India's digital economy has transformed the way consumers shop, businesses operate, and entrepreneurs innovate. Digital platforms have expanded market access for millions of sellers, lowered barriers to entry for startups and accelerated the adoption of technology across sectors.
As this ecosystem matures, it is both timely and necessary to examine whether India's competition framework is equipped to address emerging challenges.
The debate around the Draft Digital Competition Bill (DCB) presents an opportunity to do precisely that. But the discussion should not be framed as a choice between regulating or not regulating digital markets.
Rather, the focus should be on designing a framework that reflects how these markets actually function, targets genuine competition concerns and remains proportionate to the challenges it seeks to address.
The world's largest digital markets have stumbled precisely where this balance has been lost.
Case Study 1
Europe's Digital Markets Act—The "regulatory leviathan"
The European Union's Digital Markets Act (DMA), adopted in 2022 and fully applicable since May 2023, was designed as an "ambitious regulatory effort" to reshape digital competition through ex-ante regulation—establishing rules before harm occurs rather than punishing it afterwards.
What went wrong: Regulation over function
Forced interoperability with unintended consequences. When the DMA mandated that Google unbundle Maps from Search, it created a textbook case of regulation harming the very users it aimed to protect.
European users now face multiple clicks to find a destination instead of a seamless integration. As one Brussels-based user noted: "The change has made the service worse, not better."
Digital policy experts compare the fragmented experience to GDPR's endless cookie consent forms—adding friction without improving outcomes.
One-size-fits-all rules ignore market dynamics. The DMA imposed blanket obligations and prohibitions without distinguishing between different types of competitive conduct or recognising that innovation platform ecosystems can be harmed when mandatory interoperability adds producers without improving the ecosystem. Academic analysis concluded that the DMA, rather than becoming a "regulatory Magna Carta promoting effective innovation competition," became a "regulatory Leviathan"—an overbearing set of rules imposing particular forms of competitive pressure regardless of whether such competition is effective.
Companies are exiting innovation entirely. Privacy and cybersecurity objectives have already been compromised. Companies are actively pulling new features and innovation from the EU market to avoid getting trapped in regulatory conflicts they cannot resolve. The very innovation ecosystem Europe sought to protect has begun migrating away.
The lesson for India
India should be cautious about importing a one-size-fits-all model of ex-ante regulation across digital gatekeepers. Uniform obligations may be intended to prevent anticompetitive behaviour before it occurs, but they can just as easily create friction that makes digital services less efficient for users, replace market-driven outcomes with regulatory preferences and discourage investment and innovation in regulated markets. Most importantly, such frameworks risk treating legitimate, pro-competitive conduct as inherently harmful simply because it does not fit a prescribed regulatory model. The objective should not be to regulate every potential risk in advance, but to intervene where there is clear evidence of consumer harm or genuine anticompetitive conduct.
Case Study 2
UK Online Safety Bill—When vagueness becomes risk
The UK’s Online Safety Bill demonstrates how regulation intended to make the internet safer can, if poorly designed, create a different set of risks. By imposing broad obligations to remove illegal content and material deemed “harmful to children” without sufficiently precise definitions, the framework places platforms in a difficult position: when the cost of getting moderation wrong includes criminal liability and substantial fines, the safest corporate response is often to remove more, not less. That risk is compounded by concerns from cybersecurity experts about the implications for encryption and technical security.
More than 70 cybersecurity organisations and experts have opposed the legislation, warning that an overly broad framework could undermine free expression, privacy, encryption, innovation and the security of digital services.
The lesson for India
The lesson for India should be straightforward: regulation cannot rely on ambiguity and fear to deliver safety. When obligations are unclear, but penalties are severe, platforms are likely to optimise for regulatory risk rather than user welfare—removing legitimate content, restricting lawful expression and adopting blunt automated moderation tools.
The result can be a chilling effect on speech and innovation, while privacy and security protections may themselves be weakened in the name of safety. India’s regulatory approach should therefore prioritise clear definitions, proportionate obligations and technically workable safeguards, ensuring that the pursuit of online safety does not inadvertently make the digital ecosystem less open, innovative or secure.
What India can learn
Proportionate regulation by design
The common thread across these failures is clear: regulation driven by the impulse to control digital markets, rather than frameworks designed to address specific, measurable competitive harms.
India's regulatory framework must target genuine anticompetitive harms rather than platform dominance itself—recognising that innovation-driven competition often produces concentrated markets. Regulatory tools should be tailored to specific sector concerns, not imposed uniformly across all digital gatekeepers, as blanket ex-ante obligations often cause more harm than the conduct they prevent. With India's digital market still developing and attracting investment, frameworks that destroy value or deter innovation—as China learned at tremendous cost—undermine the very competition they seek to protect. The bill must build in flexibility and proportionality, defining clear violations tied to specific harms with graduated responses rather than vague obligations backed by severe penalties. Crucially, regulations that harm users should trigger reassessment and adjustment based on market feedback, not further tightening—mechanisms for evidence-based evaluation and reform are not luxuries but essential safeguards against regulatory drift.
The regulation question is really a design question
The DCB's success will be measured not by how comprehensively it regulates, but by whether it protects genuine competition while preserving the innovation and growth that make digital markets valuable to consumers and the economy.
The available evidence illustrates this diversity. E-commerce today accounts for only 6–7 per cent of India's overall retail market, while nearly 80 per cent of retail continues to be driven by the unorganised offline sector. Competition is therefore not confined to online marketplaces but extends across neighbourhood stores, organised retail and omnichannel businesses. Likewise, India's streaming industry is among the most competitive globally, with around 70 services competing for viewers who routinely subscribe to multiple platforms and switch between them. Cloud computing presents another distinct picture, where enterprises choose between public cloud providers, private infrastructure, on-premises systems and more than 20 competing providers. These sectors differ fundamentally in how firms compete and how consumers exercise choice.
Europe, China, and the UK each chose the wrong side of these questions. Their experience offers India an invaluable opportunity to learn what not to do.
The DCB presents an important opportunity to shape India's digital regulatory architecture for years to come. Achieving that objective will require more than good intentions. It will require a framework that is evidence-led, proportionate and responsive to the distinct characteristics of different digital markets. Regulation should ultimately be judged not by how broad it is, but by how effectively it addresses proven competition concerns while preserving the innovation and investment that have powered India's digital economy.
The author is professor at IIM Ahmedabad.
The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.
