Withdraw proposed data usage restrictions on large digital platforms, recommends ESYA Centre Paper

New Delhi-based technology policy think tank ESYA Centre has urged the Corporate Affairs Ministry (MCA) to withdraw the provisions in the proposed digital competition law that places data usage restrictions on certain identified large digital platforms. 

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The draft Bill restricts Systemically Significant Digital Enterprises (SSDEs) from cross-using or combining personal data of end users and business users, or sharing it with a third party, without their consent.

Proposed ban

ESYA Centre has also recommended the withdrawal of the proposed ban on tying and bundling that restricts SSDEs from requiring or encouraging end consumers (and business users of core digital services) to use one or more of the other products offered by the SSDE.

There is a strong likelihood that this bundling and tying restriction provision will negatively impact the ability of MSMEs to access services like Single Sign-on, as these are often provided as part of a larger product bundles, ESYA said in a Paper.

It also highlighted that the unbundling such services may result in an increase in their prices, and reducing their availability to MSMEs that typically operate on tight budgets.

“Our Survey show that 6 out of 10 MSMEs would be negatively affected by restrictions on sign-in services of digital platforms. This ratio is twice as high as that of those in favour of such restrictions”,  the Paper added.

This Paper discusses the findings of a Survey that assessed the impact of the Draft Digital Competition Bill 2024 on MSMEs in India. The Survey covered 300 business proprietors across India.

An important facility made available to MSMEs by large online platforms are identification management services known as single-sign on. This is when a third party website uses a digital platform’s sign-on service to onboard customers. 

Research suggests that the Single sign-on system is extremely convenient for users as it spares them from managing multiple passwords and accounts. Also, this service is useful for MSMEs because it gives them a means to leverage the large user bases of digital platforms as potential customers. 

EX ANTE FRAMEWORK 

This think tank has also recommended that MCA must adopt a “wait and watch” approach and learn from the experience of the European Union and its experiments with the Digital Markets Act (DMA), to further understand the ramifications of introducing ex-ante competition laws. This is required as draft Bill does not consider the nature of stakeholder interactions in a digital ecosystem holistically, according to the Paper. 

Noting that the draft Digital Competition Bill does not factor in the symbiotic relationship between digital platforms and MSMEs, the ESYA Centre paper said this could possibly jeopardize efficiency gains in the sector. 

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Also the proposed law would lead to significant deadweight losses, as these enterprises would have to re calibrate their online commerce and advertising by diverting resources that could otherwise been used for value creation. The only beneficiaries of the draft Digital Competition Bill would be entities that directly compete with SSDEs, this think tank ‘s Paper added.

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