Parliamentary panel expresses need for Digital Competition Act to tackle gig economy

India needs to enact a new Digital Competition Act and prescribe a code of conduct for tech giants so that they do not stifle competition with their market power, Parliamentary Standing Committee on Finance led by BJP’s Jayant Sinha said in a set of recommendations on Thursday.  

The committee, in its report titled ‘anti-competitive practices by Big Tech companies’ tabled in Parliament on Thursday listed a set of undesirable practices observed in the digital economy and said that a code of conduct-based approach (ex-ante approach) was needed for digital market winners called digital market gate keepers.  

The undesirable market practices flagged by the panel include e-commerce platforms pushing their own private labels over third party brands sold in the platform, using customers’ personal data to get ahead of competition and bundling different products and services.

The panel had earlier this month gave its report on the Competition Amendment Bill, 2022 that is before the Parliament.

Mint had reported on 18 August that the government was considering ex-ante approach for regulating competition in digital markets for which a Digital Markets Act was being contemplated on the lines of similar legislation in the EU. This is to “ensure a fair, transparent and contestable digital ecosystem, which will be a boon not only for our country and its nascent start-up economy but also for the entire world,” the panel said.

The panel also said in its latest report that digital businesses tend to have rapidly diminishing marginal costs, grow and gain scale quickly leading to winner-take-all market outcomes. Hence, digital markets ‘tip’ quickly and one or two winners or leading players emerge in a short span of time.  

By the time policies can be formulated or anti-competitive behaviours be adjudicated, markets tip in one direction and a winner emerges. Therefore, competitive behaviour needs to be evaluated ex-ante before markets end up monopolized instead of the ex-post evaluation being carried out at present, the panel said.

Ex-ante approach is forward-looking regulation in contrast to initiating an investigation after an anti-competitive act has been committed--the ex-post approach.  

The panel said systemically important digital market gate keepers, who can negatively influence competitive conduct in the digital ecosystem needs to be identified based on their sales, capitalization, and the number of business and end users. The code conduct should be applicable to them.

The panel highlighted ‘anti-steering’ provisions in e-commerce platforms which prevent its business users from steering its customers to cheaper or otherwise attractive alternatives. It also flagged the practice of ‘self-prefencing’ or absence of platform neutrality in ecommerce business. This refers to an e-commerce platform favouring its own or a subsidiary’s product or service over that of other business users in the platform. This happens when the platform has its own private label.

“The Committee strongly recommend that a systematically important digital intermediary (SIDI) must not favour its own offers over the offers of its competitors when mediating access to supply and sales markets….,” said the report.

Bundling and tying different products and services are prevalent across sectors in the digital market which enables leading players to leverage their market power in one core platform service to another, the report said.  

The Committee also recommended that digital market gate keepers should not exploit the personal data of end users of the platform in certain ways for advertising to ensure level playing field. Such data should also not be combined with data from other sources for advertising. Nor should the platform sign in end users to other services in order to combine personal data, without the end user’s specific choice and consent, the report said.

Also, digital market gate keepers have to inform Competition Commission of India (CCI) of any intended mergers and acquisition in certain cases even if the deal does not meet the asset-sale threshold for seeking CCI clearance.