10% of global turnover, 3 years imprisonment: Big Tech stares at hefty penalties in Digital Competition Bill

The bill was part of a report submitted by the Committee for Digital Competition Law

Big Tech companies that violate the Digital Competition Bill, the draft of which was released for public consultation on March 12, face a fine of up to 10 percent of their global turnover and in some cases, imprisonment for a maximum of three years.

The hefty penalties in the proposed law come at a time when Indian companies and Big Tech counterparts have locked horns over issues such as market dominance and regulatory compliance.

In 2022, a parliamentary panel recommended setting up a separate digital competition law to address Big Tech’s anti-competitive practices.

A committee was set up the next year to study the need for such a law.

The draft Digital Competition Bill was a part of the 235-page report submitted to the government on February 27, 2024. The bill essentially proposes additional compliance requirements for Big Tech.

Tech company or an ‘SSDE’?    

The draft bill introduces a new term for Big Tech companies— Systematically Significant Digital Enterprises. SSDEs are defined as enterprises that offer "core digital services" such as online search engines, social networking services, video-sharing platform services and so on.

An enterprise can be declared an SSDE offering core digital services if its India turnover is not less than Rs 4,000 crore or its global turnover is not below $30 billion, for three consecutive financial years.

A company can also be deemed an SSDE if its gross merchandise value (GMV) in India is not less than Rs 16,000 crore or if its global market capitalisation is not below $75 billion for three consecutive financial years.

An enterprise can also be treated as an SSDE if it has had 1 crore Indian users of its digital service in the three immediately preceding financial years, or if it has at least 10,000 business users, for the same time period.

The bill has also brought in a self-reporting obligation for SSDEs. Section 4 of the draft bill says a company, within 90 days, has to self-report to the Competition Commission of India (CCI) that it meets the criteria for being deemed as an SSDE.

Penalties

For such companies, the proposed law introduces additional obligations such as ensuring dealing with end-users in a fair and transparent way, not preferring own products over others, not restricting third-party applications and so on.

CCI, which will have the same powers as a civil court, will be empowered to inquire into non-compliance by an SSDE.

If CCI orders are violated, enterprises face a penalty, which may extend to Rs 1 lakh for each day of non-compliance to a maximum of Rs 10 crore.

If a person does not comply with the orders and also fails to pay the fine, the bill proposes imprisonment for a term that may extend to three years or a fine of up to Rs 25 crore or both.

The draft bill doesn’t identify the “person”.

For violations, the competition watchdog can also penalise SSDEs or associates a sum not exceeding 10 percent of its global turnover in the preceding financial year.

If a company fails to declare itself an SSDE, it can be penalised up to 1 percent of its global turnover. The penalty will also be applicable if CCI finds a company has provided incorrect, incomplete or misleading information.

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