Draft Digital Competition Bill 2024 — will this empower FMCG companies in India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Draft Digital Competition Bill, 2024, stands as a beacon of hope for Fast-Moving Consumer Goods (FMCG) companies in India, heralding a new era of fairness and competition in the digital marketplace. With its aim to regulate digital markets, combat anti-competitive practices, and ensure a level playing field, this legislation holds particular significance for FMCG companies navigating the complexities of the digital landscape.

Proposed by the Parliamentary Standing Committee on Finance, the Draft Digital Competition Bill, 2024 (“Bill”), emerged in response to mounting concerns regarding the dominance of large tech firms and their potential to engage in anti-competitive behaviour. India’s digital markets, while experiencing rapid growth, have faced challenges including unfair trade practices and violations of consumer rights, prompting the need for regulatory intervention.

Key Provisions of the Bill

Definition and Assessment of Digital Markets: The Bill provides a clear framework for defining digital markets and assessing market dominance. Factors such as market share, network effects, access to data, and barriers to entry are considered in determining the competitive landscape within digital sectors.

Regulation of Systemically Significant Digital Enterprises (SSDEs): The Bill targets large digital companies with a significant presence in India, known as Systemically Significant Digital Enterprises (“SSDEs”). These entities are subject to heightened regulatory scrutiny to prevent anti-competitive practices and ensure fair competition.

Prohibition of Anti-Competitive Behaviour: Anti-competitive practices such as predatory pricing, exclusive contracts, and collusion are explicitly prohibited by the Bill. It aims to prevent dominant firms from abusing their market power to stifle competition, distort market outcomes, or harm consumer interests.

Data Governance and Privacy Protections: Recognising the importance of data in the digital economy, the Bill includes provisions for data governance and privacy protections. It mandates transparency in data collection practices, user consent mechanisms, and secure handling of personal information to safeguard consumer privacy rights.

Ex-Ante Regulation: The Bill adopts an ex-ante regulatory approach, meaning that rules and regulations are established before any anti-competitive behaviour occurs. By identifying SSDEs and setting predetermined conduct rules, the Bill aims to proactively promote fair competition and prevent market distortions. 

Enforcement Mechanisms: The Bill proposed that the Competition Commission of India shall be empowered to enforce the provisions of the Bill, investigate complaints, and impose sanctions on entities found to be in violation of the regulations, meaning that the Competition Commission of India shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 while trying a suit. Judicial review mechanisms ensure procedural fairness and accountability in enforcement actions.

Interoperability and Data Portability: To promote competition and consumer choice, the Bill encourages interoperability among digital platforms and facilitates data portability. This enables users to switch between platforms seamlessly while retaining their data, reducing barriers to entry for new market players.

Remedies and Sanctions: In cases of non-compliance or anti-competitive behaviour, the Bill outlines a range of remedies and sanctions, including fines, divestitures, or injunctions. These measures are aimed at deterring misconduct and restoring competition within affected markets.

Consumer Protection Measures: The Bill incorporates provisions to protect consumers from deceptive practices, unfair terms and conditions, and unauthorised use of their personal data. Regulatory authorities are empowered to investigate consumer complaints and take enforcement actions to safeguard consumer rights in the digital sphere.

Impact on FMCG Companies

FMCG companies in India increasingly rely on digital platforms for marketing, sales, and distribution. The Bill’s provisions offer assurance to these companies by preventing dominant tech firms from leveraging their position to stifle competition. By fostering a level playing field, the legislation aims to create opportunities for FMCG companies to thrive in an environment characterised by fair practices, transparent rules, and healthy competition, ultimately encouraging innovation and growth.

While the Bill presents promising prospects for FMCG companies, its successful implementation hinges on close monitoring and collaboration among regulators, industry players, and legal experts. FMCG companies are urged to stay abreast of developments surrounding the Bill and actively engage in shaping its provisions through public feedback, ensuring that their voices are heard and their interests safeguarded.

As India’s digital economy continues to evolve, the Bill emerges as a beacon of hope for FMCG companies seeking to navigate the digital landscape with fairness and confidence. By promoting competition, preventing anti-competitive practices, and fostering a conducive environment for innovation, the Bill paves the way for a vibrant and equitable digital marketplace, where FMCG companies can thrive and contribute to India’s economic growth and prosperity.

—The author, Juhi Khanna, is Senior Associate in the Corporate & Commercial Practice area at Gravitas Legal. The views expressed are personal. 

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