CCI Updates: New Merger Control Regulations, Focus on Digital Market and AI

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India’s antitrust regulator, the Competition Commission of India, is set to introduce new merger control regulations to implement certain provisions of the Competition (Amendment) Act, 2023. Additionally, the regulator has presented arguments favoring higher scrutiny of digital firms and preventing monopolistic tendencies fueled by algorithmic collusion, among others.

New implementing regulations

Over the past year, the Competition Commission of India (CCI) has been developing a regulatory framework under the Competition (Amendment) Act, 2023. This framework incorporates global best practices to address emerging market competition challenges.

New regulations include measures for negotiated settlements on anti-competitive practices, merger and acquisition regulations based on deal value, and an expanded leniency scheme to incentivize cartel disclosures.

Upcoming regulations will focus on merger control, aiming to clarify transaction value assessments and expedite the merger review process, reducing decision time from 210 to 150 days.

An informed source speaking to the media on condition of anonymity noted that the new regulations, expected post-election after the model code of conduct is lifted, will include a mandatory CCI approval for transactions over INR 20 billion (approx. US$240.2 million), even if they do not meet traditional asset and sales thresholds. Additionally, the amendments require the CCI to form a preliminary view on a deal within 30 days, or the deal will be automatically approved.

CCI position on the digital marketplace

The Ministry of Corporate Affairs is currently developing a Digital Competition Bill, which will establish guidelines for systemically important digital economy firms. Public consultation on the draft bill has concluded, and inter-ministerial consultations are set to occur over the next few months before the bill is presented to Parliament. Several industrial stakeholders, however, are seeking an extended period of feedback.

CCI is keen to address the anti-competitive concerns in digital markets raised in the Bill.

On May 20, 2024, the CCI raised concerns regarding the “opacity of algorithms” and “data dominance” of digital firms. The CCI chairperson, Ravneet Kaur, flagged the competitive advantages gained by tech majors through the collection, analysis, and utilization of vast amounts of data, which presents a formidable challenge to regulatory competition authorities.

The CCI has emphasized the need for competition law enforcement to keep pace with digital innovations and trends to ensure consumer protection and fair competition amongst players. The CCI chairperson has identified three key problems that could arise with control over large datasets by digital platforms:

  1. Barriers to entry
  2. Issues with platform neutrality
  3. Algorithmic collusion

Kaur says that because many digital platforms benefit from network effects where the value of the service increases as more users join, there is a tendency for digital markets to concentrate. This can result in a situation where one or two businesses control the majority of the market in the digital economy.

On the “algorithmic collusion” challenge, digital firms utilize algorithms to determine user experiences and in pricing and product placement. However, the opacity of these algorithms may make it difficult for regulators, such as CCI, to evaluate their effects on competition.

Market study of AI underway

The CCI chairperson also spoke of the necessity for a sophisticated strategy that combines traditional competition analysis with a thorough comprehension of the dynamics of digital markets. To combat the present competition issues presented by digital marketplaces, Kaur has proposed new analytical tools, regulatory agility, and perhaps innovative regulatory frameworks that are expressly designed for the digital environment.

Consequently, the antitrust regulatory organization is working on an artificial intelligence (AI) market analysis. The CCI chairman pointed out that while AI’s revolutionary potential holds enormous promise for boosting competitiveness, its use would also bring up a number of associated challenges. The goal of the study is to obtain a comprehensive understanding of how the competitive landscape is evolving, how ecosystems are developing, and how AI applications affect productivity, innovation, and competition in significant user industries.

Monopoly in the e-commerce sector

The Attorney General for India, R. Venkataramani made remarks indicating that the monopoly of e-commerce platforms over user data “can be an issue for inspection” and would possibly be taken up by the new administration within the e-commerce policy within the first 100 days of new government formation.

In 2019, the Department for Promotion of Industry and Internal Trade (DPIIT) shared the draft National E-Commerce Policy of India for public consultation. The final policy draft has yet to be made public. The original draft of the policy aimed to strengthen consumer safeguards against unsolicited calls and emails. It also aimed to give the government the power to require the release of an organization’s source code and algorithms and to implement data localization regulations that impose limitations on cross-border data flow.

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