The European Union has enacted the Digital Markets Act (DMA). The purpose of the law is to tackle the anti-competitive practices augmented by the rise of Big Tech companies, hitherto considered positive, equitable and cohesive. The Act is a principle-based legislation which identifies certain business practices as anti-competitive on an ex-ante basis giving due weightage to efficiency effects associated with it. Even though the DMA was enacted back in 2022, its substantial provisions came partly into force in 2024 when the regulated entities, referred to as ‘gatekeepers’ in the law, filed their compliance report versions before the European Commission (EC) detailing the changes made by them by March 6.
Background
The rise of Big Tech firms has redefined the business conducted globally. Starting from the computer Operating System (Windows), tech entities have expanded their business lines to mobile services, search engine services, social media, e-commerce, gaming platforms and so on. The growth has been such that some of the companies like Google, Meta, Amazon, Microsoft and Apple are being considered as inevitable partners for any business to be sustainable in the digital world. The ascent has been mostly progressive where not only Big Tech firms’ revenues swelled up but it also brought prosperity for the domestic citizens and small businesses. The fundamentals of this growth were free market and enterprise where the governments across the world duly promoted innovation in the economy to realise the entrepreneurial spirit present within.
Excess of anything, however, could prove to be bad and as it turned out, ‘promoting innovation’ was a no outlier. For instance, there have been more than 100 antitrust suits pending against Google Inc. for anti-competitive conduct across the globe where a similar number of cases against other Big Tech firms might still be largely unknown. These cases were filed by the competitors of Big Tech firms, their vertical partners and consumer associations alike thereby further aggravating the issue.
Objectives of competition law
It is relevant here to discuss the objectives of competition law and policy. The first antitrust legislation across the world was the Sherman Act enacted in 1890 by the US. There have been multiple competition laws since then, including Articles 101 and 102 of the Treaty of the Functioning of the European Union (TFEU) and the Competition Act, 2002 (India), however, the core premise of these legislations has been to provide an equal and fair opportunity to various economic players present in the market. The DMA is an extension of this premise where the legislature has identified certain practices to be considered anti-competitive on an ex-ante basis and directed the companies to refrain from such practices in the interests of a level playing field.
Substantive provisions of the DMA
Some of the substantive provisions of the DMA include bundling, tying and self-preferencing. A typical example of tying could be considered as buying an Android smartphone and ‘tying’ usage of Google Maps, or Gmail with it. Self-preferencing could be understood in the context of an e-commerce ecosystem where a company shows its products on top of the search results when other third-party sellers have also listed their products on the same platform. Apart from the mainstay, the gatekeepers are further directed to refrain from practices such as obtaining ‘general consent’ for the usage of data and utilising it for generating services across the portfolio. The legislature has further cast a positive obligation upon the companies to ensure that the processes adopted by it operate on the principle of transparency and interoperability. Depending on the complexity of the technology involved, the companies may have an extended time of up to two years to comply with this provision of the DMA and report to the European Commission (EC). This would be in line with the purported objectives of the law, i.e. to provide equal and fair opportunity to various economic players present in the digital ecosystem.
Indian policy landscape
It is suggested that the Indian competition scenario is currently governed by the provisions of the Competition Act, 2002. The substantive provisions of the law include anti-competitive agreements, abuse of dominance, merger control and competition advocacy. Currently, there is no express provision under the law which could put a check on the anti-competitive practices of digital marketing companies like dubious data processing policies, strategic cementing of the incumbent position and so forth. There have been a few orders passed by the Competition Commission of India (CCI) under vertical agreements and abuse of dominance provisions holding the tech companies in violation of the law, however, all of them have been on the ex-post basis. This would simply mean that the Commission has to conduct a detailed procedure followed by economic analysis to return a finding of the contravention. This defeats the purpose of the law as a lot of time is wasted thereby delaying the course correction of the market.
Also read: Is India Adequately Prepared to Regulate Big Tech?
Way forward
The harm caused by the anti-competitive practices of the Big Tech companies is apparent. Time and again, the current Indian competition legal framework has proved to be insufficient to tackle the nuances of the digital markets. The need of the hour may be to learn from the best global practices and enact similar legislation along the lines of the DMA duly factoring in the local conditions. The Digital Competition Act (‘DCA’) as recommended by the CDCL in India might be a good start to begin with[3]. Such an enactment would not only be in line with the constitutional mandate of ensuring equality but also fulfil the objectives of the economic policy of the government.
Sumit Jain and Abhishek Raj are Directors at the Centre for Competition Law and Economics (CCLE).
