The Missing Clause(s): Redefining Business User Under the DCB (Part 1)

This guest post is authored by Vivek Kumar, Research Fellow with the Corporate Law and Financial Regulation vertical at Vidhi and Kunaal Hemnani, a 3rd-year member of CASCA

Introduction

The Digital Competition Bill, 2024 (“DCB”) was a proposed ex-ante legislation aiming to regulate entities having a systemically significant position in the digital market to maintain contestability, fairness and transparency. The DCB proposed to designate an entity as a Systemically Significant Digital Enterprise (“SSDE”) if it satisfies the prescribed quantitative and qualitative criteria. The draft DCB was released for public consultation and inputs were received from a wide range of stakeholders. However, following these inputs, it was decided to shelf the proposed legislation for lack of an evidence-based foundation. One of the glaring criticisms of the DCB was that it’s quantitative thresholds for designation of users as either business users or end-users suffered from both over-inclusivity and under-inclusivity which may be reconsidered.

Despite the robust method of designation formulated under the DCB which was tailored to catch “large digital enterprises”, there were flaws in certain aspects of the designation process. The blog seeks to address this flaw by providing an evidence-based method of designation. The delineation of business users on a platform is not only relevant for evaluation with respect to quantitative thresholds, but also plays an important role in the qualitative evaluation. Therefore, any deficiency in the definition of business users can significantly disrupt the designation process.

Need for Distinction between Business-Users and End-Users

The difference between the definitions of “business user” and “end user” is not just academic but it carries significance in how digital markets operate. A large part of India’s current digital economy is made up of micro, small, and medium enterprises (MSMEs), individual entrepreneurs, and gig workers, and a broad definition of business users, often misclassifies a large number of occasional and small-scale sellers as formal organized business users. For example, an artisan who occasionally sells handicrafts on an e-commerce platform or a home chef operating a cloud kitchen that occasionally delivers meals via a food delivery app will be classified as a business user, despite lacking a habituality of trade. A broader definition of business users triggers over inclusion of users that could artificially inflate the user metrics of a platform. Such misclassifications would in turn, burden the platforms to comply with ex-ante regulations in the DCB, as it equates casual business users to regular professional business users. Therefore, the broad definition of business users in earlier proposed DCB required distinguishing between the two types of business users to enable participatory growth in India’s digital ecosystem which avoiding disproportionate ex-ante obligations on the companies.  

Broad but Narrow: Comparative Analysis of the Two Definitions

Clause 2(3) of the DCB defined Business User as “any natural or legal person supplying or providing goods or services, including through Core Digital Services”. The definition of Business User under the DCB resembled the definition in the American Innovation and Choice Online Act (“AICO Act”) which also refers to “a person that uses or is likely to use a covered platform for the advertising, sale, or provision of products or services, including such persons that are operating a covered platform or are controlled by a covered platform operator.”      

On the other hand, under the Digital Markets Act (“DMA”), a more specific definition has been stipulated. Article 2(21) of the DMA defines Business User as “any natural or legal person acting in a commercial or professional capacity using core platform services for the purpose of or in the course of providing goods or services to end users”.

When compared against the definition of Business User under the DMA, two glaring differences are conspicuous:

Firstly, the definition of Business User under the DMA is more specific and nuanced with respect to who are and who are not business users. The inclusion of the qualifying clause “acting in a commercial or professional capacity”, makes the distinction between business users and end users much clearer, as provisioning of goods and services by itself is insufficient to qualify a person as a business user. The definition centers around habituality of trade, covering users engaging in provisioning frequently and consistently, while excluding casual users.

Secondly, the definition under the DMA shows a deeper understanding of “business use” as it includes the usage “for the purpose of or in the course of providing goods or services to end users.” This means that DMA envisages a wider ambit of business use, which is not only restricted to provisioning of goods and services, but also includes peripheral activities that aid such provisioning, such as, communicating with the business user.

This is an important distinction to create in a legislation that distinguishes between two different subjects on the basis of their conduct on the platform.

Definitional Ambiguities and Implications for Business Use

Blurred Boundaries

Diagram 1 given below provides a graphical representation of the end-users, business users under the DCB and business users under the DMA.

It is clear from the diagram that the lack of a qualifying clause under definition of business users in the DCB widens the ambit of business users substantially.

In Meta’s Designation Decision in relation to its CDS Marketplace, the Commission distinguished between actual business users from casual end-users. Meta’s main argument was that since business users were prohibited from listing products on Marketplace, it meant that no business users were operating on the platform. The Commission held a contrary view and considered, inter alia, the high frequency of listing from the same account, product descriptions, variety offered, etc. to hold that such accounts were actually business users, even when the listings were made using personal accounts.

In case the definition of ‘Business User’ was devoid of the qualifying clause, such a distinction would not have been possible; since provisioning of goods and services would have been the only consideration. This, in turn, would have led to an overcounting of the number of business users active on the platform. 

Similarly, a bigger problem might crop up on platforms where the provisioning of goods and services does not happen in a traditional sense, like on a platform where supply and demand sides are not clearly delineated. For example, on platforms such as TikTok, where users can self-identify as a business account by toggling a switch in the menu, it becomes necessary to distinguish actual business users from self-identified business users. This can only be possible when evaluation is done on the basis of commercialization of the platform.

Another concern is with regards to the scope of “supplying or providing”, as it is not clear whether there has to be evidence that a user has supplied or provided goods and services on the platform, or whether a mere possibility that the user will provide or supply goods or services would be sufficient. The AICO Act addresses this ambiguity by adding the phrase “a person that uses or is likely to use a covered platform”, which means that a person who can potentially use the platform for “advertising, sale, or provision of products or services” would be a business user. Under the DMA, such a clarification is not even warranted because the requirement of ‘commercial and professional capacity’ inevitably warrants the assessment to be evidence based which can only occur ex-post.

The difference between the number of business users under the two approaches would be substantial. For instance, a platform allows users to list their products for sale; however, the precondition for listing such products is that the user will have to register itself on the platform. In such a situation, under the EU approach, as also seen in the Facebook Marketplace decision, only users who are evidently involved in listing of products in a commercial or professional capacity would be counted as business users. On the other hand, under the US approach, all registered users would be counted as business users as, by virtue of registration, they would be able to list their products on the platform, which would make them “likely to use a covered platform for the advertising, sale, or provision of products or services.”

However, it is not surprising that there would be an overlap between the two approaches. For example, in the ByteDance decision, the Commission noted that any user who uses the self-identification feature on TikTok gets access to business-specific functionalities, which are aimed squarely at businesses, “making it likely that, at the very least, a significant portion of self-identified business accounts are actual business users.” In this decision, the Commission deviated from its evidence-based approach and employed an assessment based on likelihood.

Coverage Conundrum

Diagram 2 gives a graphical comparison of differences in coverage of different platforms for business use.

From the diagram, it is clear the definition under the DMA has a wider coverage of platforms as it envisages the presence of business users on not only platforms which are used for provision of goods and services, but also platforms that may be used in the course of such provisioning. On the other hand, the DCB envisages the presence of business users only on platforms which are used for provisioning of goods and services, making the definition one-dimensional.

Microsoft’s Designation Decision highlights this problem. In the Designation Decision, Microsoft argued that business users were prohibited from using outlook.com due to its terms and conditions, therefore, outlook.com is unconducive to business use. However, the EC held that certain users actually use outlook.com in a commercial or professional capacity for the purpose of or in the course of providing a service to end users, which makes them business users under the Act. However, such assessment would not have been possible under the ‘DCB’, as outlook, or for that matter, any platform that does not provide for provisioning of goods and services, would not be conducive to business usage, and would not possess any business users.

Under the DCB, consideration has to be given to the fact that India’s digital economy is in same way based on the ability of digital platforms to interoperate; like UPI for payments, ONDC for commerce, and the Account Aggregator framework for consent-based financial data sharing. India’s digital ecosystem is one where business activities are distributed across various, interconnected platforms rather than being confined to one single core digital service. For example, a small retailer in a Tier 2 city might sell his products on Flipkart, process payments via a UPI payment aggregator like PhonePe, manage consumer relations through WhatsApp Business, handle the logistics of deliver through Delhivery and manage his financial statements and accounting through Odoo. Under the narrow definitions only the platform where the final sale occurs i.e. Amazon will be seen as hosting business users. This definition ignores the substantial and integral business use on platforms like WhatsApp and PhonePe which were as important for the transaction as Amazon.