A few years ago, the Competition Commission of India (CCI) imposed a penalty on a major tech company for abusing its market dominance, violating the competition law of India. Given how many of us rely on apps on daily basis, from ordering food to investing in stocks, it’s crucial to prevent digital entities behind these apps from distorting market competition. An efficient market economy is characterized by fair competition that regulates market prices, and the CCI is mandated to ensure this under the Competition Act, 2002.
Recognizing that digital markets differ from traditional ones, the Committee on Digital Competition Law (CDCL) recommended a separate law in February 2024. The draft Digital Competition Bill (the draft bill) includes “ex-ante” conditions for digital markets, which has sparked significant debate.
The central question is whether these ex-ante provisions will promote competition or potentially hinder innovation in the digital realm.
India’s Competition Act, 2002 uses both ex-post and ex-ante measures to handle market distortions. Understanding these provisions helps clarify how they work to keep markets competitive.
Ex-post provisions are actions taken after anti-competitive practices have happened. Under the Competition Act, 2002, Section 3 prohibits anti-competitive agreements and Section 4 proscribes abuse of dominant position by firms in Indian markets. Though, these provisions are crucial for fixing market issues post factum but these are reactive, meaning the CCI steps in only after the problem has occurred.
Ex-ante provisions are designed to prevent anti-competitive issues before they happen. Under the Competition Act, 2002, Sections 5 and 6 provide proactive measures for mergers and acquisitions. These provisions, along with prescribed thresholds, focus the CCI’s resources on significant deals, ensuring that only those with potential competition issues are scrutinized. If a merger or acquisition could harm competition, the CCI works to implement remedies to mitigate any adverse effects.
Ex-ante provisions are proactive measures aimed at preventing anticompetitive behaviour before it happens, particularly in fast-moving digital markets. By identifying risks early, they help maintain a competitive environment and support innovation. In a rapidly changing digital economy, where dominant players are often tempted to abuse their power, these regulations are crucial for fairness and ensuring a level playing field. They promote innovation and create opportunities for smaller and emerging players. The CDCL’s report highlights how these measures can prevent practices that hinder new entrants and stifle innovation.
The CCI has been applying an ex-ante approach for merger control, as outlined in Sections 5 and 6 of the Competition Act, 2002, since June 1st , 2011. With over a decade of experience, it can be said that the CCI has effectively managed merger cases, with 97% of combinations approved without modifications, reflecting its focus on necessary intervention only. The CCI’s use of innovative methods, like the Green Channel route for faster approvals, highlights its efficiency in reviewing mergers while safeguarding competition. The average time taken by CCI in merger reviews and the remedies suggested in the cases are at par with the global standards in merger control.
The draft bill aims to enhance competition in India’s digital markets and protect innovation by adopting an ex-ante approach. The bill introduces the concept of Systemically Significant Digital Enterprises (SSDEs) for major players in areas like search engines, social media, digital advertising etc. To be classified as an SSDE, a firm must meet quantitative thresholds and qualitative criteria related to market power, aggregate data, potential ability to influence the markets etc. These SSDEs will have to comply with the exante obligations, including prohibition from self-preferencing, use of non-public data of business users, restricting third party applications, anti-steering, tying and bundling. This preventive measure is designed to address any potential anti-competitive conduct and maintain a fair and competitive market, with a penalty provision by CCI in case of noncompliance with the ex-ante obligations.
The draft bill proposes a customized approach to set the ex-ante obligations for each SSDE, taking into account their unique market power and characteristics. This flexible framework addresses the specific challenges of different digital markets. For example, a company that dominates both – social media and digital advertising, will face different rules than one focused only on an online market. This tailored approach is crucial for managing digital players with influence across various sectors, allowing the CCI to monitor and address potential anticompetitive practices effectively as market conditions change.
The ex-ante approach is designed to protect consumers from anti-competitive practices and foster a more competitive and innovative digital economy. It makes compliance easier, reduces legal uncertainties, and supports smoother business operations. By regulating the conduct of dominant players, it helps new and smaller companies to enter the market, encouraging innovation and fair competition. This approach also aligns Indian competition law with global standards, supporting India’s goal of becoming a leader in technology and digital innovation, and contributing to the vision of a “Viksit Bharat.”
The recent decision of the Government of India to withdraw the Draft Digital Competition Bill, 2024, and initiate a process of wider consultations and market studies must be seen as a welcome step in strengthening the policy framework for the digital economy. By taking this path way, the government has showcased foresight and responsibility, recognising that a law of such far-reaching importance should include inclusive dialogue, and a thorough understanding of India’s unique digital landscape. This approach ensures that when the Bill returns in a revised form, it will be better aligned with global best practices while also being rooted in domestic realities, thus safeguarding both innovation and fair competition , much needed in this Amrit Kaal of India . This marks a progressive step in legislative maturity—one that underscores India’s commitment to shaping a resilient, future-ready digital marketplace. Incorporating the strongest features will not only strengthen our competition law framework but will also stand as a matter of national pride, demonstrating that India is determined to lead with balance, fairness, and vision in the digital era.
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