CCI tells blockchain stakeholders to be mindful of competition law provisions

KR Srivats New Delhi | Updated on April 11, 2021

Warns against anti-competitive clauses in contracts

The Competition Commission of India (CCI) has said that Blockchain stakeholders should be mindful of the provisions of the Competition Act while participating in a blockchain. Also, blockchain applications should not be used to exchange competition-sensitive information among competitors including recent data on prices, cost or output information of competitors, the competition watchdog said in a discussion paper prepared with EY India.

The discussion paper on blockchain technology and competition, in its broad level guidance for various stakeholders in a blockchain ecosystem, also emphasised that blockchain or smart contracts should not be designed to enable enforcement of any collusive or anti-competitive conduct of any form.

As regards provision in the Competition Act on abuse of dominance (Section 4), the CCI discussion paper has guided that any enterprise operating or participating in a blockchain, which is in a position of dominance, should avoid potentially anti-competitive behaviour such as fixing unfair or discriminatory prices or conditions or provision of services, limiting or restricting production/development of goods or services or denial of market access of goods or services. The discussion paper highlighted that India may derive economic benefits from the use of blockchain technology and that research and development on blockchains, including their different applications, their scaling up and future development, are already underway.

Important innovation

Blockchain technology is seen as an important innovation that can promote competition across different sectors of the Indian economy. Blockchains are an evolving technology and most applications based on this technology are at a proof of concept or pilot stage.

There is very little empirical information on the conduct of blockchain applications, especially from a competition law perspective.

However, the technology is attracting interest and there is a possibility that blockchains could become more pervasive, on the same scale that the internet was a few decades ago, the discussion paper noted.

Commenting on the discussion paper, Kanika Chaudhary Nayar, Partner, L&L Partners said: “The CCI’s discussion paper on blockchain technology and competition provides insight into the fact that the CCI is considering this space and the potential anti-competitive impacts it could have on the market seriously. The paper gives the stakeholders quite an in-depth look into the possible violations that the CCI may assess and course-correct.”

Published on April 11, 2021

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