December 3, 2016 12:04:06 am
Investment and innovation in the digital sector has generated enormous opportunities for the Indian economy. It has raised the economic and global profile of entire cities, created jobs, and produced innovative technologies used and sold around the world. This is even more important now as we are trying to speedily switch over to a country-wide system of digital payments across sectors in a cashless economy. Several new start-ups are in the offing.
However, for all the benefits it brings to the economy, consumers, entrepreneurs and businesses, it has flagged a number of new challenges for regulators to navigate and generated significant discussion among the bar and the bench. A recent conference co-hosted by the Competition Law Bar Association and the CCI revealed that the latter recognises its critical role in encouraging innovation in this growing area of the economy. It recognises that in view of the low barriers to entry and high levels of innovation, companies that find themselves at the top of an industry have to work harder than ever to keep customers, who can easily switch their allegiance to a better or cheaper competitor. We have seen this dynamic play out many times in the short history of this sector, from Facebook overtaking MySpace to the rise of apps such as Whatsapp, Nimbuzz, and Hike replacing SMS messages.
In this backdrop, it is interesting to examine how regulators outside of India have been examining the dynamic and fast-moving technology sector. The core principle everywhere remains that regulators have to protect competition in their own jurisdiction, focus on domestic consumers rather than competitors, and, as the preamble of our own competition law states “… keeping in view of the economic development of the country”.
That may be the reason why tech progressive countries such as the US and Canada have taken a cautious approach to tech interventions. Longstanding, high-profile tech-related investigations continue in Europe. Our regulators could be cautious about seeking European guidance on regulating the digital sector given Europe’s indifferent performance in tech. As others have documented, Europe’s technology sector is far from thriving, and many have put the blame on over-regulation. A recent analysis of the market capitalisation of online platforms by The Economist showed that the US leads the world, followed by Asia, and Europe is a distant third. At a time Indian tech companies such as Flipkart, Zomato, MakeMyTrip, Yatra, Snapdeal, Justdial, Paytm, and others, are growing and the economy is poised on an accelerated growth trajectory mainly due to the country’s technology sector, Indian regulators must be cautious in following Europe’s example in the regulation of its digital economy. The Indian government is working hard to encourage investment and bring rapid expansion in the technology sector. It is now incumbent on regulators to weigh the pros and cons of their actions against this objective and not rush into decisions that could jeopardise this growth.
India’s market regulator, one of the youngest in the world and highly respected for what it has achieved within its relatively short existence, has the potential to show the path to various developing economies, many of which are looking to India. That would take time, and it means erring on the side of caution, rather than experimentation, and taking decisions that are relevant to India and in the best interests of Indian consumers. It also means drawing lessons from overseas about what works, and, just as importantly, what doesn’t.
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