Facing sustained opposition from both global tech majors and leading domestic digital platforms, the government has decided to withdraw the draft Digital Competition Bill (DCB) in its current form, which was aimed at introducing ex-ante regulations for large online enterprises.
Fresh draft to follow detailed market study
As part of a rethink, the ministry of corporate affairs (MCA) will first commission a comprehensive market study, involving consultations with other ministries such as the ministry of electronics and information technology (MeitY) and extensive engagement with industry stakeholders, before coming up with a fresh version of the legislation. Sources said that in all probability, ex-ante provisions may not figure in any fresh draft of the Bill.
The move follows widespread criticism during inter-ministerial consultations and feedback from industry, which flagged the current draft as vague, subjective and overly broad in scope. Officials said that one of the key concerns was the Bill’s reliance on turnover thresholds to determine which companies would be classified as systematically significant digital enterprises (SSDE), rather than focusing solely on market power.
According to analysts, high turnover figures do not necessarily reflect dominance. For example, Apple’s strong revenues in India are largely due to the high average selling price of its products, yet it commands only around 6% of the smartphone market.
The DCB also proposed other triggers for SSDE classification, including gross merchandise value (GMV), global market capitalisation, or user base metrics. But the thresholds, such as 10 million Indian users over three years, were seen as too low in a country with over 1.2 billion mobile subscribers.
“In such a market, these user numbers cannot be the basis for ex-ante regulation,” officials said. Sources said that therefore, threshold levels may be re-looked in the new draft.
Concerns over scope and compliance burden
Further, qualitative criteria such as a company’s resources, volume of data collected, and bargaining power over business users were viewed as too subjective, opening the door for interpretative disputes and regulatory overreach.
The Bill’s ex-ante framework, designed to pre-empt anti-competitive behaviour rather than respond after any such act, had become the biggest sticking point. While intended to plug gaps in the existing ex-post approach of the Competition Commission of India (CCI), industry players had pointed out that it would create compliance burdens even before any wrongdoing occurred. The MCA’s proposal to grant the CCI wide residuary powers to regulate future platforms or services not yet in scope further led to apprehensions among companies.
Further, alongside big tech firms such as Google, Meta, and Amazon, several prominent Indian players, including Zomato, Swiggy and Oyo, had also opposed the ex-ante model. The Internet and Mobile Association of India, led largely by domestic companies, had also voiced its opposition. Interestingly, industry bodies representing smaller rivals, such as the Federation of Hotel & Restaurant Associations of India and the National Restaurant Association of India, had supported the Bill’s provisions, citing what they saw as predatory practices by dominant local platforms.
The government’s decision not to go ahead with the current draft is also because it feels that CCI is capable of handling big tech cases under existing rules. In recent times, the regulator has initiated multiple investigations into global digital firms, and with the introduction of a settlement and commitment regime, so a sweeping ex-ante mandate is not really required..
Minister of state for corporate affairs Harsh Malhotra told Parliament recently that market studies are crucial given that ex-ante regulation is still in its early stages worldwide. Experts said such an exercise may help the government recalibrate the scope of SSDE classification.
While the UK’s Digital Markets Act, on which parts of the DCB were modelled, was preceded by years of market analysis, India’s effort had moved directly from concept to drafting. That sequencing, officials said, contributed to the Bill’s troubles during inter-ministerial review. By reversing course and placing consultations at the front of the process, the government hopes to produce a more balanced law that addresses anti-competitive risks without stifling innovation, officials added.
“A market study is likely to lend greater credibility to the quantitative thresholds for SSDEs that may be proposed under the Bill and may help address concerns that the net has been cast too wide,” said Modhulika Bose, partner (competition law), Chandhiok and Mahajan Advocates and Solicitors.