After recommending major changes to India’s bankruptcy framework and competition regulation, the Parliament’s Standing Committee on Finance will now look into state finances, market and banking regulators’ operations, and the threat of cybercrime.
GS Paper-2: Parliament and State Legislatures—Structure, Functioning, Conduct of Business, and Issues Arising out of these
The regulatory framework plays a critical role in the country’s competitive digital ecosystem. Discuss. Highlight the various challenges associated with the regulatory framework, as well as the government’s efforts to address them. (150 Words)
Why is the regulatory framework in need of strengthening?
- The rapid digital transformation of India’s economy, one of the fastest-growing major economies, necessitates stronger regulatory oversight.
- Dominant digital market players must be identified as digital gatekeepers and must file annual compliance reports to the regulator under a proposed forward-looking legal framework called the Digital Competition Act, which will establish fair behaviour norms for these entities.
- Experts recommend that the Competition Amendment Bill, 2022, as well as the proposed Digital Competition Bill, be passed immediately in order to strengthen regulatory requirements.
- Furthermore, the proposed Digital Competition Act should include a regulatory framework for news publishers to enter into fair advertisement contracts with digital market gatekeepers such as dominant online search engines.
What are the key areas identified by the Parliamentary panel to strengthen the regulatory framework for competition?
- Cybercrime must be addressed comprehensively in the following areas: o Issues such as fraudulent loan apps and various types of ponzi schemes easily scam people.
- Cybercrime, particularly these fraudulent apps, is a top priority.
- State finances must be addressed comprehensively: o Many states are currently dealing with a number of financial challenges post-covid.
- The transition from the National Pension System (NPS) to the Old Pension System (OPS) will exacerbate some of these public-finance problems.
- Strengthening the regulatory framework: o Regulators such as the CCI, SEBI, and RBI must review their regulatory frameworks to ensure that they are ready for a $5 trillion or $10 trillion economy so that India can expand comfortably into it.
- India must develop regulatory capacity, skills, and expertise.
- The need to be extremely vigilant in terms of regulations and innovation: o India now has a very sophisticated financial system, particularly in terms of digital infrastructure.
- Direct benefits transfer, UPI, fintech proliferation, and the introduction of digital currency all necessitate vigilance in terms of regulations and innovation.
What are the recommendations of the panel on the Competition Amendment Bill?
- First, there will be a mandatory transaction threshold limit of 2,000 crores, and any transaction with either party having significant business operations in India will be required to be reported to the Commission.
- Within the purview of CCI, this resulted in the development of very important technologies or market shaping impact.
- Second, and most importantly in terms of ease of doing business, was the issue of settlement and commitments.
- Adding much more flexibility to the adjudication process by proposing settlements and commitments for all parties.
- It may be possible to reach a negotiated settlement quickly without allowing for an appeal, allowing justice to be delivered quickly.
- A critical feature of the settlement and commitment process is that it is not appealable.
Why does India need two competition laws—the Competition Amendment Bill and the Digital Competition Act?
- The reason for having two laws is that one (the Competition Act of 2002) deals with anti-competitive practises that occur after the fact (where the investigation is initiated after a breach is committed).
- The Digital Competition Bill addresses ‘ex-ante,’ or ‘before the fact,’ anti-competitive practises (or forward-looking regulations).
- By implementing an ex-post and ex-ante framework, India will have a world-class competition framework.
- The Digital Competition Bill is intended to work by identifying the small number of systemically important digital intermediaries that do have a dominant role in specific markets.
- These companies will be required to follow the rules, and they will also be required to file an annual compliance report to ensure that the rules are followed. This is known as ex-ante regulation.
- The Parliamentary committee has unanimously made a certain set of recommendations, so the government can take whichever of the recommendations they believe is appropriate, and these Bills will be passed with unanimous support from both the Lok Sabha and the Rajya Sabha.
- The Competition Amendment Bill should be passed completely during the Budget session, and if the Digital Competition Bill can be introduced during the Budget session, there will be an opportunity to refine it. It can be passed later during the monsoon session. After both bills are passed, India will have the world’s most well-thought-out, fairest, and open set of competition laws.