Amidst the increased reliance on digital technology and the surge in global data usage, the move to regulate the digital industry seems illogical. In an era of level-playing field, going global and developing unicorns, any protectionism move will not yield dividends and could prompt small and mid-size businesses to stay away from digitisation.

The Digital Markets Act, to be implemented in the European Council, is being studied by policymakers the world over. The DMA, in its urge to regulate BigTech, seems to have missed the point that Big is not necessarily Tech. The Amazons and Walmarts of this world are e-commerce players and should be viewed as part of the retail sector, whereas Google and Apple are part of the app ecosystem and should be viewed as such. However, when the same law is sought to be applied to such different worlds, there is a cause for concern.

The new legislation is likely to have an impact on how tech companies, including Apple, Google and Meta, conduct their business due to the control over distribution, whether it be for apps, platform ads or even communication. While these players hold 96 per cent of the market, whether they are abusing their dominance and preventing others to compete is the debate.

Tighter regulation

The implementation of DMA will likely be viewed as a green signal by India’s technology policy activists to enact their own regulations for stricter restraint of major digital corporations. The recent recommendation by the Parliamentary Standing Committee on Commerce, to identify “gatekeeper” platforms “of a specified scale” for tighter regulation, is of concern. To realise the goals of the domestic digital economy, increasing competition cannot be achieved by placing restrictions on digital enterprises irrespective of their size.

In a developing digital economy like India’s, general laws like the DMA of the West might not work efficiently. There are additional competitive paradigms, such as traditional firms versus their digital counterparts, and international digital enterprises versus Indian businesses.

Balance these conflicting factors in a way that improves India’s competitiveness, maintains value and competition in the local digital economy and keeps customers fulfilled will be a challenge. It will take a lot more than a legal requirement, intended to limit significant digital corporations, to resolve this.

The DMA further forbids gatekeepers from exploiting data from one service to their own advantage and from self-preferencing. Any organisation with a significant share of the market, one that offers a central platform service as internet intermediaries, search, social media, messaging and operating systems, or one that enjoys an entrenched monopoly, qualifies as a gatekeeper.

A 2021 poll revealed that 42 per cent of respondent start-ups intended to expand globally in 2022, citing improved access to people, money and business prospects as justifications.

India cannot move forward on this path without placing challenges on start-ups becoming unicorns and contributing to the digital economy. The legislation might lead to minimisation of home-grown digital businesses.

Furthermore, as the idea of protectionism becomes the norm, unfavourable treatment against major foreign firms will translate into standard procedure. This can have a negative impact on India’s access to global markets. At present, India must focus on growing its own digital market before copying digital governance models.

These efforts would keep the local digital enterprises at the forefront and help them in going global. The knowledge base of BigTech and other e-commerce platforms would help local businesses and entrepreneurs. If development and enhancement is the goal, it should not be at the expense of local entrepreneurs looking to reach a wider, global audience.

The writer is a former Secretary, Govt of India

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