India looks to arm antitrust law with stringent penalties

antitrust law, big tech, digital
The Competition Amendment Bill which will be taken up by Parliament in the ongoing Budget session will provide for steep fines on companies indulging in antitrust practices.

The Competition Commission of India may tweak the formula for calculating penalties under the Competition Act as it looks to promote fair business practices and prevent formation of monopolies.  Steep fines on companies that violate antitrust laws will be incorporated in the Competition Amendment Bill which will be taken up by Parliament in the ongoing session. The government has also ordered the setting up of a committee that will review whether existing antitrust laws in the country are equipped to deal with the present and future challenges posed by the digital economy.

The committee will also look at the need for ex-ante regulations. Simply put, these rules may look to prevent large platforms from engaging in certain types of conduct that could result in reducing competition. Currently, ex-post regulations go after companies after investigating allegations of misconduct that have already occurred.

READ | Budget 2023: The shove to push the Indian economy

Anti-trust laws are designed to promote competition and prevent monopolistic practices that can harm consumers and the economy as a whole. These laws look to prevent price fixing by businesses, and stopping market division.

In India, anti-trust laws are governed by the Competition Act, 2002. The act aims to promote and sustain competition, protect the interests of consumers, and ensure freedom of trade in the markets. The Competition Commission of India (CCI) is responsible for enforcing the provisions of the act and investigating anti-competitive practices.

The Competition Act prohibits anti-competitive agreements, abuse of dominant position by companies, and mergers and acquisitions that lead to a substantial lessening of competition. The CCI has the power to impose fines, order the divestiture of assets, and even cancel licenses or permits if a company is found to be in violation of the act.

In recent years, the CCI has become more active in enforcing the Competition Act and investigating anti-competitive practices in various sectors, including e-commerce, telecom, and pharmaceuticals. The state of anti-trust laws in India is generally considered to be strong and effective in promoting competition and protecting consumer interests. However, there is still room for improvement in the enforcement of these laws and the speed at which investigations are conducted.

The Competition Act was enacted at a time when digital markets like e-commerce and social media were not prominent. Controlling big tech companies such as Google has been a priority for governments across the world. India too has been proactively taking steps in the direction which have started bearing fruits. Google has said it will cooperate with India’s competition authority after a Supreme Court judgment upheld an antitrust order. This forced the US firm to change how it markets its popular Android platform. The CCI ruled in October that the Alphabet-owned company had exploited its dominant position in Android and curbed competition. Google was fined $161 million, small change for the company, yet a powerful signal that India meant business.

Currently, CCI imposes fines up to 10% of a company’s average turnover in the applicable market. However, to levy hefty fines, the government may change the definition of average turnover to include global turnover derived from all products and services by a person or an enterprise. What this means is that any fault of a company in India will fetch the company a fine on its total turnover including that generated from other segments. This will also cover proceeds from exports, if the proposed tweak became law. This will make a huge dent on companies dealing in sectors such as pharma, automobiles and paint. 

Need for tighter antitrust laws

Policy makers and governments across the globe are scrambling to regulate companies that have outgrown their functions and have become monopolies. India is not the only country trying to tame such companies. In fact, a number of legislation is under way in Europe, the US, and some Asian countries. Major concerns with these companies include curbing competition and choking budding startups by abusing their monopoly-like position. Other concerns include the privacy of users.

The government has been trying to formulate strong laws against data collection and usage policies. In August last year, a proposal was floated to bring out a new Digital Markets Act to govern business practices. This also comes with fresh clauses in the Competition Act. The government will take into account global best practices before framing new legal provisions.

The market value of several companies has reached astronomical heights. The top five technology — Google, Amazon, Meta, Apple, and Microsoft — collectively have $10.31 trillion valuation. Last five years have seen this valuation grow manifold. The annual revenues of these firms are higher than the GDPs of most world nations. However, a major roadblock in regulating these companies is the fact that most of them are based out of the US which has strong free speech laws.

The anti-trust laws vary from country to country. Some of the developed economies have strong anti-trust laws. The US has a long history of enforcing anti-trust laws with the Federal Trade Commission and Department of Justice playing key roles in investigating and prosecuting anti-competitive practices.

READ | Government must add road safety element to infra push

The EU also has anti-trust laws. The European Commission has the authority to investigate and fine companies that violate these laws. Countries such as Japan, Canada, and Australia also have strong anti-trust legal frameworks that are strictly enforced. The EU is on a mission to rein in US tech giants which have been accused of tax avoidance, stifling competition, raking in billions from news without paying for it and spreading misinformation. Hefty fines have been slapped on companies such as Apple and Google in tax and competition cases.

The EU also recently legislated the Digital Markets Act (DMA). A list of obligations has been set under this law. Non-compliance will attract stringent punishments including fines of up to 10% of the global turnover.