While startups pledged support, IAMAI concerned over draft digital competition bill

Delhi: Nearly 40 Indian startups have joined forces to pledge support to the draft digital competition bill, describing its proposed 'ex-ante' regulations as potential "game-changer" in tackling the anti-competitive practices of big tech companies.

However, the Internet and Mobile Association of India (IAMAI) has written to the Corporate Affairs Ministry, expressing concerns that the draft Digital Competition Bill will negatively impact Indian startups and other digital enterprises.

The association cautioned that the ex-ante regulations proposed in the draft bill will render businesses "untenable" and could "dry up venture investments in tech startups."

Startups rally support

With battle lines drawn within the industry over provisions of the draft bill, prominent names like Matrimony.com, TrulyMadly, Innov8, QuackQuack, Magicbricks, Hoichoi, and Medibuddy are among startups which have written to the Ministry of Corporate Affairs (MCA) on the issue.

Asserting that the digital competition bill, with its focus on 'ex-ante' regulations, could potentially be a "game-changer" for the Indian startup ecosystem, these companies have urged the MCA to move forward with the bill "at the earliest" even as they accused the big tech players of often indulging in delay tactics.

As such, the ex-ante provision aims to ensure that the behaviours of large digital enterprises are proactively monitored and that the CCI intervenes before instances of anti-competitive conduct transpire.

Currently, the Competition Act primarily envisages an ex-post framework of intervention, wherein the CCI intervenes after the occurrence of anti-competitive conduct.

These startups have termed the draft bill as a step in the right direction and said it will address long-standing concerns of Indian ventures to rein in practices, which stifle innovation, and limit consumer choice and growth of young businesses.

Threshold for SSDEs

"While requesting that the government move forward with the Bill at the earliest and not give in delay tactics, the startups have also asked for an upward revision of the thresholds for designating Systematically Significant Digital Enterprises (SSDEs)," according to a release.

They argue that the bill should only target the real gatekeepers of the internet - firms that have long enjoyed dominant positions, accumulating extensive resources, and influence to shape the rules of the digital ecosystem.

"By narrowly targeting the new law, the government can rein in monopolistic practices while making sure that Indian startups have the space to grow within India and beyond Indian borders, to compete globally," it said.

IAMAI’s POV

The IAMAI described the draft provisions as "an unfair imposition on digital companies."

Additionally, the IAMAI pointed out that the criteria for designating companies as "systemically significant digital enterprises" (SSDEs) are "subjective, all-encompassing, and self-contradictory."

The IAMAI argued that a redundant ex-ante regime would not only increase their compliance burden but also substantially raise operational costs.

"Therefore, an additional competition regulatory regime, which departs from the well-tested foundation of competition law, is unnecessary and could lead to significant harm," media reports indicated.

These comments came two months after the Ministry of Corporate Affairs solicited feedback on the draft Digital Competition Bill presented by the Committee On Digital Competition Law.

Startups POV

In a joint letter to Manoj Govil, Secretary in the Ministry of Corporate Affairs, the startups said that the digital competition bill, with its focus on ex-ante regulations, has the potential to be a "game-changer" for the Indian startup ecosystem.

The startups, however, felt that current thresholds prescribed for designating Significant Strategic Digital Entities were low and could "perhaps, inadvertently encompass startups and other digital enterprises which are not gatekeepers.”

It has, therefore, suggested an increase in the financial thresholds and also provided numbers for end-user and business-user count, which would "better reflect" the realities of the Indian startup ecosystem.

The startups, in their letter, have also urged the MCA to move forward with the bill "at the earliest" and not give in to further requests for extensions in the consultation period. The current consultation period has been more than sufficient, they said.

The startups accused the big tech companies of demonstrating a consistent pattern of employing delay tactics even when faced with clear orders from antitrust regulators worldwide to address their anti-competitive practices.

"These companies frequently resort to tactics, such as prolonged legal battles, exploiting regulatory loopholes, or opting to pay fines instead of implementing required changes," the startups claimed in the letter.