Competition Law revision concerns tech firms, may increase quantum of fines

New Delhi: Companies, including Big Tech firms, are worried about the government’s response to Joint Parliamentary Committee (JPC)’s report on Competition (Amendment) Bill, 2022, which proposed a significant increase in the quantum of revenue on which anti-competitive penalties are imposed. Experts said that the proposal, if it comes to fruition, will significantly increase the amount of penalties imposed on tech firms. 

On February 8, Mint reported that the upcoming Competition (Amendment) Bill is expected to include a revised penalty clause, which will see companies abusing market dominance or stifling market competition being fined on the overall revenue of their global business. At present, India’s competition law is restricted to penalizing companies based on the revenues they earned from the specific vertical deemed to be in violation, that too only from India.

For instance, the Competition Commission of India (CCI) fined Google a total sum of ₹2,273 crore ($280 million) in two cases of violation, between October and November last year. In comparison, the European Commission (EC) said in September last year that Google would be fined a total of over $4 billion, on account of similar anti-competitive practices in Europe.

Lawyers and industry experts who spoke to Mint said that simply focusing on a lump sum penalty may not make for a blanket regulation that stems abuse of dominance. Instead, spoken orders that direct companies to course-correct themselves could play a bigger role to rein in Big Tech dominance.

“What’s important to understand is that penalties imposed on tech firms in India at the moment, by the Competition Commission of India (CCI), are not very small. Expanding this penalty scope will be a massive deterrent for tech companies, who are likely to find it a major obstacle in terms of India’s regulatory environment,” said Akshayy S Nanda, partner at Delhi-based law firm, Saraf Partners.

To be sure, India’s proposed Competition Bill revision is in line with Europe’s Digital Markets Act, which enables EC to impose fines of up to 10% of a company’s global revenue, and 20% in case of repeated infringements.

The Competition (Amendment) Bill, 2022 is expected to be tabled in Parliament in the ongoing session itself after a scheduled ‘recess’. On February 7, the government offered its responses on the Competition Bill, based on submissions made by a JPC chaired by MoS Finance, Jayant Sinha.

“It’s important to understand the objective of regulating competition. Fines have always been used as a deterrent, and unless they are large, they won’t serve the purpose. That is what serves as a rationale for taking a percentage of overall revenues from global markets of a company into account, when computing a penalty. But, whether that acts as a sufficient deterrent or disciplining factor remains to be seen, once the law comes into effect,” said Isha Suri, senior researcher at policy think-tank, Centre for Internet and Society (CIS).

However, Suri added that the sole factor of penalties may not be enough to force companies deemed to be abusing market dominance, into correcting their course of action and opening up sectors for competitive market practices.

“There are two things that a nation’s regulators can do — one, impose an ex-ante approach that puts excessive obligations on a digital firm. The second, in case of an abusive market conduct verdict, is to impose a large fine quantum. But, whether it has the requisite deterrent effect on the market remains to be seen. For enabling rectifications of market practices and not just deter companies from abusive practices, behavioural remedies under the Competition Bill actually have a more damaging impact on a company’s business model, and are likely to correct the market,” she added.

A senior industry executive who deals with policy issues concerning Big Tech said that simply imposing penalties may not be deemed sufficient to regulate and force compliance from Big Tech, and closely inspecting cases with clear orders that restrict companies from certain industry practices would be a more important factor to consider.

“Most of the Big Tech companies that indulge in anti-competitive practices have huge financial stamina to see through such penalties, and the key concern would be to make sure that orders given alongside the penalty are followed, in order to maintain the hygiene of markets,” the person said.