The introduction of the Digital Markets Act (DMA) and the Digital Services Act (DSA) in the European Union (EU) has triggered a lot of discussion regarding specialized digital gatekeeper regulation. Other jurisdictions have also been exploring different forms of gatekeeper regulation. The UK has already established a Digital Markets Unit (DMU) under the aegis of its Competition and Markets Authority, and is preparing to introduce the DMU’s associated legislative framework in the form of the Digital Markets, Competition and Consumer Bill. Germany has also amended its Competition Act to introduce Section 19a which envisages ex-ante regulation for digital gatekeepers. Australia too, as part of its five-year-long Digital Platform Services Inquiry, is considering the adoption of new legal tools to address harms to consumers, small businesses, and competition. Highlighting how widespread this regulatory trend has become, Agnidipto Tarafder, an expert on law and technology, notes that even the US whose “laissez-faire and ex-post regulatory approach (arguably) helped it attain its market leadership in tech” is debating the introduction of ex-ante gatekeeper regulation.
All these different forms of gatekeeper regulation have two common principles: i) they are primarily ex-ante in nature, that is, they try to preempt and prevent market failures before they occur rather than remedy them ex-post; and ii) they are sector-specific, that is, they acknowledge and respond to the unique regulatory challenges that arise in the context of digital markets. Beyond these basic foundational similarities, the models of ex-ante gatekeeper regulation differ in significant ways in their details and operationalization.
Unsurprisingly, India has not been immune to this wave of global interest in ex-ante gatekeeper regulation. Recently, the Parliamentary Standing Committee on Commerce recommended the introduction of a gatekeeper regulation in India. Simultaneously, the country’s competition regulator, the Competition Commission of India (CCI), has reportedly started setting up a dedicated Digital Markets and Data Unit (DMDU). As most major jurisdictions seem to be moving towards some form of gatekeeper regulation, it is only a matter of time before India follows suit. At this juncture, though there are a few models of gatekeeper regulation to choose from, the Parliamentary Standing Committee’s skeletal recommendations seem to be aligned with the DMA, while the CCI’s move of creating a DMDU mimics the UK’s strategy. While regulatory transplant in India (i.e., import of legislative frameworks from foreign jurisdictions) is neither uncommon nor decidedly undesirable, it is important to customize these laws to the unique legal, social, and market conditions of India. Tarafder goes even further to state that “the size of the Indian market puts it in a unique position where its regulatory designs could set the norms and cause a ‘New-Delhi effect’” (similar to the Brussels effect which posits that EU-based regulation has often shaped global regulation).
The Parliamentary Standing Committee’s skeletal recommendations seem to be aligned with the DMA, while the CCI’s move of creating a DMDU mimics the UK’s strategy.
Against this backdrop, this essay enumerates four principles that should guide the drafting of gatekeeper regulation in India: i) the designation of gatekeepers should be on quantitative metrics; ii) the prohibitions and obligations should be specific enough to be self-executing; iii) the gatekeeper regulation should clearly identify its broader goals and foundational first principles; and iv) the gatekeeper regulation should be situated within the framework of the Indian Competition Act and its implementation should be entrusted to the CCI. Notwithstanding which foreign prototype ultimately ‘inspires’ the Indian legislative exercise, the essay argues that these four principles should form the core of our domestic digital gatekeeper framework. Before outlining these core principles and the rationale for their centrality, it is important to understand the promises of ex-ante gatekeeper regulation over the existing legal frameworks.
Advantages of Gatekeeper Regulation: Specificity and Speed
There are many who still remain skeptical of the introduction of any form of ex-ante gatekeeper regulation. As one eminent educator and antitrust expert explained, the Law and Economics school (which was the dominant ideological school for the most part of the last 50 years) harbors “a general skepticism towards the ability of the state to regulate the market” and believes that capitalism on its own “engages in creative disruption”. The expert compared ex-ante regulation to “acupuncture with a fork — no matter how careful you’re with one prong, the other is bound to hurt”. Despite such skepticism, there has been an emerging consensus on the need for gatekeeper regulation in digital markets, due to both the qualitatively distinct nature of issues as well as the scale at which they emerge.
Notably, many types of problematic conduct which arise on digital platforms are already covered under existing legislation, including consumer protection, speech and moderation, intermediary liability, and competition laws. For instance, unfair preferential treatment and biased ranking of its own verticals (like Google Flight) on Google’s search engine has already been penalized by the CCI as a competition law violation. The theory of harm here is that preferential treatment of its own verticals lessens competition by unfairly disadvantaging other competing services (such as other flight aggregators and third-party comparison shopping websites) and harms consumers by decreasing choice and promoting inferior options. Similarly, the CCI has initiated investigations into most major digital platforms, including Apple; Amazon and Flipkart; Facebook and WhatsApp; and Zomato and Swiggy.
“The size of the Indian market puts it in a unique position where its regulatory designs could set the norms and cause a ‘New-Delhi effect.’”
However, these cases have struggled to correct the behavior of digital platforms and have the desired impact because the investigations are often plagued by delays, appeals, and other procedural hurdles. The Google search bias competition complaint filed in 2012 was amongst the first platform regulation cases in India. The CCI’s final order in this case passed after six years in 2018, and is still pending at the very first stage of appeal before the National Company Law Appellate Tribunal. Under the traditional legal system, not just the final orders but even the prima facie orders and other intermediate investigative steps are frequently challenged. The remedies that finally emerge after the exhaustion of all avenues of appeal will potentially be futile. It is unlikely to reverse the unfair entrenchment of the dominance of these platforms or provide any succor to the competition that has already been unfairly excluded from these markets. Hence, although the conduct of platforms might be covered under existing legal frameworks, these cases do too little, too late to prevent or ameliorate the (often irreversible) harms that occur on digital platforms.
Moreover, existing laws with their broad definitions of offences involve subjective, uncertain, and time-consuming interpretative exercises and thus, fail to provide guidance on the behavior that is expected from these platforms. For example, the CCI is currently assessing whether WhatsApp’s data extraction, sharing, and processing practices amount to the imposition of an ‘unfair’ condition by a dominant entity. Under traditional legal frameworks, offences are often premised on the assessment of vague and broad concepts such as ‘unfair’, ‘anti-competitive’, etc. Such broad definitions and flexibility are required from traditional legislations such as competition law since they are expected to respond to the varied requirements of a wide range of markets and sectors. However, in the platform regulation cases, a lot of precious time and resources are lost on these subjective assessments. It also makes these decisions more susceptible to challenge and makes it difficult for companies to self-regulate. Thus, in order to be more beneficial than the existing legal frameworks, the gatekeeper regulation should be more specific in its expectations and speedy in its processes and execution. The principles prescribed below as the essential building blocks of gatekeeper regulation in India are premised on maximizing both speed and specificity, the two primary advantages of ex-ante gatekeeper regulation over traditional legislations.
1. Designation of gatekeepers should be on quantitative metrics
Structurally, a typical gatekeeper regulation framework would consist of the following constituent elements: i) parameters and procedure for the designation of gatekeepers; ii) specification of obligations and prohibitions; iii) enforcement and monitoring; and iv) remedy. Out of these, the first element, the designation of gatekeepers, is the crucial distinguishing factor when compared to existing legislations. A clear and concise process of designation of gatekeepers would help to identify the players who are covered by the regulation. Designation could be done on the basis of qualitative or quantitative metrics. A quantitative approach to designation looks at objective numeric metrics associated with the company and its services, such as the annual turnover, market capitalization, the number of active monthly and yearly users, etc. If a company satisfies these objective thresholds, then it is designated (or presumed to be) a gatekeeper. On the other hand, the qualitative approach to designation entails a subjective assessment of the power of Big Tech companies to ascertain whether they operate as gatekeepers considering their role and power in the digital ecosystem. Examples of a qualitative approach to designation include Germany’s Section 19a which applies to firms that are of “paramount significance for competition across markets”, and the UK’s DMU which seeks to identify firms that have a ‘Strategic Market Status’ (SMS). These qualitative and subjective assessments of whether a firm is of ‘paramount significance’ or has a ‘strategic market status’ are unpredictable as well as time- and resource-intensive. The qualitative approach to designation would dilute both the advantages of specificity and speed that gatekeeper regulation promises to offer over conventional laws.
Existing laws with their broad definitions of offences involve subjective, uncertain, and time-consuming interpretative exercises and thus, fail to provide guidance on the behavior that is expected from these platforms.
Existing cases against digital platforms also caution us against this qualitative approach. For example, in the competition cases relating to Apple’s and Google’s app store policies and commission rates, the CCI first had to delineate the relevant market in which these app stores operated and then ascertain whether Apple/Google is dominant in them. Determining the relevant market in which Google’s Play Store and Apple’s App Store operate is no easy task and has resulted in tenuous single-brand market definitions. While the power of Google and Apple in the mobile ecosystem seems almost intuitive and obvious now, meeting the legal thresholds to show their dominance has proven challenging. Defining the relevant market and ascertaining market power of digital platforms has turned out to be extremely complex. Unfortunately, only once these preliminary issues have been decided, can the CCI proceed to examine the actual conduct – in this case, the imposition of unfair and opaque app store policies on developers and charging of exorbitant commissions. Gatekeeper regulation skips these unnecessary yet onerous preliminary hurdles of market definition and assessing market power through the process of designation of gatekeepers. Once a firm has been designated as a gatekeeper then it has to comply with all the prescriptions and there is no need to show the market power of the firm in each individual case. However, if a qualitative approach to the designation of gatekeepers is adopted then it would turn out to be equally tedious and long-drawn as the status quo of defining the relevant market and proving dominance.
Instead, the designation of gatekeepers should be done primarily on quantitative metrics and qualitative assessment of the market power of a platform should only be used in exceptional cases. For instance, under the DMA, a company that: i) meets a specific annual turnover or market capitalization threshold; ii) provides a ‘core platform service’ (from an exhaustive list of core platform services); and iii) has a specified minimum number of active monthly or yearly users, is presumed to be a ‘gatekeeper’ and is designated as such. Such objective numeric metrics make it possible for platforms to self-identify and self-regulate. They make the designation process easier and faster and thus maximize specificity and speed. According to Smriti Parsheera, a lawyer and public policy researcher working on issues at the intersection of technology and society, this conversation should also consider “who will set the standards” and “whether it has the malleability to evolve with emerging knowledge and practices”.
A clear and concise process of designation of gatekeepers would help to identify the players who are covered by the regulation.
Parsheera explains that while deciding between the qualitative, quantitative, or hybrid approach to the designation of gatekeepers, we need to carefully consider “who are gatekeepers in the Indian context and gatekeepers to what?” In her previous work, she has discussed the potential for alternative systems based on an open Application Programming Interface (API) and interoperability standards such as the Unified Payments Interface (UPI), the Data Empowerment and Protection Architecture, and the Open Network for Digital Commerce to emerge as ‘alt Big Tech’. She cautions that a quantitative-only approach might not capture these entities and other outliers even though they are important and powerful players in the Indian tech landscape. To capture these and other borderline or doubtful cases which do not meet the numeric thresholds but might still exercise crucial market power, a separate qualitative assessment process could be built in addition to the default quantitative approach. This is similar to the DMA which provides that the Commission may undertake a market study to designate a company that otherwise does not meet the objective criteria of being a gatekeeper.
2. Prohibitions and obligations should be specific enough to be self-executing
As discussed above, many of the regulatory principles that gatekeeper regulation seeks to protect and promote are already enshrined in the existing legal regimes. The important contribution of gatekeeper regulation then is that it specifies the expectations from digital platforms with a high level of granularity such that they could serve as self-compliance guidelines. Tarafder also emphasizes the importance of moving from a system of ‘soft regulation’ to greater specificity and granularity. An excellent example is the DMA which is quite exact in its drafting. In anticipation of the DMA coming into force, we are already witnessing platforms modifying their conduct.
However, not all proposed models of gatekeeper regulation seem to appreciate the importance of high specificity and incorporating greater details into their prescriptions. For example, the UK’s Digital Markets regime is considering an alternative approach where the legislation only contains high-level objectives and principles such as a broad prescription that the conduct of digital platforms should promote fair trading, open choices, trust, and transparency. Under this approach, the actual legally binding expectations based on these broad themes would be designed subsequently by another body (DMU in the UK) or through delegated legislation. These specific conduct prescriptions would be evidence-based, targeted, and firm-specific. The approach of describing only the first principles or broad themes in the legislation and delegating the task of tailoring specific prescriptions is aimed to create flexibility and avoid the limitations of one-size-fits-all thinking.
There is some indication that the Indian government is also contemplating a kind of ‘light-touch’ approach to the regulation of digital platforms premised not on specific binding obligations and exact prescriptions but only on disclosures. This strategy seems to be triggered by the threat of Big Tech firms slowing down their investment plans in India due to the CCI’s interventionist approach. Additionally, as mentioned earlier, the CCI also seems to be in the process of setting up a DMDU. Thus, there is a real possibility that India would describe only the broad thematic principles while delegating the exercise of crafting the details to a new unit/agency within the CCI. However, as Tarafder explains, in the absence of evidence showing the efficacy of such an approach, “the fear of being perceived as being anti-investment should not influence or deter or defer regulation”.
There is some indication that the Indian government is also contemplating a kind of ‘light-touch’ approach to the regulation of digital platforms premised not on specific binding obligations and exact prescriptions but only on disclosures.
Such effects-based assessment on a case-to-case basis by a unit within the CCI does not really offer any substantial advantages over the status quo. A special unit would surely reflect enforcement priorities and assist by dedicating resources and manpower to this important sector. However, these benefits would only be marginal and the essential quality of gatekeeper regulation that they are ex-ante and specific enough to act as guidelines and be self-enforcing would be lost. In other words, if the gatekeeper regulation only identifies broad principles and themes such as ‘fair trading’ or ‘transparency’, then it wouldn’t be very different from the existing legal regimes which rely on an assessment of concepts of ‘anti-competitive’ or ‘unfair’ conduct. This would make gatekeeper regulation subject to ambiguity and interpretative uncertainty just like the existing legal regimes. Such an approach would also compromise the speed of the process since a lot of time would go into interpretation and specifying conduct for each individual platform or service. Thus, gatekeeper regulation in India should define prohibitions and obligations with a high degree of specificity such that they are self-executing instead of simply delegating this task to the implementing or adjudicatory body to decide on a case-to-case basis. According to Tarafder, “Even if the cost of self-regulation initially seems onerous, it will yield results in the future, especially since digital platforms are here to stay.”
3. The gatekeeper regulation should simultaneously identify its broader goals and foundational first principles
While outlining the prescriptions in detail is essential for all the reasons discussed above, it is also important that an effective gatekeeper regulation should know its broader goals and objectives. The DMA has been criticized for specifically targeting a handful of American Big Tech companies, namely the GAFA: Google, Apple, Facebook, and Amazon. In fact, even the individual provisions of the DMA have been traced to the various ongoing antitrust actions by the European Commission against Big Tech companies and all of the DMA’s obligations have been matched with the exact platform whose conduct seemingly inspired their inclusion in the text of the statute. Such claims seem to suggest that gatekeeper regulations do not have any unifying themes or objectives but are merely a patchwork of prescriptions against specific platforms stitched together due to regulatory necessity (or even political motivations). These arguments do not just cast suspicion on the intellectual and analytical coherence of the regulation but also raise doubts about its enduring value. If the gatekeeper regulation is tailored in response to the regulatory issues that arise with GAFA, then it risks becoming obsolete when faced with competition and fairness issues in the next generation of tech (in AI, blockchain, robotics, metaverse, etc.)
Thus, it is important to identify the broad objectives and foundational first principles of the gatekeeper regulation. For instance, the DMA identifies ‘fairness’ and ‘contestability’ as its primary purpose. It has also built in a procedure for subsequent addition of new ex-ante prescriptions in response to newer types of platforms or other new technology. The UK’s proposal also seeks to outline the aims of the code (‘fair trading’, ‘open choices’, and ‘trust and transparency’) in the text itself. Although these objectives may sound overly broad and ambiguous, they are still useful in indicating the overall direction of regulation and its underlying themes. In India, the goals of the legislation are usually outlined in its Preamble or the Statement of Objects and Reasons or in some other provision relating to advocacy functions, etc. In the gatekeeper regulation too, these parts of the legislation could be used to describe the unifying themes and overarching objectives of the framework. Identification of objectives and first principles would assist in not just interpretation and implementation of existing provisions but also make the code flexible and pave the way for future adaptations to newer forms of technology. Even from the point of view of platforms, Tarafder argues, “Once they pay the compliance cost in the beginning, transitioning subsequently in response to smaller changes and amendments to the framework is more feasible.”
4. The gatekeeper regulation should be situated within the framework of the Indian Competition Act and its implementation should be entrusted to the CCI
Deliberations for the introduction of every new regulation or legislation in India are accompanied by suggestions for the establishment of a new specialized regulator. Even in the context of tech regulation, there are already proposals for not one but many specialized regulators. The draft Digital Personal Data Protection Bill will create a Data Protection Board. The Non-personal Data Governance Framework recommends the establishment of a Non-personal Data Regulatory Authority and the Digital India Act (which will replace the Information Technology Act, 2000) is also expected to propose the setting up of a specialized digital regulator. The creation of a specialized regulator is usually justified on grounds of expertise, speed, and efficiency. However, there is no real evidence to indicate that the myriad of specialized regulators which already exist in India have delivered on any of these promises. Nor is there any indication that specialized regulators facilitate speedy and efficient case resolution. For instance, even though there is a specialized competition regulator in the country, most competition cases are still encumbered by appeals before general courts (or even subjected to writ jurisdiction of constitutional courts).
If the gatekeeper regulation is tailored in response to the regulatory issues that arise with GAFA, then it risks becoming obsolete when faced with competition and fairness issues in the next generation of tech.
Instead of perfunctorily creating another specialized regulator, the task of digital gatekeeper regulation should be entrusted to the CCI. This is because the idea of gatekeeper regulation emanates from the difficulties faced in maintaining a free and competitive digital market – ideals that fall under the purview of the competition regime. Indeed, the term ‘gatekeeper’ itself (as opposed to ‘intermediary’ or ‘service provider’) reflects the competitive position of these companies and their control over entire markets or ecosystems. Thus, the harm that gatekeeper regulation is concerned with is to free, fair, and competitive markets. Competition law is tasked with protecting and promoting precisely these ideals. Gatekeeper regulation traces its philosophical foundations to the competition law regime. This is evident both in the nature of its prescriptions as well as the deliberations leading up to it. Additionally, as Tarafder explains, “While the DPA can deal with the consumer-end of issues, the CCI can deal with consumers as a class and any market dominance related issues.” Entrusting these regulatory aspects to the CCI would “ensure expertise and avoid jurisdictional conflicts”.
Thus, gatekeeper regulation should fall under the ambit of the larger competition law regime. This would ensure that gatekeeper regulation builds on and benefits from the existing ideas and jurisprudence of competition law. Even when the prescriptions contained in the gatekeeper regulation are very specific, there would still be room for interpretation and competition law jurisprudence could help fill the gaps here. For example, explicitly prohibiting digital platforms from preferential treatment of their private labels or preferred sellers would still raise questions about which types of conduct would amount to ‘preferential treatment’. In such instances, principles of competition law and its tools could help determine which types of conduct undermine competition and hence should fall within the scope of the prohibition. Over the years, competition law scholarship and jurisprudence have developed some guidance on the meaning of ‘competition’ and the diverse ways in which it could be maintained. Gatekeeper regulation would definitely benefit from this existing knowledge. Further, entrusting the competition regulator, CCI, to implement the gatekeeper regulation would help leverage pre-existing knowledge bases about technologies and markets (developed through the CCI’s multiple digital platform cases) and create many synergies. It would ensure harmony in objectives and schemes and facilitate unity of action. Parsheera further adds that any proposed regulatory framework should clarify, “the institutional dynamics of what is expected to be done by the government, the CCI, and the courts”.
Sooner or later, the introduction of a gatekeeper regulation in India will become inevitable. This paper has highlighted that although several regulatory issues arising on digital platforms might in principle be covered by existing legal frameworks, there is still a need for a gatekeeper regulation. The principal advantages that a gatekeeper regulation would offer over existing ones are speed and specificity. Thus, proposals for gatekeeper regulation in India should carefully examine how these two advantages could be maximized through design and implementation. Towards that end, the paper has suggested the following four core principles which should form the building blocks of any gatekeeper regulation in India:
- Designation of gatekeepers should be on quantitative metrics;
- The prohibitions and obligations should be specific enough to be self-executing;
- Simultaneously, the gatekeeper regulation should identify its broader goals and foundational first principles; and
- The regulation should be situated within the framework of the Indian Competition Act and its implementation should be entrusted to the CCI.
In addition to maximizing speed and specificity, these four principles would confer analytical coherence, increase synergies, leverage existing knowledge bases, and enhance the potential of the gatekeeper regulation to respond to the next generation of technologies.
This essay has been published as part of IT for Change’s Big Tech & Society Media Fellowship 2022.