By Nisha Kaur Uberoi
India is one amongst the 129+ countries with competition law on its statute books. It has witnessed 15 years of competition enforcement and nearly 13 years of merger control since the Competition Act came into force. India’s growth story is necessarily premised on the fundamentals of a “free economy” operating within a regulatory framework where competition violations will attract intervention from the Competition Commission of India (CCI).
The CCI has had an admirable track record when it comes to regulating mergers—over 1,026 approved combinations in 12 years and no blocked transactions to date. There has been no gate pass for combinations where competition concerns have been identified, which have been addressed by way of remedies, with 46 instances (approximately less than 5% of all notified transactions) involving remedies.
The CCI’s enforcement record, on the other hand, has a more checkered history. Delays, whether at the investigation stage or the appeals stage have been inevitable, given the lack of a dedicated competition appellate tribunal or dedicated competition benches at the National Company Law Appellate Tribunal (NCLAT). There are but a handful of decided Supreme Court matters which provide a fillip to the evolving competition jurisprudence in India. The cost of delays in competition law are significant—overall, to the economy, and for all stakeholders—industry is subjected to crippling interest rates at 18% per annum, which effectively result in penalties doubling every six years of pendency.
The backlog, overburdened courts, and lack of dedicated competition benches have resulted in the average time from appeal of a decision of the CCI to the NCLAT and ultimately to the Supreme Court taking 7-10 years. These delays have also resulted in no damages jurisprudence in India, given consumers and affected third parties cannot seek effective recourse until a final determination by the Supreme Court.
The protracted delays in the investigation, particularly when it comes to digital economy players, has globally led some competition regulators to consider whether the traditional tools of antitrust of an ex post facto analysis and penalising companies for a violation in fast-moving digital markets well after an alleged violation is nearly enough. Europe has been the frontrunner and introduced the Digital Markets Act (DMA) in September 2023, which currently has designated six players—Alphabet, Amazon, Apple, Meta, Microsoft, and Bytedance—as “gatekeepers”, and likely two potential gatekeepers, viz. Booking and X in the offing.
The DMA, in a nutshell, is pre-emptive and a classic case of precautionary antitrust premised on the principle of “fairness and contestability”—neither being defined by objective standards. The notion of “one size fits all” with the DMA uniformly prescribing principles is fundamentally flawed and completely untested. It also ignores market realities. Some markets on their own will result in smaller number of players such as telecom or airlines on account of economies of scale. Proponents of the DMA also presume that digital market structures are such that firms are incentivised to behave with a “winner takes it all” approach and markets necessarily tip in favour of these incumbent firms. To prevent harm, an ex ante regulation is the need of the hour—this is their constant refrain.
For India, at this stage of its economic trajectory, to want to adopt an untested DMA styled legislation in terms of the new proposed Digital Competition law to govern digital economy players on an ex ante basis may not necessarily yield the desired results. Given the current backlog of regular competition cases in courts, introducing a DMA-like legislation will not serve to fix the issue of “delays in investigation” without correspondingly addressing the lack of dedicated competition benches in court, if not a dedicated competition appellate tribunal and competition benches across the country.
It may also have other unintended major fallouts—dissuading investment and innovation in and by existing digital players, hampering the vibrant startup ecosystem India has been globally lauded for, where Indian innovators want to attract further investment to further innovate and scale up or be acquired and become part of a larger ecosystem, all of which will now likely stand to be regulated in an ex ante framework. Ex ante regulation will lead to sledgehammer antitrust—where regulatory responses will be disproportionate and merely on account of concerns of scale. Due process will stand compromised, given a non-level playing field where a gatekeeper who is the single-largest digital player in a particular market will now stand precluded from the freedom of trade offered to all its competitors.
India is the proud incubator of several successful homegrown unicorns, be it Ola or Oyo, and a DMA-like approach which will essentially lead to a “make not invest” theory will impact such future growth stories. The cost of avoiding a long-drawn investigation in digital markets cannot be set off with the opportunity cost of growth, efficiency, innovation, and investment. The CCI has enough tools in its arsenal, as admirably demonstrated by its investigations across the digital player spectrum, where several players have been penalised. The CCI has also used interim measures in the MMT-Oyo case to provide quicker relief during the course of an investigation demonstrating that there is a successful real alternative to ex ante regulation in digital markets. The proposed Digital Competition law, flowing in part from the recommendations of the Standing Committee Report on Anticompetitive Practices of Big Tech, is likely to curb Indian champions who have attained economies of scale and scope and penalise efficiencies, leading to inequitable outcomes and protracted litigation which will take at least a decade to resolve. Far from a winner takes it all approach, everyone stands to lose.
For a free market to thrive and for the stage to be set for India’s future growth story, it is hoped that the CCI’s existing toolkit is further strengthened—be it the inclusion of data scientists in its staff, quadrupling of its bench strength given the India growth story, presence across every major metro and not merely regional advocacy outposts, as well as dedicated competition benches in the courts. This will obviate from the need to veer towards ex ante regulation and precautionary antitrust which will lead only result in over-regulation and stifling innovation and investment.
The author is Partner and national head with Competition Law at Trilegal. Views expressed are personal.