Govt panel moots ex-ante regulation of Big Tech firms – Technology News

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A committee set up by the government on digital competition law has proposed that Big Tech firms that have the ability to influence the Indian digital market shall be brought under ex-ante provisions to ensure fair play.

Noting that digital markets have the tendency to “tip swiftly in favour of an incumbent,” the Committee proposed that monetary penalty be imposed with ex-ante obligations for anti-competitive practices in this fast-growing segment.

The penalty, it said, could be restricted to a maximum of 10% of the global turnover of the the firms which would be identified as “Systemically Significant Digital Enterprises” (SSDEs). In cases where the SSDE is part of a group of enterprises, the ‘global turnover’ cap is calculated in relation to the turnover of the entire group.

The panel’s report follows the report of the Parliamentary Standing Committee on Finance which proposed a separate digital competition law.

The government committee headed by Manoj Govil, secretary, ministry of corporate affairs, proposed that the proposed law should “apply to a pre-identified list of Core Digital Services that are susceptible to concentration.”

Recommending the thresholds and criteria for designation as SSDEs, the panel said “an enterprise is deemed an SSDE if it passes a twin test. These include ‘significant financial strength’ test which comprises quantitative proxies of economic power, i.e. India-specific turnover, global turnover, global market capitalisation, and gross merchandise value. The second is ‘significant spread’ test which evaluates the extent to which an enterprise has been present in the provision of a Core Digital Service in India on the basis of the number of end-users and business users.

According to the panel, in cases where enterprises providing Core Digital Services are part of a group, designation may not be limited to just one enterprise in the group, but group firms could be regulated as associate digital enterprises (ADGs).

Stating that not all SSDEs and ADGs providing the same Core Digital Service have the same degree of influence on the market within which they operate, it recommended that the regulations may provide for differential obligations upon different SSDEs and ADEs depending on factors such as their business models and size of their user base.

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