Why in the News?

The Ministry of Corporate Affairs (MCA) has invited public feedback on the Digital Competition Law Committee's Report, which proposes a new ex-ante Digital Competition Act to regulate Big Tech.

Background

• The Committee reviewed the Competition Act, 2002 to address new challenges in the digital economy.
• Rising global concerns over Big Tech's anti-competitive practices have called for stronger regulatory measures for Big Techs like Google, Meta, Amazon, Microsoft, and X. 

Why Big Tech Needs Regulation? 

• Threat to Sovereignty: There is a threat of misusing user data by illegally collecting and transmitting it to servers outside country, raising serious concerns over data security and national sovereignty.
  • Example, WhatsApp selling data to its parent company Meta.
• Network effect: Big tech grows fast by using network effects i.e., the more users they have, the stronger they get, making it hard for new players to compete. This creates a risk of permanent dominance by a few firms.
  • Example, AI tools ChatGPT gained 100 million users in just 2 months, and Six of the world's top seven $1 trillion companies are tech giants.
• Revenue loss to exchequer: India loses around $10 billion annually due to tax abuse by multinational companies. To address this, India introduced a 6% Equalisation Levy in 2016, though it has now been removed.
  • Digital tech giants use Base Erosion and Profit Shifting (BEPS) to move profits to low or no-tax countries with little real business there, reducing taxes in countries like India.
• Data Privacy and Cyber Security Risks: Massive data collection opens doors to misuse, surveillance, and data breaches.
• Ethical Concerns: 
  • Transparency and Accountability: They often lack transparency in their algorithms, data usage, and decision-making processes. 
  • Public Interest vs. Corporate Profit: They prioritize profit maximization, sometimes at the cost of public well-being.
  • Digital Divide and Equity: Rural vs. urban disparity in access to AI-driven education and healthcare.
  • Ethical Policy Making and Regulation: They influence policy decisions through lobbying, donations, and strategic partnerships.
  • Environmental Responsibility: The carbon footprint of data centers and electronic waste disposal remains a concern.

Challenges in Regulating Big Tech

• Regulatory Vacuum: The Competition Act, 2002 works on an ex-post model (acting afteranti-competitive behavior). But this outdated approach struggles to handle today's fast-paced digital world.
  • Additionally, the pace of technological advancements often outstrips regulatory responses. 
• Enforcement Lag: The delay in the enforcement of law often creates challenge in regulating Big Tech. E.g., Digital Personal Data Protection Act (DPDPA), 2025 is yet to be enforced.
• Non-Uniform Regulatory Mechanism: Big Tech firms operate globally, but regulatory responses vary across jurisdictions affecting the uniform regulation.
• Techno-nationalism and Protectionism: These leads to jurisdictions favoring domestic firms.
• Ambiguity of Law: In a recent case, X challenged a government order to remove content by invoking Section 79(3)(b) instead of Section 69A of the IT Act.
  • X also opposed the Centre's new Sahyog portal, which lets all government agencies issue blocking orders using a standard template. 
  • X argued such order violates the Supreme Court's Shreya Singhal judgment, which says content can only be blocked through a proper legal process.

Key Legislations for Regulating Big Tech

India

• Digital Personal Data Protection Act, 2023 (DPDPA): Provide for the processing of digital personal data in a manner that recognises right of individuals to protect their personal data.
• Information Technology (Intermediary Guidelines and Digital Media Ethics Code) or IT Rules, 2021:  Social media platforms with large user bases in India are classified as Significant Social Media Intermediaries (SSMIs) and must follow extra rules, like tracing the first originator of messages under specific conditions.
• Competition Act, 2002: To prevent unfair practices, protect consumers, and ensure free trade.
  • 2023 amendment allows penalties based on global turnover and CCI can penalize up to 10% of average income or turnover (past 3 years) for anti-competitive acts or abuse of dominance.
• Consumer Protection Act, 2019: Penalize companies for misleading advertisements and unfair trade practices. 
• Section 69A of the Information Technology Act, 2000: Allows the Government to block "public access of any information through any computer resource in the interest of sovereignty and integrity of India, defence of India, security of the State, etc. 

Global

• European Union: Key ex-ante measures include the General Data Protection Regulation (GDPR) 2016, and the Digital Market Act (DMA) introduced through the Digital Services Act Package. 
• The UN Set: In 1980, the UN Conference on Restrictive Business Practices approved the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices.  

Way Ahead to Effectively regulate Big Tech 

Key recommendation of the Committee on Digital Competition Law are as follows:

• Need for ex-ante regulation of digital competition:  Enacting the ex-ante Digital Competition Act to enable the CCI regulate only those enterprises that have a significant presence and the ability to influence Indian digital market.
• Systemically Significant Digital Enterprises (SSDEs): Designate entities offering core services which are susceptible to market concentration like search engines, social media, operating systems, and browsers as SSDEs for ex-ante regulation. 
• Thresholds for classification of SSDEs:  Criteria include resources of the enterprise and volume of data aggregated by them.
• Associate Digital Enterprises (ADEs): Enterprises should identify all other enterprises within its group involved in the provision of a core digital service.  These enterprises should be designated as ADEs under the proposed framework and must comply. 
• Obligations of SSDEs: SSDEs must not; 
  • Favour their own or related-party products or Block third-party apps
  • Force users to adopt their other services
  • Use non-public business user data to compete
• Enforcement of provision: CCI should improve its technical capacity including within the Director General's office for early detection and disposal of cases.  Additionally, form a separate NCLAT bench for faster appeals.
• Penalties:  For contravention impose fine up to 10% of global turnover of SSDEs. 

Conclusion

Big Tech firms like Google, Meta, Amazon, Microsoft, and X are being accused of concentrating power—shaping what we consume, think, and speak. Without regulation, their dominance threatens fair competition and public discourse. These monopolies can crush competition and limit consumer choice. Timely intervention is essential to protect innovation and ensure fairness.