Draft Digital Competition Bill may harm experience with unbundling requirements

The unbundling requirements under the draft digital competition Bill (DCB) may compromise the overall user experience of digital platforms, argued a study on the proposed legislation.

“The designation of systematically significant digital enterprises (SSDEs) is expected to bring in changes in the product architecture, hence various services currently available in one single app may need to be accessed individually,” said the report by CUTS Institute for Regulation and Competition (CUTS CIRC), a think tank.

The current version of the Bill identifies bundling and tying of digital services among a list of 10 anti-competitive practices (the ACPs) undertaken by large digital enterprises to abuse and consolidate their position in digital markets.

The study suggests that this requirement would detract from the seamless experience consumers currently enjoy, increasing the effort and time required to use digital services.

Thirteen platforms, including Zomato, Swiggy, Paytm, IRCTC, MakeMyTrip, Flipkart, JioSaavn, and Pharmeasy, would fall under the DCB’s purview, according to the study’s interpretation of the Bill’s conditions.

The draft Bill specifies that large digital platforms providing core digital services will be designated as SSDEs if they meet certain financial and user thresholds.

The report highlights how the Bill may affect Indian companies, as well as global tech giants, using Paytm as an example. Under the proposed regulations, the study claimed, Paytm would be required to “unbundle” its services.

“This means that the ability to provide multiple interconnected services within a single application will be restricted. As a result, it is also assumed that this unbundling may have potential implications for the convenience and smooth user experience that Paytm users currently enjoy,” said the paper.

The implementation of the DCB, it argued, could lead to Paytm’s various services being separated into distinct standalone apps.

“Essentially, all the super apps are getting caught in this net, as they currently offer different core digital services under one umbrella — tied and bundled together,” said an industry expert, adding the Bill mandates that this practice must stop.

The unbundling clause in the DCB draws inspiration from similar requirements in the European Union’s Digital Markets Act, which prohibits gatekeepers (large firms) from tying and bundling their core platform services and imposes restrictions on switching or changing default pre-installed services.

The study also warned that unbundling services could lead to a loss of personalised, cross-service recommendations that users previously enjoyed. This could result in decreased user engagement and reduced usage of online platforms.

Under the proposed user threshold criteria, any firm with over 10 million end-users or 10,000 business users in its core digital service would be classified as an SSDE and thus subject to the proposed ex-ante regulations.

“So, to say that this Bill targets only the top four or five big companies or foreign firms is misleading. In reality, it affects a much larger number of Indian companies,” another industry executive pointed out. Business Standard