Systematically Significant Digital Enterprise (SSDE)

A Systemically Significant Digital Enterprise (SSDE) is a classification proposed under India’s Digital Competition Bill (DCB) 2024 to identify large digital platforms that possess substantial influence over digital markets and whose conduct can have a significant impact on competition, innovation, and consumer welfare. The concept seeks to establish an ex-ante regulatory regime, meaning that it imposes preventive obligations on major digital enterprises before anti-competitive practices occur, as opposed to the ex-post enforcement system under the existing Competition Act, 2002.

Background

India’s digital economy has grown rapidly over the past decade, led by global and domestic technology companies that provide platforms for e-commerce, digital advertising, app distribution, online search, and social networking. While this growth has created immense economic opportunities, it has also raised concerns regarding market dominance, self-preferencing, data concentration, and barriers to entry for smaller firms.
To address these challenges, the Committee on Digital Competition Law (CDCL), constituted by the Ministry of Corporate Affairs, proposed a new legal framework—the Digital Competition Bill. This Bill introduces the designation of certain large digital firms as Systemically Significant Digital Enterprises (SSDEs), similar in concept to “gatekeepers” under the European Union’s Digital Markets Act (DMA).
The aim is to ensure that enterprises with systemic importance in digital markets act fairly, maintain transparency, and do not misuse their dominant positions to distort competition.

Definition and Designation Criteria

A Systemically Significant Digital Enterprise is an enterprise that provides one or more Core Digital Services (CDS) and meets specific quantitative or qualitative criteria that indicate systemic significance in India’s digital ecosystem.
Core Digital Services (CDS) typically include:

• Online search engines
• Social networking platforms
• Operating systems
• Online intermediation services (e-commerce platforms, app stores)
• Digital advertising services
• Cloud computing services
• Video-sharing and communication platforms

An enterprise may be designated as an SSDE by the Competition Commission of India (CCI) if it meets any of the following parameters:

1. Financial thresholds – based on turnover, market capitalisation, and value of transactions in India and globally.
2. User base thresholds – measured by the number of active business users and end-users.
3. Qualitative assessment – where, even in the absence of meeting quantitative benchmarks, the enterprise’s influence or control over market dynamics is deemed significant enough to merit designation.

The designation process involves notification by the CCI, which may also invite representations from the concerned enterprise before finalising the designation.

Objectives of the SSDE Framework

The SSDE framework seeks to:

• Promote fair competition in the digital economy by curbing abusive conduct by dominant players.
• Ensure market contestability, allowing smaller firms and new entrants to compete effectively.
• Enhance consumer welfare by ensuring transparency and choice.
• Prevent gatekeeping behaviour, where large platforms control access to digital markets or user data.
• Facilitate regulatory clarity through a proactive, rule-based system rather than case-by-case investigations.

This approach marks a shift from reactive enforcement to preventive regulation, aligning India’s digital policy with global best practices.

Obligations and Conduct Requirements

Once designated, an SSDE is subject to specific obligations to maintain fairness and neutrality in digital markets. These obligations, framed by the CCI, may include:

• Prohibition of self-preferencing: SSDEs must not favour their own products or services over those of third-party business users.
• Restrictions on data use: They are prohibited from using non-public business user data to compete unfairly with those users.
• Interoperability and access: SSDEs must ensure fair access to core digital infrastructure, APIs, and systems for business users.
• Prohibition of tying and bundling: They must not impose conditions that force users or business partners to use another product or service of the same group.
• Transparency in ranking and algorithms: SSDEs must disclose key parameters that affect ranking, visibility, and search results.
• Freedom of choice for consumers: Users should be able to install, uninstall, and switch between applications and services freely.
• Data portability and interoperability: Users should be able to transfer their data across competing services easily.

Non-compliance with these obligations can lead to penalties, behavioural remedies, or structural interventions imposed by the CCI.

Relationship with Associate Digital Enterprises (ADEs)

The Digital Competition Bill also introduces the concept of Associate Digital Enterprises (ADEs) to extend obligations to group entities linked with an SSDE. ADEs are companies within the same corporate group that are directly or indirectly involved in providing the same core digital service.
This ensures that the SSDE’s compliance obligations are not limited to the designated entity alone but also apply to related enterprises that share data, infrastructure, or control mechanisms, thereby preventing circumvention through complex group structures.

Comparison with Global Frameworks

The SSDE model draws inspiration from international regulatory trends, particularly:

• The European Union’s Digital Markets Act (DMA), which designates “gatekeepers” based on size and impact in the internal market.
• The United Kingdom’s Digital Markets, Competition and Consumers Bill, which identifies firms with “strategic market status.”
• The United States’ digital competition proposals, focusing on transparency and interoperability in platform services.

India’s SSDE designation adapts these principles to the national context, balancing the need for regulation with the promotion of innovation and investment in the digital sector.

Economic and Regulatory Implications

The introduction of SSDEs has far-reaching implications:

• For the government, it provides a proactive mechanism to ensure fair competition in rapidly evolving digital markets.
• For digital enterprises, it introduces compliance responsibilities, transparency requirements, and operational limits on potentially anti-competitive behaviour.
• For consumers and small businesses, it enhances choice, fairness, and access to digital platforms on equal terms.

From a regulatory standpoint, this framework shifts India’s competition law landscape from a case-based ex-post system to a rule-based ex-ante regime, reducing the time and uncertainty associated with traditional investigations.

Criticisms and Challenges

Despite its intentions, the SSDE framework faces several practical and conceptual challenges:

• Ambiguity in thresholds: The Bill leaves many quantitative criteria to be prescribed later by regulations, creating uncertainty about which companies will qualify.
• Regulatory burden: The compliance obligations could be significant for designated enterprises, affecting business flexibility.
• Innovation concerns: Critics warn that excessive regulation might discourage investment or experimentation in new digital services.
• Coordination with sectoral regulators: Overlaps with data protection, telecom, and consumer protection laws could create regulatory complexity.
• Global competitiveness: Multinational companies may reassess operations if compliance costs become too high relative to market size.

Thus, effective implementation will require clear guidelines, capacity building within the CCI, and dialogue with industry stakeholders.