self-preferencing according to the business users
practices. of the platforms, are
susceptible to
manipulation/exploitation by
platforms, are search results,
‘sellers’/service providers’ data
and user review/rating
mechanisms.
5. Bundling and Tying: A SIDI The Committee has noted that DMA, European Union: Chapter Bundling and tying are a by-
should not force business users or bundling and tying are prevalent III, Article 5, Clause 8 says that the product of leveraging
end users to subscribe to, or across sectors in the digital market gatekeeper shall not bundle one of entrenched market power and
register with, any further services creating asymmetry in pricing, its services with another and offer coercing users to compulsorily
as a condition for being able to use, binding developers into taking all it to its business users. opt-in to the bundled offerings.
access, sign up for or registering services from app store operators The prime example of such
with any of that platform's core and removing competition from the As per Chapter III, Article 6, anti-competitive conduct came
platform service. market thus harming innovation. Clause 3, the gatekeeper shall into light through CCI’s order
This also leads to the consumer not allow and technically enable end in Case No. 07 of 2020 and
being given an option to choose, and users to easily un-install any Case No. 39 of 2018 wherein
may in fact lead to her paying higher software applications on the Google has bundled its varied
prices ultimately. Further, bundling operating system of the gatekeeper offerings not intrinsic for its
and tying enable leading players to without affect other related usage business users as part of one
leverage their market power in one for the user. package. The remedial package
core platform service to another. For as proposed by the Committee
example, food delivery apps make it Proposed AICO Act, USA: will unlock the market, and
mandatory for restaurants to only Section 3, Clause (a)(S) says it ensure competition at every
use the platform's delivery services. shall be unlawful for a person point of the value chain. The
Similarly, a mobile OS encourages operating a covered platform in or CCI in its E-Commerce Report
the user to their own search engine. affecting commerce to condition has also discussed the issue of
Upstream networks offer bundles of access to the covered platform or bundling prevalent in different
channels to downstream distribution preferred status or placement on sub-segments of the e-
companies and earn advertising the covered platform on the commerce industry wherein
revenue when their channel is purchase or use of other products exploitative and unfair terms in
viewed. or services offered by the covered contracts, which suited the
platform operator that are not part interest of the platforms but
of or intrinsic to the covered undermined the business model
platform. of the service providers are put
in the contract, which are often
10th amendment of the German in the nature of bundling of
Competition Act: Section 19(a), products and services.
 Clause (2), says that the
Bundeskartellamt may prohibit
undertakings of paramount
significance from taking measures
that result in the exclusive pre-
installation or integration of offers
provided by the undertaking.
6. Data Usage: The committee has The Committee highlighted that the DMA, European Union: Chapter Data as a non-price factor is
recommended that a SIDI should data advantage of market leaders, Ill, Article 5, Clause 2 talks about very crucial in terms of
not: which/who have amassed wealth of the responsible data usage and not determining market gain. The
• process, for the purpose of personal data over a period of time, making the access of user’s data CCI in Suo moto Case No. 01
providing online advertising overshadows the offerings of newer compulsory on its services offered. of 2021 realized the importance
services, personal data of end platforms in terms of quality and of data in digital markets and
users using services of third data fed personalization, due to Chapter 111, Article 6, Clause 2 accordingly also passed an
parties that make use of core which the big tends to get bigger says that the gatekeeper shall not order for the DG to investigate
services of the platform; while a small entrant struggles to use the data of its business users. Whatsapp privacy policy and
• combine personal data from attain a critical mass of users and practices. The order was also
the. relevant core service of the user data. Monopolistic control over Proposed AICO Act, USA: upheld by the Hon’ble Delhi
platform with personal data data, inevitably leads to a Section 3, Clause (a)(7)), it shall be High Court and the Supreme
from any further core services monopolistic digital market. unlawful for a person operating a Court in appeal. The CCI in
or from any other services Privileged data from one market covered platform to abuse the Case No. 14 of 2021 has also
 provided by the platform or may be, thus, used by a leading usage of data extracted from deprecated such practice of
with personal data from third- platform in another market to gain consumers. abusing data by Big-tech
party services competitive advantage. This further companies and using it to
• cross-use personal data from leads to the position of the leading Proposed Open App Markets App, leverage its position and enter
the relevant core service in platform getting entrenched. USA: Section 3, Clause (c), a into another market. As has
other services provided Second, the use of data needs to be covered company shall not use been rightly said in the
separately by the platform, seen as a zero-price or non-price non-public business information Committee report,
including other core services of factor that can hamper privacy. derived from a third-party app for monopolistic control over data,
the platform, and vice-versa the purpose of competing with that inevitably leads to a
• sign in end users to other app. monopolistic digital market.
services of the platform in Furthermore, data privacy has
order to combine personal 10th amendment of the German also become a competition law
data, unless the end user has Competition Act: Section 19(a), issue which needs attention of
been presented with the Clause 4, says that the the regulator as was adjudged
specific choice and has given Bundeskartellamt may prohibit by Bundeskartellamt in the
consent undertakings of paramount case against Facebook and its
• SIDI should not use, in significance from creating or data sharing practices.
competition with business appreciably raising barriers to
users, any data that is not market entry or otherwise
publicly available, that is impeding other undertakings by
generated or provided by those processing data relevant for
 business users in the context of competition that have been
their use of the relevant core collected by the undertaking, or
services of the platform, or of demanding terms and conditions
the services provided together that permit such processing, in
with the relevant core services, particular.
including data generated or
provided by the end users of
those business users.
7. Mergers and Acquisitions: The CCI is not able to control the DMA, European Union: Chapter The Committee says a SIDI
The SIDI should inform the CCI mergers and acquisitions in the III, Article 14, Clause 1 & 2, says forming part of a combination
about the concentration where the digital space because of the present a gatekeeper shall inform the needs to inform the CCI even if
merger and acquisitions of threshold of assets and turnover. Commission of any intended the combination does not meet
enterprises providing services in concentration, where the merging traditional asset thresholds but
the digital sector. entities or the target provide may still have an effect on
services in the digital sector. competition.
SIDI should inform the CCI about Further, the gatekeeper shall also
such concentration prior to describe the gatekeeper’s annual The CCI will assess the
implementation and following the turnover, their numbers of yearly combination based on a deal
conclusion of the agreement, the active business users and their value threshold.
announcement of the public bid, or numbers of monthly active end
users.
 the acquisition of a controlling The Ending Platform Monopolies This would prevent mergers
interest. Bill, USA: It is unlawful for a like Facebook and WhatsApp
platform to control or have a and prevent abuse of
beneficial interest in the line of dominance in the digital
business. market.

UK (Government’s response to However, the Committee’s

Constitution on a pro-competition recommendation is limited on
regime for digital market): The the computation of the deal
firms with Strategic Market Status value threshold.
(SMS) will have to report their
most significant transactions.

8. Pricing /Deep Discounting: SIDI When the platforms with market DMA, European Union: Chapter This recommendation of the
should not limit business users power engage in the practice of deep III, Article 5, Clause 3, says that Committee will prevent
from differentiating commercial discounting and push prices to the business users of online predatory pricing and deep
conditions (like, pricing, increased below-cost levels, then the offline intermediation services of discounting. The CCI has
commissions, delisting, etc.) on its and online retailers will be driven gatekeepers can freely choose received information against e-
platform. out of the market. alternative online services or can commerce giants like Amazon
directly sell online. Moreover, the and Flipkart, which were
gatekeeper should not restrict the alleged to have engaged in anti-
SIDI should not prevent business business users from offering the competitive practice like
users from offering the same same product or service through predatory pricing and deep
products or services to end users other intermediaries or through discounting.
through a third-party online their own platform.
intermediary or through their own The objective of the
direct online channel at prices or Proposed Open App Markets App, competition law would be
conditions that are different from USA: Section 3(a)(2) & (3) says an effectively enforced if the e-
those offered by SIDI. app developer should not be commerce platforms adopt
restricted from offering different transparent policies on
pricing terms or conditions on discounting in order to self-
another app store. regulate anti-competitive
practices like predatory pricing
and deep discounting.

Further, in Google Play store

order, Case No. 07 of 2020, the
CCI observed that Big Tech.,
like Google, is found engaged
in forcing app developers to
use its billing system which
results in restricting the choice
 available to select other
payment processing system.
Hence, a transparent.

9. Exclusive Tie-ups: SIDI should Exclusive tie-ups by dominant DMA, European Union: Chapter Exclusive tie-ups are vertical
not prevent business users from digital platforms can foreclose III, Article 5, Clause 3 says the anti-competitive agreement
offering the same products or markets and constrict competition gatekeeper should not restrict the which is prohibited under the
services to end users through a and can ultimately lead to increased business users from offering the Competition Act. Further, a
third-party online intermediary or prices for the end-user. same product or service through dominant digital player can
through their own direct online other intermediaries or through abuse its dominance by forcing
channel at prices or conditions that their own platform. unfair conditions in sale of its
are different from those offered by service. Recently, in Case No.
SIDI. 14 of 2019, the CCI found that
Proposed Open App Markets App, the dominant player in the
USA: Section 3(a)(2) & 3(1)(3) market for online
says an app developer should not intermediation services for
be restricted from offering booking of hotels, is engaged in
different pricing terms or forcing price parity clause on
conditions on another app store. its business users.
 So, the Committee rightly
observed that SIDI should start
self-regulating their conduct by
not entering into an exclusive
tie-ups, hence preventing
foreclosure of market.

10. Search and Ranking SIDI provides services like ranking, DMA, European Union: Chapter In Case No. 14 of 2019, the
Preferencing: query, click and view data in III, Article 6, Clause 11 says the CCI directed the dominant
SIDI must provide service to relation to free and paid search gatekeeper shall provide service to intermediation platform to
a third party undertaking providing generated by end users on its online a third-party undertaking in provide to all hotels listed on its
online search engine in FRAND search engines. FRAND terms. platform parity with other
terms. comparable hotels/hotel chains
Such services play a critical role for Proposed AICO Act, USA: on visibility, terms of ranking
SIDI should anonymise personal the third-party undertaking, like an Section 3(9) says the online and placement in a fair
data for services like query and advertiser, to reach the right platform shall provide search and reasonable and transparent
click and view data. customers. ranking functionality in fair and manner. The issue of rigged
non-discriminatory terms to all its search and ranking preference
SIDI should maintain a fair and business users. also fetters with consumer
non-discriminatory practice while choice and preferences.The
providing search and ranking Committee aptly recommended
functionality between business that the Search and rank
users. preferencing should be
transparent, hence the SIDI
must provide service to a
business user under fair and
non-discriminatory terms. The
CCI in the e-commerce report
also suggested for laying down
search and ranking parameters
by the platforms and also
situation where the main
parameters include the
possibility to influence ranking
against any direct or indirect
remuneration paid by business
users, Additionally, in the
inaugural address by the
Chairperson, CCI on CII
Annual Conference on
Competition Law & Practice
on 10.12.2021, he said that
 platforms which acts as a
central point of interaction
between different sides in
digital markets, remain neutral,
offer a level playing field and
allow enterprise, big or small,
to compete on merit

Thus, the suggestion of the

Committe is a welcome move
and would democratize the
platform markets.

11. Third-party Applications: The The Commission discusses on how Digital Markets Act, EU: Chapter It will provide end users with
Commission recommends that the gatekeepers restrict installation or 3, Article 6, Clause 4: enable the alternatives, and the power of
recognized SIDI) should allow the operation of third-party installation and effective use of decision making based on their
installation and effective use of applications. Referring to the anti- third-party software applications preference rather than a
third-party software applications steering provisions, they state as to or software application stores forceful choice imposed on
or software application stores, how such restrictions do not provide American Innovation and Choice them.
using its operating system, by the user any choice of alternatives Online Act, USA: Section 3(a)(8):
which may provide him with a better App Pre-installation and Steering:
 means other than the relevant core interface or better functionality It is unlawful for the operator of a
services of the platform. among other benefits. For instance, covered platform to “materially
Further, SIDI should not take away provisions in Apple Developer restrict or impede” platform users
from the end user his choice, Program License Agreements or the from uninstalling preinstalled apps
technically or otherwise, to set the App Store Review Guidelines or changing default settings.
downloaded third-party software prohibits app developers from
application or software application creating any store or storefront or Open Markets Act, USA: Section
store as his default. how Google puts out an alert that it 3(d): Interoperability
is a risky application while installing
third party apps. This results in
denial of market access for potential
app distributors/ app-store
developers.
12. Advertising Policies: Certain With marketing becoming largely Digital Markets Act, EU: With content consumption
recommendations made by the digital, there are a range of • Chapter 3, Article 5, Clause moving to online platforms,
Committee to ensure transparency competition concerns which need to 2(a): not process personal data digital ad marketing has also
in advertising policy are such as: be mentioned. Firstly, as to how of end users using services of gained prominence. Big Tech
• SIDI should not process consumer data can be leveraged third parties that make use of Companies are usually
personal data of users using with the help of Artificial core platform services of the involved in several levels of
services of third parties that Intelligence for cost-effective gatekeeper supply chain, and thus action is
targeted advertising. Secondly, there
 make use of core services of is increased market concentration • Chapter 3, Article 5, Clause 9: required against self-
such platform. and integration at many levels of certain information regarding preferencing.
• Advertisers to be provided supply chain. Thirdly, with remunerations to be exchanged
with information as to the price platforms operating at all levels of • Chapter 3, Article 6, Clause 8:
paid by the advertiser and supply chain, there are problems provision of performance
remuneration received by the such as conflict of interest or self- measuring tools
publisher. preferencing, providing such Big-
• Access to performance tech companies with an unfair edge
measuring tools of the over the market. Because of such
gatekeeper. lack of transparency and
• Access to data to advertisers information asymmetry in ad-tech
and publishers to check on services, it prevents complete
their utilization of ad utilization of ad inventory of the
inventory. publishers.
Requirement of regulations to Moreover, Big Tech companies
ensure fair and transparent contract have been able to perform well in
establishment between news search advertising because of use of
publishers and SIDI. such companies’ crawlers by
websites to attract traffic, in turn
increasing their consumer activity
and data. Also, such companies’
 policies allow apps to host
advertisements pertaining to skill-
based contests or tournaments, and
such host has no ownership interest
in advertised services.
13. Need for Digital Competition The digital market presents unique DMA is a separate legislation The Report fails to give
Act: The Committee recommends needs which necessitate which has been enacted to lay sufficient reasons for enacting
introducing a Digital Competition enhancement of the present down harmonized rules to ensure a separate legislation for
Act which would ensure a fair, competition regime. As the contestable and fair markets in the enacting a separate legislation
transparent and contestable digital Committee notes, this digital market digital sector across the Union for regulating digital
ecosystem, enhancing the start-up is different from the traditional where gatekeepers are present. competition in India. We
economy of the country. market as they are driven by massive Similarly, AICO Act is currently believe that Section 63 of the
increasing return, and work not only being considered by Congress in Competition Act, 2002 gives
on scale and scope effects, but the USA. sufficient powers to Central
learning and network effects. This Government to make rules to
makes digital market, a winner-take- carry out the provisions of the
all market, providing this Act. Further, the provisions of
monopolistic player competitive the Act in itself are widely
advantage. worded to cover the anti-
competitive conducts of such
SIDIs. For example, Section
3(1) of the Act mandates that
no enterprise shall enter into
any agreement which is likely
to cause an appreciable adverse
effect. (AAEC) Similarly, the
factors of assessing the AAEC
under Section 19(3)(f) also
covers ‘technical’
developments. The Committee
could have further explored the
possibility of making necessary
amendment in the existing Act
to deal with digital markets and
bring in ex ante regulations.
Further, a separate statute for
big tech platforms may lead to
some overlaps and conflicts,
which may further complicate
the regulation process and also
judicial interventions.
14. Revamping Competition Competition Commission of India A Digital Markets Unit has been The proposal for Digital
Commission of India: should be strengthened to take on established by the Competition and Market Unit may be helpful as
new responsibilities resulting from Markets Authority to deal with investigation in digital market
A specialised Digital Markets Unit
the surging digital market. The anti-competitive practices in the would require a specialised
to be established within the
monopolistic players in the market digital markets. Although it is a understanding owing to the
Commission to
can use their power to non-statutory body yet, it has been technicalities involved. As
• closely monitor SIDI and
• Extract data/rent from accorded with responsibilities such proposed in the Competition
emerging SIDI
consumers as Amendment Bill, 2022, the
• provide recommendations to
• Restrict innovation by buying • preparatory work to implement composition of the
Central Government on
out possible competitors the statutory regime Commission would also
designated SIDI
• Use advantage in one market to • advising government on include a member having
• review SIDI compliance
gain advantage in other markets establishing the statutory expertise in technology. Hence,
• adjudicate on Digital Market
regime there is no requirement to
cases
evidence-gathering on digital create a different adjudicating
• efficient monitoring of digital
markets. unit for digital market.
markets
• monitoring unfair practices of
digital players other than SIDI
CONCLUSION

The Committee has recommended some bold steps for regulating the digital market, which may result in promotion of competitive behaviour in
the market. The same also addresses certain gaps which exists in the present Act as it stands today. For instance, there may be more than one SIDIs
in the same relevant market (falling outside the scope of dominant enterprise) and the proposed regulation will govern the competitive behaviour
of all such the entities. The proposal of the Committee is also in line with the international practices in other jurisdiction, such as the European
Union. Internet penetration in India is high, which, as suggested by the Committee, would increase substantially by in the future. Hence, it would
be an appropriate step to take a timely action and ensure that the digital market remains competitive. The time is ripe for bring into regulation and
measures, including emboldening the present Act to deal with big tech.

Overall, the proposal of the Committee, largely addresses the concerns of the stakeholders, without causing any prejudice to the ‘big techs’. The
idea is to ensure that the market remains open and contestable and ensure competition across the entire value chain.