The Indian digital economy is booming, fueled by expanding digital public infrastructure and private capital. As digital platforms reshape global markets, antitrust regulators face a complex task - preserving market contestability without extinguishing the very mechanisms that drive technological progress.
The proposed Digital Competition Bill (DCB) introduces a shift in Indian competition policy. The DCB is an ex-ante framework to regulate competition in digital markets, similar to the EU’s Digital Markets Act. It sets the rules of conduct upfront, seeking to pre-empt anti-competitive behaviour before it occurs. To achieve this, the DCB imposes obligations and prohibitions on systemically significant digital enterprises, which are identified through quantitative financial and user-based thresholds.
However, using static quantitative thresholds to identify market power in digital markets ignores their dynamic nature. Innovation disrupts existing market structures far more rapidly than in traditional industries. In this fast-paced environment, potential competition poses a genuinely credible threat. Incumbent market leaders constantly face the risk of obsolescence from emerging technologies and agile startups. Consider how conventional keyword-based search engines now compete with AI chatbots as the starting point for online search queries.
Antitrust frameworks that disregard the transformative impact of disruptive innovation inadvertently stifle the very drivers of long-term consumer welfare. Regulatory interventions should be calibrated to these complex economic nuances, ensuring that policy does not merely penalize enterprises for their structural scale.
The conflict: Dynamic markets vs. static rules
There was significant and justified pushback against the DCB in its original form. The primary concern was that the proposed designation thresholds were far too low and overly broad, and would likely capture too many digital enterprises.
Applying broad thresholds can have unintended consequences, such as inadvertently sweeping in emerging tech companies. Nascent tech startups would effectively be punished for their success, by being forced to comply with the DCB’s conduct mandates simply because they rapidly expanded its user base or crossed the DCB’s gross merchandise value threshold. The DCB’s conduct rules include prohibitions against practices like bundling or using third-party data - mechanisms that frequently facilitate market entry, rapid scaling, and consumer benefit.
Subjecting fast-growing companies to ex-ante compliance burdens too early stifles their ability to scale. It also deters capital deployment and new entry. When growth is capped by an artificial regulatory ceiling, the economic incentive to fund a disruptive challenger diminishes significantly.
This highlights the core tension: competition in digital markets is inherently dynamic, whereas ex-ante restrictions tied to objective statutory thresholds are static. Relying on a single line in the sand to identify potential competitive harm, ignores the complex operational realities of digital businesses.
Indian policymakers recognise the transformative impact of innovation on economic growth. Systems such as the Unified Payments Interface (UPI) lowered transaction costs and democratised digital access across the country. Similarly, India’s AI Governance Guidelines and the CCI’s AI Market Study reflect a shared consensus that over-regulation can itself become a primary barrier to economic and innovation gains. A rigid, interventionist framework risks destroying these benefits before they fully materialise.
The MCA’s market study: an opportunity for course correction
The Indian government is alive to these structural risks. The Ministry of Corporate Affairs’ decision to commission a market study to recalibrate the DCB is a necessary step in the right direction. It presents a valuable opportunity to recalibrate the ex-ante framework specifically to the Indian context, ensuring it responds to the particular concerns of India’s digital landscape, competitive dynamics, prevailing market structures and evolving user preferences.
Further, not every "core digital service" defined in the DCB operates under the same economic logic. Applying a singular regulatory template through uniform quantitative thresholds across sectors as diverse as online search engines, social networking, web browsers and e-commerce ignores distinct market realities and runs counter to the CCI’s own enforcement experience. The market study’s empirical assessment should dictate where regulatory lines are drawn, what specific conduct obligations apply, and whether ex-ante intervention is even justified in a given sector.
The MCA’s market study shifts the policy debate from theoretical assumptions to concrete evidence by grounding regulation in the actual state and needs of the Indian digital economy, rather than static numerical thresholds. Ultimately, competition law must act as a guardian of the competitive process, not a barrier to scale. By embracing a dynamic, evidence-based approach, India's regulatory framework will remain innovation-centric, ensuring it propels the country into its next phase of exponential economic growth by prioritising innovation.
The authors are Knowledge Management Counsel at Axiom5 Law Chambers.
