Open-ended definitions in digital competition bill creating chilling effect on startup ecosystem: PhonePe CEO Sameer Nigam

PhonePe CEO Sameer Nigam requested the government to hold a 6-month consultation for the draft digital competition bill

According to Sameer Nigam, the recently released draft Digital Competition Bill has opted for a grab-all characterisation of what constitutes a systemically important tech company.  And such "open-ended" definitions and phrases in the draft bill is creating a "chilling effect" on the startup ecosystem, the PhonePe CEO said.

The draft of the bill, which was released for consultation on March 12, contains additional compliance requirements aimed at major technology companies, which the bill refers to as Systematically Significant Digital Enterprises (SSDEs).

A company that offers "core digital services" can be declared an SSDE based on its global turnover, gross merchandise value, number of users in India and so on, the bill says.

Nigam, who was speaking at an April 3 roundtable on the new competition bill organised by CCAOI, which defines itself as a trust "engaged in capacity building, research and advocacy mostly in India especially related to Internet and digital policies", pointed out that the thresholds for designating a company as SSDE in the bill can even apply on smaller companies and startups.

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

Online intermediation service

For instance, the draft bill lists nine "core digital services" that an SSDE may be offering. They are "online search engines" , "advertising services", "online intermediation services", and so on.

The bill further defines "online intermediation service” as "any other digital service"  that "receives, stores or transmits electronic record or provides any service... (including) web-hosting service providers, payment sites, auction sites, online application stores, online marketplaces and aggregators providing services such as mobility aggregation, food ordering, food delivery services and match-making".

Regarding this specific definition, which he termed as "open-ended", Nigam said that he is worried that the Competition Commission of India will decide what kind of companies fall under "online intermediation service".

Also read: No mixing of personal data, anti steering and more: Decoding obligations for Big Tech in Digital Competition Bill

"It's (The definition is) so open-ended. It leaves everybody in the startup ecosystem running scared, because the minute you leave that kind of interpretive power with a body like the CCI, you're basically creating a chilling effect on the ecosystem," he said.

Threshold too low?

The draft bill says that an enterprise can also be treated as an SSDE if it has 1 crore users in India of its digital service in the three immediately preceding financial years, or if it has at least 10,000 business users in India for the same time frame.

Nigam said, "If I look at 10,000 businesses in India, apps like Dookan and Khaata would have triggered this clause three years ago. Now, they may not be in your conventional thinking of internet companies, but they're all working off the internet. These are connected SaaS solutions today. Are they all SSDEs today as far as that limit is concerned?"

'Definition of enterprise very loose'

The draft bill says that an enterprise can be declared an SSDE 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.

Also read: Elon Musk's X backed India's proposal to bring in new law to tackle Big Tech

A company can also be deemed an SSDE if its gross merchandise value 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.

Nigam said, "Translating everything into rupees, the global market cap defined is at Rs 6.2 lakh crore, and the global turnover is Rs 2.5 crore. However, if you're in India, the turnover is Rs 4,000 crore. So either we are submitting that if you are large abroad, you are more likely to cause harm, and this goes entirely into the ex-ante flavour."

"Either what they meant to say is that the global turnover for the parent entity, not the India business, is so high that you're likely to cause harm or they are talking about an Indian business' global turnover. I have not seen any internet company out of India where your domestic turnover is less than Rs 4,000 crore but your global turnover is Rs 2.5 lakh crore. I don't know of such a company at all," Nigam said, while urging the government to provide at least six months for further consultation on the proposed law.

Other participants in the roundtable, which included academicians, lawyers and consultants, held consensus on asking for and extension of the consultation time period for the bill, which ends on April 15.