CDS

Should it be included in the DCB?

Reasons for your answer

Online search engines

Yes ☐

No ☒

There is no market failure in online search engines that justifies the application of competition regulation in this space. As Judge Mehta found in his decision on remedies in the Google search case in the United States, the search market is rapidly being disrupted by AI tools, with OpenAI’s chief financial officer recently stating that AI is “blowing open the search markets,” noting that the company doubled its search share from roughly 6 percent to 12 percent in just 6 months.

Online social networking services

Yes ☐

No ☒

There is no market failure in online social networking services that justifies the application of competition regulation in this space. As U.S. courts have also concluded, social networking services like Facebook and Instagram face intense competition for users from video-sharing platforms like YouTube and TikTok. Indeed, when India banned TikTok in 2020, Indians spent considerably more of their time on Facebook and Instagram—as much as 60 percent more on Facebook and 25 percent more on Instagram.

Video-sharing platform services

Yes ☐

No ☒

See above response.

Interpersonal communications services

Yes ☐

No ☒

There is no market failure in interpersonal communications services that justifies the application of competition regulation in this space. Not only do services like WhatsApp and Signal continue to grow in the Indian market, but domestic startups like JioChat are actively competing with them—reflecting output expansion and market entry that are the exact opposite of what one would expect in a failing market in need of regulatory intervention. And of course, the existence of direct network effects does not indicate market failure—consumers benefit the more users a particular messaging app has.

Operating systems

Yes ☐

No ☒

There is no market failure in operating systems that justifies the application of competition regulation in this space. For example, not only do India’s PC and mobile markets continue to grow, but Apple is increasing its market share to challenge the historically popular Windows and Android operating systems.

Web browsers

Yes ☐

No ☒

There is no market failure in web browsers that justifies competition regulation in this space. While Chrome is popular with Indian consumers, it is extremely easy for users to switch to alternative browsers such as Firefox, Edge, or Opera, as well as to innovative offerings from Indian players such as Ulaa (Zoho).

Cloud services

Yes ☐

No ☒

There is no market failure in cloud services that justifies the competition regulation in this space. Not only is India’s cloud computing industry growing rapidly, but Microsoft, Amazon, and Google compete intensely with one another and with growing Indian players like Yotta and Reliance Jio that offer lower-cost options.

Advertising services

Yes ☐

No ☒

There is no market failure in advertising services that justifies the application of competition regulation in this space. Not only does digital advertising in India continue to grow, but Google and Meta intensely compete with e-commerce platforms like Amazon and India’s Flipkart.

Online intermediation services

Yes ☐

No ☒

Online intermediation services can, in theory, encompass a broad swath of platforms, but digital commerce in India generally shows no signs of market failure. For example, the e-commerce space in India is fiercely competitive, with Flipkart competing with Amazon, Meesho, JioMart, and other players—not to mention countless vertical ecommerce websites that compete with the more general platforms for various specific groups of products (e.g., Myntra, Nykaa, etc.).

Existing Thresholds (Financial / User)

Do you think this threshold should be changed?

Please state reasons for your answer

What could be possible thresholds (you may answer the MCQ related to quantitative threshold given after this question)

Turnover in India

not less than INR 4000 crore

b) No

ITIF does not object to a financial threshold of turnover in India of not less than INR 4000 crore as a way to ensure that only firms with a sufficient impact on the Indian market are captured by the DCB, provided that it is not a pretext to exclude significant Indian digital firms from the regulation.

Global Turnover

not less than USD 30 billion

a) Yes

ITIF objects to a financial threshold of global turnover of not less than USD 30 billion as a sufficient condition for a firm to satisfy the financial threshold, as it could capture firms even if they do not have significant turnover in the Indian market and could raise concerns that the Draft DCB is attempting to target large foreign firms.

Gross Merchandise Value in India

not less than INR 16000 crore

a) Yes

ITIF objects to a financial threshold of gross merchandise value in India of not less than INR 16000 crore as a sufficient condition for finding that a firm satisfies the financial thresholds. A firm may operate a platform with a high gross merchandise value but nonetheless have disproportionately lower profit and little market power.

Global Market Capitalisation

not less than USD 75 billion

a) Yes

ITIF objects to the financial threshold of global market capitalisation of not less than USD 75 billion, as it could capture firms even if they do not have a significant financial presence in the Indian market and could raise concerns that the Draft DCB is attempting to target large foreign firms.

End Users

at least one crore

b) No

ITIF does not object to the Draft DCB’s consideration of user thresholds as a means of excluding offerings which do not have a significant impact on the Indian economy. But counting users is not the same as assessing market power, as a firm may have a significant number of users and nonetheless lack any dominance, especially given the prevalence of multi-homing in the digital economy. 

Business Users

at least ten thousand

b) No

See above. In addition, user thresholds should not be set in a way that gives rise to the disproportionate targeting of foreign products and services relative to those of domestic players.

Existing Thresholds

Do you think this threshold is relevant?

Please state reasons for your answer

Volume of commerce of the enterprise

b) No

In calculating whether a firm enjoys entrenched dominance, which should be the central focus of the DCB’s qualitative analysis, assessing the overall volume of commerce that occurs on a platform is typically especially probative—a firm may have a large volume of commerce on its platform but enjoy disproportionately little profits or market power.

Size and resources of the enterprise

b) No

Just because a firm is large in terms of revenues and resources does not mean that it enjoys substantial market power protected by high barriers to entry. Big should not be treated as bad for purposes of assessing whether a firm is dominant when determining whether to treat it as a systemically significant digital enterprise.

Number of business users or end users of the enterprise

a) Yes

In calculating whether a firm is dominant, it is typically important to consider its number of customers—either as part of an analysis of its market share or as part of a direct assessment of its market power (i.e., a monopolist’s reduction of output).

Economic power of the enterprise

a) Yes

This should be the primary qualitative factor in determining whether a firm is a systemically significant digital enterprise. However, the existence of a firm enjoying significant market power should not be treated as a sufficient condition for such a designation. Rather, a firm’s substantial market power should also be protected by high barriers to entry in a way that ensures that market-driven disruptions do not obviate the need for regulation.

Integration or inter-linkages of the enterprise with regard to the multiple sides of market

a) Yes

The DCB should absolutely assess whether the business of a digital firm reflects a multisided platform market, which generally means that perceived anticompetitive behaviour on one side of the market may actually be procompetitive for the platform as a whole, such as by increasing output.

Dependence of end users or business users on the enterprise

b) No

While an analysis of switching costs can be a relevant factor in assessing whether a firm enjoys substantial market power protected by barriers to entry, mere “dependence” is too vague a criterion to form part of a rigorous analysis of a firm’s economic power. Moreover, dependence can also arise in situations where firms offer complementary products and thus even when a firm is not dominant in the service that is being assessed under the regulation.

Monopoly position whether acquired as a result of any statute or by virtue of being a Government company or a public sector undertaking or otherwise

a) Yes

In assessing whether a dominant position is protected by barriers to entry, the Draft DCB should consider regulatory or other government-sponsored barriers to entry in addition to those that reflect more typical market forces. What’s more, in considering whether to designate a government company, regulators should be particularly concerned about capture and the picking of winners and losers, as regulators may have an incentive to inherently favour state-sponsored entities that they are more affiliated with relative to private and especially foreign players. 

Barriers to entry or expansion including regulatory barriers, financial risk, high cost of entry, marketing costs, technical entry barriers, barriers related to data leveraging, economies of scale and scope, high cost of substitutable goods or services for end users or business users

a) Yes

The Draft DCB should make clear that, for purposes of designating a firm as a systemically significant digital enterprise, any indirect demonstration that a firm enjoys dominance by virtue of having high market shares in a relevant market must be accompanied by a demonstration that there are substantial barriers to entry. In evaluating whether a dominant position is protected by barriers to entry, the Draft DCB is right to consider the sorts of factors identified therein.

Extent of business user or end user lock in, including switching costs and behavioural bias impacting their ability to switch or multi-home

a) Yes

In assessing whether a dominant position is protected by barriers to entry, the Draft DCB is right to consider factors like lock-in and switching costs. However, while behavioural analyses are increasingly being deployed in high-profile tech and antitrust cases around the world—such as in DOJ v. Google and FTC v. Facebook—regulators should only credit such analyses when they are clearly supported by empirical evidence that justifies departing from general rationality assumptions.

Network effects and data driven advantages

a) Yes

In assessing whether a dominant position is protected by barriers to entry, the Draft DCB may consider factors like network effects and data-driven scale efficiencies. However, regulators should not consider the existence of network effects and data efficiencies to constitute as substantial barriers to entry per se, let alone any kind of market failure: Not only do many consumers engage in multihoming across multiple platform networks, where network effects result in consumer benefits, but alternative sources of data are often widely available to competitors and can mitigate any perceived data advantages enjoyed by supposedly entrenched firms.

Scale and scope of the activities of the enterprise

a) Yes

In assessing whether a dominant position is protected by barriers to entry, the Draft DCB should allow for consideration of factors like scale- and scope-driven efficiencies.

Countervailing buying power

a) Yes

In assessing whether a firm enjoys a dominant position, the Draft DCB should allow for consideration of countervailing buyer power, which can serve to negate the market power that a firm may otherwise enjoy and mitigate the risk of false positives resulting from over-designation.

Structural business or service characteristics

a) Yes

While the Draft DCB should allow for consideration of structural business factors like the effect of broader technological change on the industry, as well as whether a firm is failing or flailing and thus unlikely to enjoy dominance or market power going forward, this factor is itself vague and should be clarified accordingly.

Social obligations and social costs

b) No

The Draft DCB errs in allowing for consideration of non-economic criteria like social obligations and social costs when analysing whether a firm should be designated as a systemically significant digital enterprise. These non-economic considerations confound what should be a narrow focus on dominance and economic power with vague and subjective concerns that risk facilitating regulatory capture and imposing regulatory strictures on markets where there are no real concerns about potential harm to competition.

Market structure and size of the market

a) Yes

In assessing whether a firm enjoys a dominant position, the Draft DCB should allow for consideration of structural factors like market shares and overall industry concentration, provided that regulators do not treat them as dispositive but also analyse whether substantial barriers to entry exist. Moreover, regulators should also seek to assess direct evidence of market failure (i.e., price increases, reduced output, diminished quality, or lessened innovation), which is typically more probative of market power than circumstantial and structural evidence.

Any other factor which the Commission may consider relevant for the assessment

b) No

In general, the qualitative determination of whether a firm is a systemically significant digital enterprise should be tailored to the well-defined economic concept of a  dominant position protected by barriers to entry. Extensive statutory lists of relevant factors risk creating unnecessary vagueness and confusion.