After NCLAT ruling, startup founders urge proactive regulation against 'dominant digital gatekeepers'

CCI first ordered an antitrust probe into the mandatory use of Google Play Store's payment system for paid apps and in-app purchases in November 2020.

Indian startup founders have called for government regulation that can proactively curb anti-competitive practices and prevent "dominant digital gatekeepers" while welcoming The National Company Law Appellate Tribunal (NCLAT)'s ruling on the Competition Commission of India’s (CCI) antitrust order against Google.

On March 28, NCLAT upheld certain key findings and directions of the CCI's antitrust order against Google's Play Store policies. This includes the antitrust regulator's decision that Google imposed unfair and discriminatory conditions on app developers by mandating the use of the Google Play Billing System (GPBS) for paid app sales and in-app purchases.

However, the tribunal also set aside some other directions from the regulator and reduced Google's penalty from Rs 936.44 crore to Rs 216.69 crore, granting partial relief to the tech giant in a key growth market.

"While the reduction in penalty is a minor setback, it is less significant than the tribunal's clear message that Google's payment system is anti-competitive" said Vinay Singhal, co-founder of Stage, a regional video streaming platform.

Singhal, however, noted that there is significant ground to cover in curbing anti-competitive practices.

"We need proactive regulation that can swiftly address anti-competitive practices pre-emptively - even before the damage to the business is done and assessed. A legislation like the Digital Competition Bill could be the right tool to prevent market distortions and ensure a level playing field in the digital ecosystem," he said.

The Indian government released the draft of the Digital Competition Bill, a proposed legislation that aims to address the nti-competitive practices of Big Tech companies, in February 2024. However, it is yet to be finalised.

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Truly Madly co-founder Snehil Khanor said the timelines of the case highlight how resolution in competition cases are "often delayed and happens too late to prevent significant market damage...By the time decisions are finalised, smaller companies have already suffered irreparable economic harm."

CCI first ordered an antitrust probe into the mandatory use of Google Play Store's payment system for paid apps and in-app purchases in November 2020.

Nearly two years later, in October 2022, the regulator fined Google Rs 936.44 crore for abusing its dominant position with regard to its Play Store policies. It also ordered a series of corrective measures to modify the company's app payment policies and issued a cease-and-desist order.

Google stated that it will continue to comply with all applicable laws and regulations as the tech giant reviews the NCLAT’s judgment and evaluates its legal options.

"Google is committed to supporting the growth of Indian developers and contributing to a thriving app ecosystem for both developers and users in India," the company said in a statement.

Meanwhile, Khanor said that the need of the hour is having "proactive, forward-looking regulations that can prevent dominant digital gatekeepers from exploiting their market power before such exploitation becomes entrenched."

"The digital ecosystem requires preventive safeguards, and I truly feel that ex-ante framework in some shape or form is imperative to ensure such practices don’t occur," he said.

MagicBricks CFO Hitesh Uppal also echoed a similar sentiment, stating that this development suggests a need to "explore a more comprehensive legislative approach to define and regulate dominant digital entities in the ecosystem" and that the draft Digital Competition Bill offers a potential framework that merits "thoughtful consideration".

"From a preliminary review of the judgement, it appears that while the CCI identified Google as dominant in two relevant markets, the NCLAT raised concerns about designating digital entities as ‘gatekeepers’ without a clear legal framework. The tribunal noted the absence of an established mechanism for such designations in India, which highlights the challenges within the current competition law framework," he said.

The government is said to be currently evaluating the feedback and inputs received on the draft legislation from various stakeholders since it was floated for public consultation last year.

The Ministry of Electronics and Information Technology (MeitY) has held consultations with several industry associations, think tanks, and civil society groups. Some stakeholders have also argued that ex-ante regulation, like the Digital Competition Bill, will severely impact startups and innovation.

Read: Stakeholders seek balance in Digital Competition Bill; overregulation concerns discussed at consultation meet