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  • Nidhi Rayudu

Combating Hegemonic Instability: Anti-Competitive Regulation on Systemically Significant Digital Enterprises

[Nidhi is a student at Gujarat National Law University.]


In propounding the concept of hegemonic stability, Keohane confers that the dominant state has the power in an international system setting to steer other states to emulate its predilections. The EU has commanded as a structural power in influencing the standards of regulations, controlling the emerging guidelines in several economies also influencing in India the Draft Digital Competition Bill 2024 (DCB). With the UK’s Draft Digital Markets, Competition and Consumer Bill currently at the draft stage, and the twelve bills proposed in the United States for regulating competition in digital markets still at the passage stage, the European Unions Digital Market Act (DMA) serves as a significant instrument.

 

The Draft Competition Law Bill followed suit to countries such as the USA, UK and the EU recognizing ex-ante legislation and revamping their antitrust agencies. India's Draft DCB aims to systematically identify digital enterprises to regulate their practices in the provisions of core digital services through the principles of contestability, fairness and transparency. Despite the welcome move on the proposal for the regulation of the digital ecosystem, the DCB requires a relook into the clauses of governmental gatekeepers in the digital ecosystem, the personal data usage as also the role and authority of the Competition Commission of India (CCI) in this process.

 

Systematically Significant Digital Enterprises and Gatekeepers

 

The Draft DCB aims to impose pre-emptive obligations and restrictions on enterprises categorized as systemically significant digital enterprises (SSDE). The DCB lays down several thresholds for the qualification of an enterprise as an SSDE under Section 3 of the DCB. Similarly, the European Unions DMA categorizes an enterprise as a gatekeeper through qualitative and quantitative standards of determination under Article 3 to designate a gatekeeper. The designation of an SSDE is similar to the formulation of a gatekeeper in a digital ecosystem by the categorization of the entity to qualify and self-report its obligation to the respective authority. To impose a certain self-imposing regulation both DMA and DCB can be explained as mechanisms through state interventionism establishing mandates that hinder competitive dynamics of digital monopolies operating in the ecosystem.

 

Exemption on Regulation of Governmental Enterprises

 

The bill further provides exemptions to certain entities operating in the digital ecosystem under the draft bill from imposing regulation and categorizing them to regulate their behavior. The draft committees' intention on exemption of certain enterprises through the obligations imposed under this act was imposed in a two-fold manner- firstly allowance through the CCI's expert prerogative to exempt the applicability of certain obligations through regulation and secondly to vest in the central government the power to exempt an enterprise from the purview of the draft DCB.

 

The Manoj Govil Committee proposed an exemption of certain regulations vested on CCI was to be implemented on the grounds of economic viability and the protection of existing intellectual property rights. The power of the Central Government to exempt enterprises is under Section 38 which vests the exclusion of any provisions of this draft bill on grounds of public interest, public security or under any obligations in accordance with any country or in the discharge of any sovereign function on behalf of the central government.

 

A pertinent criterion of evaluation lies in the scope of power vested to the state in the exemptions of certain enterprises in the draft bill as compared to the EU’s DMA.

 

The exemption power vested to the Central Government was provided identical to Section 54 of the Competition Act 2002, to those entities engaged in providing critical support to the government. This non-imposition of certain regulations on decided enterprises of the Central Government does exempt an SSDE for a limited duration as does the DMA for gatekeepers. It further leaves the determination of the time frame of exemption of an SSDE subject to the notification of the Central Government, without any involvement of the CCI. Whereas, Article 10(2) of DMA lays out a similar exemption to be granted on grounds of public health and public security. This exemption under EUs DMA has also been determined as one of a revisionary nature and permits an exemption to be granted to be subject to review at least every year.

 

Privacy Regulation and Consensual Access

 

Section 12 bars the intermix and cross-use of personal data and the usage of such by a third party. The likelihood of exemption of governmental digital gatekeeper platforms induces several escape clauses for the public interest-run entities to abscond regulatory provisions through Section 38 of the DCB. Section 38 grants power to the Central government to exempt enterprises from any provisions or rules and regulations. The state leaning towards the exemption of any of its entities would cause a rift in the classification of state and non-state entities as SSDEs in its exercise of authority over the digital realm. Take for instance, that an entity is exempted under Section 12 of DCB that deals with the data usage by SSDEs.

 

The core digital services are often disposed to collect the personal data directly of the end-users in order to provide better services on their platforms. In EU's DMA, the gatekeepers are required to enable the end users to freely choose to opt in to such data processing as well as provide alternatives for services conditional upon the end users' consent, so that the gatekeepers do not undermine the usage of the core platform services.

 

Contrasting to the EU's DMA, the DCB only disallows the usage of such data by a third party only in the instance of it being “without the consent of the end user" under Article 12. If alternatives are not provided to the user, the user has no option but to consent to the platforms usage of data. This validation of data collection when obtained consensually in the lack of alternatives being provided puts the end-users at a disadvantage in the services of government platforms. Government SSDEs upon not providing options for services conditional on the users' consent through the DCB would crop up privacy issues between the processing of personal data of the services operating on the SSDE and its dissemination to third parties.

 

CCI's Authority

 

The DMA grants exemption to the designation of gatekeeper platforms on the two conditions of public health and security under Article 10. Further, under Article 10(2), the commission is vested with the power to review this exemption decision yearly. On the other hand, granting an exemption to an SSDE is conferred upon the Central Government and not on the CCI. The exemption authority of an SSDE from any regulation in the DCB vests solely in the Central Government with the CCI not even being afforded any recommendatory or approval powers. These exemptions are further not provided any means to be reviewed by the CCI.

 

The DMA allows the European Commission to serve as the regulatory body vesting it in all the powers. On the other hand, despite the CCI being India's regulatory body, it is kept out of the purview in decisions relating to the exemption of SSDEs granted by the Central Government. The CCI, being vested with powers under Section 18 of the Competition Act 2003 to eliminate negative competition practices arising in the market, should also be similarly applied to the monopolies existing in the digital markets. The commission, being a foreboder in adjudicating the disputes in its realm, should have a stake in SSDE exemption.

 

Conclusion

 

Personal data collection by SSDES needs an address of the issue in the event of a lack of alternatives for the services to be provided by the platform. The governmental SSDE applying the approach of essential governmental platform services being provided even on conditional consent does not serve as a viable option. The governmental platform by adopting the approach of symmetric access of data between the CCI as well as the intermediaries would provide a more feasible alternative by not undermining the governmental platform's public interest function.  Further, keeping the commission in the loop between the digital platform and the entities.

 

It is pertinent for the CCI being the regulatory body to be vested with a significant authority to regulate the happenings in the digital market ecosystem. The inclusion of the CCI with the Central Government in determining the exclusion and timely review of the exemption of particular SSDEs would serve as a mechanism to curb the arbitrary exclusion of the SSDE meeting rules and obligations.

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