Digital Competition Bill, a threat to MSMEs: India SME Forum
According to the India SME Forum, the proposed Digital Competition Bill poses a significant threat to MSMEs, jeopardising their capacity to capitalise on India's impeding ecommerce advancement.
India SME Forum (ISF) has termed the proposed Digital Competition Bill (DCB) a threat to MSMEs. It has written to the Ministry of Corporate Affairs, highlighting its adverse effects on MSMEs' ability to access and compete in emerging markets.
MSMEs are integral to India's pursuit of a $5 trillion economy by 2030, particularly through harnessing ecommerce. Nevertheless, the forum said the proposed DCB jeopardises their capacity to capitalise on India's impeding ecommerce advancement.
The forum convened legal and academic experts who underscored the draft provisions discourage MSMEs from expanding their operations due to heightened scrutiny from regulators. Focused primarily on digital services, these provisions constrain SMEs' ability to derive value from digital platforms and dissuade them from embracing digital commerce.
It added that including MSME representatives in future consultations can ensure their unique challenges are considered in regulatory decision-making processes.
The DBC aims to spot big companies, or Systemically Important Digital Intermediaries (SIDIs), who could dominate the market due to their size and influence and need to generate a report saying they're playing fair and transparently.
The Digital Competition Law Committee assessed if India needs rules for fair competition in digital markets before any issues arise and suggested a draft Bill based on its findings, released on March 12, 2024.
Meghna Bal, Head of Research at Esya Centre, said, “The Bill approaches competition from a very narrow frame, only considering competitive dynamics between businesses and digital platforms and neglecting the synergies between these entities."
She added, "The bill limits platform data use for targeted ads. Indian MSMEs heavily rely on such ads for revenue, customer acquisition, and cost-saving. As per our study, 61% [of MSMEs] would suffer if targeted ads became less effective.”
Shreya Suri, Partner, Indus Law said the draft legislation mainly focuses on identification and enforcement, resembling the Competition Act. "More discussions are needed for India's market. The suggested quantitative thresholds, even lower than DMA, may not suit India's vast population and digital user base. We must prioritise what suits the Indian market," she said.
Highlighting the various possibilities and impact on MSMEs, Vinod Kumar, President of India SME Forum, and Trustee and President of FIRST India, said, “As an economy, India is not used to paying for everything, and hence companies resort to bundling to lower the costs for consumers. For example, the Outlook service part of Microsoft 365." He highlighted that the current framework is too early for Indian MSMEs.
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Viswanath Pingali, Associate Professor, IIM Ahmedabad, said, “A significant advantage that big platforms offer small and medium enterprises lies primarily in their capacity to lower transaction costs... However, regulations imposing a blanket ban on practices such as tying and bundling, which are integral to these platforms, might ostensibly foster competition but inadvertently undermine this trust by complicating resolution processes previously streamlined by platform services."
He added, "This regulatory approach could significantly erode the trust element that platforms have built, particularly, affecting smaller firms that disproportionately rely on digital advertising and platform services for their market reach and discovery."
On the involvement of various stakeholders in the consultation process, Kumar highlighted that MSMEs have had limited involvement in the consultation process, leading to framing of regulations that do not represent their viewpoints.
Edited by Suman Singh
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