The Ministry of Corporate Affairs (MCA) has invited stakeholder comments (by April 15, 2024) to the Report of the Committee on Digital Competition Law (CDCL) and the Draft Digital Competition Bill, 2024, which will redefine (largely in the footsteps of the European Commission/EC) how large digital companies will conduct business in India.

The CDCL was constituted to review whether the existing provisions of the Competition Act, 2002 were sufficient to address challenges of the digital economy and to examine whether an ex-ante digital competition law was required.

The CDCL report concludes that ex-post intervention under the Competition Act may not sufficiently enable early detection and intervention to prevent digital markets from irreversibly tipping. The report then examines certain ex-ante sector regulations and concludes that their intersection with the competition regime is sporadic, since they ‘are limited in their ability to holistically ensure fair competition in the digital economy in an ex-ante manner’.

Is the ex-ante regulation of the digital economy a pre-drawn conclusion? Per the CDCL report, that an ex-ante digital competition law is required seems premised on: (i) international developments; (ii) a general acknowledgement that digital markets move faster than meaningful regulatory intervention; and (iii) stakeholder responses.

The CDCL report provides an exemplary insight into legal developments across the world and a statement of stakeholder concerns, but it does not answer the questions of whether an ex-ante competition law is required, and what its anticipated effects will be for India’s burgeoning digital sector.

Per the Draft Bill, Systematically Significant Digital Enterprises (SSDEs) will be identified by objective criteria (qualitative and quantitative metrics are specified); the Competition Commission of India (CCI) has residual power to declare an enterprise an SSDE even if it does not meet these criteria. Exemptions are limited in scope and do not include benefits to consumers outweighing harm from business practices. This has far-reaching consequences for Indian consumers.

It is too soon to understand the effects of the similar ex-ante digital markets law in Europe, which was brought into effect recently. Other major jurisdictions are still discussing/bringing into effect their versions of ex-ante law. While on the question of developments in Europe, take the idea of ‘killer acquisitions’, which has received much attention worldwide. In India too, the concept has been covered by recent amendments to the Competition Act.

‘Killer’ acquisitions

The reference is to acquisitions by a larger competitor of a smaller competing target that may — in the future — challenge the acquirer. Oddly, the marquee case on ‘killer’ acquisitions for the European Commission (EC) has been Illumina/Grail, where the acquirer was not in fact, a competitor of Grail. Grail (developer of a blood-based early cancer detection test) was acquired by Illumina (the only supplier of technology to develop this test) in 2021.

In 2022, the merger was prohibited by both the European Commission and the US Federal Trade Commission. The regulators believed that Illumina would be incentivised to restrict supply of its technology to innovators competing with Grail.

The EC triggered its jurisdiction using a hitherto little used, broadly worded provision of the EU Merger Regulations (Art 22) because its jurisdictional thresholds were not actually met. The investigation into Illumina/Grail by the EC meant uncertainty for future transactions.

The matter is in appeals before the Court of Justice of the European Union (CJEU) (parties may not further contest the US litigation).

Recently, the Advocate General of the CJEU opined that the EC’s prohibition of this merger was wrong for lack of jurisdiction. If the CJEU reverses the EC’s order, the EC’s regulatory philosophy faces a reset, especially as regards jurisdictional overreach. The AG’s opinion is not binding on the CJEU, and one awaits the final ruling with interest.

The development does lend hope to the foundations of regulatory jurisprudence, i.e., due process, certainty, and checks on jurisdictional overreach. In the clamour for ex-ante regulation of digital markets worldwide, these ideas continue strengthening judicial systems.

Developments in India on ‘killer acquisitions’ point to local presence as triggers to the CCI’s jurisdiction, which is reasonable. Indian law is, therefore, chartering its own course.

The CDCL report is a comprehensive reference for market testing the consequences (including unintended ones) especially for Indian consumers. It must be viewed as a starting point, and the MCA could consider commissioning market studies by the CCI before the Draft Bill is legislated.

The writer is Partner (Head - Competition Law), Cyril Amarchand Mangaldas. Views are personal