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Tuesday, December 6, 2022

Digital economy giants might be fined for violating market rules

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Two parliamentary standing committees have investigated the necessity for such “dos and don’ts”
for enterprises in the digital economy. The Digital Markets Act, which would impose behavioral rules, is
now being discussed. The penalty is likely to be tied to the company’s revenue for the years in default.

If early discussions in government lead to a planned new law, digital economy titans might face a
penalty for violating a set of recommended behavioral rules aimed to guarantee that digital
marketplaces stay competitive and established corporations do not abuse their control.

Each of them referencing practices in mature markets. The problem was investigated by the standing
committee on finance, led by BJP leader Jayant Sinha, although the committee’s findings is not yet
published.

Two parliamentary standing committees have investigated the need for such “dos and don’ts” for digital
economy enterprises, and negotiations for a Digital Markets Act, which would dictate the behavioral
standards, are underway, according to a source familiar with government deliberations.

These norms, which would prohibit practices such as e-commerce platforms”self-preferencing’
(promoting their private labels) and using business user data in the e-commerce platform to compete in
the market, are likely to carry penalties for violations, according to the person, who requested
anonymity. The penalty is likely to be tied to the company’s revenue for the years in default.

CCI can already impose a penalty of up to 10% of a company’s sales if it is found guilty of anti competitive agreements or abuse of power. According to the individual, discussions on the matter have
taken place between the ministries of corporate affairs and electronics and information technology, as
well as the Competition Commission of India (CCI). The main features of the proposed law, however,
have yet to be finalized.

The suggested ‘does and don’ts’ would provide the regulator an advantage in market monitoring, with
forward-looking regulation on Big Tech (the ex-ante method) rather than launching an inquiry based on
anti-competitive behavior that has already occurred.

The proposed code of conduct will also detail what digital economy businesses must do in terms of
business operations. This is expected to feature system interoperability.

The guidelines are unlikely to be uniformly applied and are intended to encompass mainly significant
enterprises, dubbed “digital market gatekeepers,” in categories such as search engines, social media
platforms, and e-commerce, which will be selected based on their market reach.

The recommendations would be finalized based on the findings of two Parliamentary Standing
Committees. In its June report, the Standing Committee on Commerce, led by YSR Congress party leader Vijayasai Reddy, stated that the existing statutory instruments were insufficient to effectively monitor and regulate the competition dynamics at play in e-marketplaces, which differ from traditional brick- and-mortar retail competition.

The ex-ante method was endorsed by the committee, noting trends in mature markets. The issue was
investigated by the standing committee on finance, led by BJP leader Jayant Sinha, although the
committee’s findings is not yet published.

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