Is the EU’s Digital Markets Act the right way forward for India?

Is the EU’s Digital Markets Act the right way forward for India?

The European Union (EU) recently adopted the Digital Markets Act (DMA) with an aim to level the playing field in the digital platform services sector by ensuring anti-trust compliance by big tech companies in digital markets. In this context, the DMA adopts an ex-ante approach in as much as it identifies potential antitrust practices beforehand in order to pre-emptively regulate the behaviour of select big tech companies.

The DMA designates and regulates only those big tech companies as “gatekeepers”, which have at least 45 million monthly individual end users and 100,000 business users and control at least one “core platform service” such as marketplaces and app stores, search engines, social networks, cloud services, advertising services, voice assistants and web browsers. In addition, the gatekeepers must also have an annual turnover of €7.5 billion in the EU or a global market value of €75 billion. These gatekeepers act as gateways for smaller players in digital markets to have access to new customers. The DMA prevents the usage of personal data for targeted advertisements without users’ consent.

The legislation also allows smaller players to inter-operate with big tech’s services. For instance, customers on Signal will now be able to message their friends on WhatsApp. It will also prohibit the so-called gatekeepers from favouring their products and services over third-party sellers and service providers registered on their platforms. This would also entail businesses registered on their platforms to have the ability to partner up with other e-commerce and social media platforms. Other requirements include placing additional options for operating systems, virtual assistants and web browsers and enabling users to install and use apps that are downloaded from third-party app resources and uninstall pre-installed apps.

In case of breach of these provisions, sanctions will be imposed on such gatekeepers. The EU firmly believes that it will foster and inclusive environment for all industry players in the digital space through the DMA.

The legal landscape in EU took close to five years to come up with a framework that may disrupt the industry but the Indian government’s intention to copy paste these regulations to a developing economy could have catastrophic impact. Inter-ministerial consultations are happening between the Ministry of Electronics and Information Technology (MeitY), Corporate Affairs, and Competition Council of India (CCI) to pass legislation similar to DMA to regulate the Indian digital market space.

However, there is a need for the Indian government to take a step back and ponder whether India does need one more regulation. Introducing a stringent legislation might discourage the major tech firms from expanding in India and come to have a negative impact on India’s vision to be a USD 5 trillion economy in 2024. Gatekeepers possess the ability to heavily invest in their research and development and tailor solutions to the needs of the Indian market. They have also facilitated an easier and faster adoption of e-commerce and social media by consumers and is a major contributor to creating a conducive environment for MSMEs to seamlessly integrate themselves within the digital markets space.

No one is denying the fact a novel sector like digital markets requires appropriate policy interventions to prevent anti-trust practices. However, the DMA should not be viewed as a “one size fits all” solution i.e. what is meant for tech players should not be force implemented on e-commerce entities. India is a unique country with a diverse demographic dividend and therefore, blanket acts implemented in the EU like DMA can de-rail Digital Bharat movement. Furthermore, if firms are being subjected to regulation based on their size, it could come at the cost of MSMEs who harbour ambitions of going global and might cause inhibitions. Thus, India may end up missing opportunities to make its mark in the global value chain.

Lastly, there is no guarantee that restricting the operational practices of Big Tech companies will foster healthy competition amongst all players in the digital ecosystem in a developing market like India.

While regulation is the need of the hour, stakeholder consultations do need to be considered so as not to discourage the already well-established players or disincentivise domestic companies from going global. Rather the answer lies in conducive policies that allow MSMEs to reach where Big Tech stands today.

Story: Shreya Suri, Partner, IndusLaw, EINPress/India Times


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