Stricter compliance for gatekeeper labels soon: report

Startups such as food delivery app Zomato and e-commerce platforms Myntra and Nykaa that boast the patronage of millions of users and larger revenues may face stricter compliance standards under the upcoming Digital Competition Bill 2024, a Mint report said

The bill, put together by a panel under the ministry of corporate affairs earlier this year, aims to identify influential digital economy companies and mandates that they be designated systematically significant digital enterprises (SSDEs) that will have to adhere to dos and don’ts or ex-ante regulations.

All SSDEs must file an annual compliance report with the Competition of India (CCI), with digitally influential startups violating regulations liable to be penalized up to 10% of their global turnover.

The bill, once it comes into force, will cover a whole host of food delivery apps, streaming, fashion platforms, companies delivering medicines, railway ticket booking platforms, and other digital platforms offering digital payments, a report released by think tank CUTS Institute for Regulation and Competition (CIRC) said.

The European Union has similar legislation dubbed the Digital Markets Act (DMA) of 2023, and identifies six companies–Alphabet, Amazon, Apple, Byte Dance, Meta Platforms, and Microsoft Corp.–as digital gatekeepers. As per the European Commission’s regulations, these companies must submit compliance reports effective April this year.

The SSDE tag should be given only to those digital firms that justifiably fit that description in the light of India’s economic and market realities, Navneet Sharma, director general of CIRC, said in the Mint report, adding  that “companies with an unduly large number of businesses should fall under the ambit of the new law; otherwise, it would overburden the regulator and affect its performance.”

While highlighting the other conditions like domestic sales of ₹4,000 crore or global sales of $30 billion, gross merchandise value of ₹16,000 crore, or international market capitalization of $75 billion and also meet the criterion of 10 million end users or 10,000 users will be designated as SSDE.

The definition of SSDE further encompasses all other enterprises not meeting this criterion but having significant market presence in the market for specified services, including internet search and advertising services and operating systems, which, in CCI’s view, will be tagged as SSDE.