As the government revisits the Digital Competition Bill (DCB), the proposed regulation is likely to retain the ex ante principle mooted earlier but tweak the various thresholds so that the new regime will principally apply only to global Big Tech firms. Domestic start-ups are set to be excluded from its ambit, judging by the questionnaire sent to stakeholders for an official study in this regard.
The market study carried out by MDI Gurgaon on behalf of the Ministry of Corporate Affairs (MCA) places significant emphasis on reviewing the proposed financial, user-based and qualitative thresholds for designating Systematically Significant Digital Enterprises (SSDEs). However, there is apparently no plan to scrap the ex-ante regulations altogether.
India first proposed a separate law to regulate competition in the fast-growing digital space in March 2024. This was inspired by the experience of several countries where the standard use of an ex-post law may not be effective or sufficient for the sector. It was felt that ex-ante regulation is required to pro-actively address practices like self-preferencing, tying and bundling which large tech firms use to expand market presence and dominance.
Stakeholders are being asked by MDI whether the existing thresholds should be revised and to propose alternative threshold levels. They have also been told to recommend additional qualitative parameters and suggest whether the current list of nine Core Digital Services (CDS) should be expanded. In contrast, the questionnaire devotes little attention to the need for any review of ex-ante obligations.
Officials said the findings of the exercise are expected to shape the next version of the Bill.
Protecting Indian Startups
“The objective has always been to regulate global gatekeeper platforms that possess huge market power. The earlier thresholds were broad enough to potentially capture some Indian startups, which was not the policy intent. That’s exactly what the study is examining,” a senior official said.
The market study started in early June and is expected to be completed by October. As part of the exercise, MDI is seeking responses across industry, legal and policy circles.
Last year, the government had dropped the draft DCB after facing strong pushback from Big Tech firms and domestic start-ups, which argued that its wide regulatory ambit could stifle innovation and increase compliance burden. “After the consultations, it became clear that there was broad support for a digital competition law but differing views on where the thresholds should be drawn. The market study is intended to build a consensus to arrive at those numbers,” the official added.
Earlier, the draft DCB had proposed two sets of thresholds—quantitative and qualitative. The quantitative thresholds included Indian turnover of over Rs 4,000 crore, global turnover of $30 billion, global market capitalisation of $75 billion, gross merchandise value (GMV) in India of Rs 16,000 crore and the norm of at least 10 million end users or 10,000 businesses in India.
The qualitative thresholds evaluated a company’s market influence using factors like economic power, data control, network dominance, user dependence, high entry barriers, and its ability to lock in customers or connect across multiple digital markets.
Pranjal Prateek, partner at Khaitan & Co, said the market study would be critical in determining whether India’s thresholds ultimately target only the largest digital platforms. “The study should serve as a guidepost for setting India’s optimal threshold levels,” he said. “If the evidence shows that only the absolute largest digital players should be regulated, the study should explicitly reflect that.”
Samir Gandhi, co-founder of Axiom5 Law Chambers said the existing thresholds in the draft Bill were “too low and over-inclusive” and required recalibration so that they capture only genuine and systemic risks to competition. “The market study should allow for a more nuanced and context-specific assessment of market power under the DCB. This is especially important because broad ex-ante regulations carry a significant risk of impeding innovation and constraining economic growth,” Gandhi said.
Before withdrawing the Bill, the government was busy refining the proposed law through multiple rounds of consultations. For instance, after the Committee on Digital Competition Law (CDCL) submitted its report and the draft Bill in February 2024, the MCA placed both documents in the public domain for stakeholder comments on March 12, 2024, receiving over 100 responses. This was followed by consultations convened by the Ministry of Electronics and Information Technology (MeitY) beginning June 18, 2024, during which technology firms, startups and industry bodies raised concerns over the proposed thresholds, and the scope of ex-ante regulation.