Date: 04/01/2023

Relevance: GS-2: Parliament and State Legislatures—Structure, Functioning, Conduct of Business, and Issues Arising out of these.

Key Phrases: Parliament’s standing committee on finance, Digital Competition Act, Competition Amendment Bill, 2022, Digital Competition Bill, ponzi schemes, CCI, SEBI and RBI, Digital Intermediaries

Context:

• After recommending sweeping changes to India’s bankruptcy framework and competition regulation, the Parliament’s Standing Committee On Finance will now examine the issue of state finances, the working of market and banking regulators, and the menace of cybercrimes.

Why is there a need to strengthen the regulatory framework?

• Rapid digital transformation of India’s economy—one of the fastest-growing major economies—warrants stronger regulators.
• Dominant digital market players need to be identified as digital gatekeepers, will have to file annual compliance reports to the regulator under a proposed forward-looking legal framework called Digital Competition Act that will set fair conduct norms for these entities.
• Experts suggest that both the Competition Amendment Bill, 2022, and the proposed Digital Competition Bill be passed immediately to strengthen the regulatory requirements.
• Moreover, a regulatory framework for news publishers to enter into fair advertisement contracts with digital market gatekeepers, such as dominant online search engines, should be set in the proposed Digital Competition Act.

What are the key areas identified by the Parliamentary panel to strengthen competition regulatory framework?

1. Areas of cybercrime need to be addressed comprehensively:
   • Issues like fraud loan apps, various kinds of ponzi schemes easily scam people.
   • Cybercrime, particularly these fraud apps, is a very high priority.
2. Area of state finances need to be addressed comprehensively:
   • Many states now, post-covid, are dealing with a lot of challenges in terms of their finances.
   • The switch from the National Pension System (NPS) to the Old Pension System (OPS) is going to aggravate some of these public finance issues.
3. Strengthening of regulatory framework:
   • Regulators like CCI, SEBI and RBI need to review to make them ready for a $5 trillion or $10 trillion economy so that India can expand into that comfortably.
   • India has got to build regulatory capacity, skills, and expertise.
4. Require to be very vigilant in terms of regulations and innovation:
   • India has a very sophisticated financial system now, particularly as far as the digital infrastructure is concerned.
   • Currently, direct benefits transfer, UPI, fintech proliferation, with digital currency coming in, all of these require us to be very vigilant in terms of regulations and innovation.

What are the panel recommendations on the Competition Amendment Bill?

1. Firstly, mandatory transaction threshold limit:
   • it will be mandatory to notify the Commission of any transaction with a deal value in excess of ₹2,000 crores and if either of the parties has substantial business operations in India.
   • This led to developing of very important technologies or market shaping impact—within the purview of CCI.
2. Secondly, very important from the ease of doing business perspective, was the question of settlement and commitments.
   • Introducing much more flexibility in the adjudication process with settlements and commitments now proposed for all parties.
   • It could be possible to get to a negotiated settlement quickly without allowing appeal so that justice could be delivered quickly.
3. A very important aspect of the settlement and commitment process is that it is non-appealable.

Why should India have two laws on competition— Competition Amendment Bill & Digital Competition Act?

• The reason to have two laws is that one (Competition Act, 2002) deals with ‘ex-post’ cases of anti-competitive practices (where the investigation is initiated after a breach is committed).
• While the Digital Competition Bill deals with ‘ex-ante,’ that is, ‘before the fact’ anti-competitive practices (or forward-looking regulations).
• By putting in place an ex-post and ex-ante framework, India will have a competition framework in India that is world-leading.
• The Digital Competition Bill is proposed to function by identifying the small handful of systemically important digital intermediaries that do have a dominant role in certain markets.
• These companies are going to have to play by the rules, and they will also file a compliance report annually to make sure that these rules are followed. This is the ex-ante regulation.

Way Forward:

• The Parliamentary committee has unanimously made a certain set of recommendations so the government can take whichever of the recommendations they think are suitable, and these Bills will be passed with support from everyone both in the Lok Sabha and Rajya Sabha.
• The Competition Amendment Bill should get passed absolutely in the Budget session, and if the Digital Competition Bill can be introduced in the Budget session, then there will be a chance to refine it. It can be passed in the monsoon session later.
• After both bills passed, India will then have the most well-thought-out, fairest and most open set of competition laws in the world.

Source: Live Mint

Mains Question

Q. Regulatory framework occupies a very important place in the competitive digital ecosystem of the country. Discuss. Also, highlight the various challenges associated with the regulatory framework and measures taken by the government to address them. (15 marks)