The ministry of corporate affairs (MCA) and the Competition Commission of India (CCI) seem to have finally realised the futility of pushing for an ex-ante regulatory framework to prevent anti-competitive conduct in the digital space. This shift in stance is reflected in the recent remarks by minister of state for corporate affairs Harsh Malhotra and CCI chairperson Ravneet Kaur at an event on economics of competition law.
Though they spoke on different aspects, a common theme was that while regulation is necessary, it cannot be rigid in an industry that keeps evolving at an extraordinary pace. While Kaur pointed out the rapid advancements in artificial intelligence (AI) and their implications for market behaviour, Malhotra emphasised the need for adequate deliberations before implementing a Digital Competition Law. Together, their statements present a case for a flexible, continuously evolving regulatory approach rather than an immediate leap into an ex-ante framework.
The draft Digital Competition Bill, introduced in March 2024, has seen considerable opposition due to its preventive approach, which aims to anticipate and curb anti-competitive conduct before it occurs. Currently, the regulatory framework relies on an ex-post approach, where action is taken after an anti-competitive act has been identified. The fundamental question now is whether preemptive regulation is truly the best way forward.
One of the strongest arguments against ex-ante regulations is that the digital sector is far too heterogeneous for a one-size-fits-all approach. The industry is not neatly divided into Big Tech vs small firms or foreign vs domestic players. Rather, market dynamics vary widely, with different platforms wielding influence in vastly different ways. In such a fluid landscape, an ex-ante regulatory framework runs the risk of either being overly broad, stifling innovation, or too narrow, failing to address real concerns.
The consultations on the Bill have made it clear that the concerns of domestic digital entities are not solely about global tech giants. Home-grown firms have also been accused of engaging in anti-competitive practices. This makes it clear that competition between firms serves as a natural check on monopolistic behaviour. Rather than introducing sweeping new regulations, it may be more prudent to focus on updating and strengthening the existing framework. Malhotra’s call for studying digital competition laws in Europe, Japan, and Australia is a wise one. However, the lesson from these jurisdictions should not be to replicate their ex-ante frameworks blindly but to understand their limitations.
The CCI’s track record suggests that an ex-post approach, with continuous updates, may be the more effective route. As the CCI chief pointed out, in 2024 alone, 42 antitrust cases were brought before the commission, with detailed investigations ordered in eight. This means that the regulator has demonstrated its ability to tackle anti-competitive behaviour without the need for a rigid ex-ante framework. Her remarks on AI-driven collusion underscore the importance of keeping regulations dynamic. According to her, companies are now using AI for price coordination and algorithmic discrimination, posing new challenges.
Rather than implementing an extensive ex-ante framework, a more practical approach would be to focus on regulatory interventions on the most dominant players in the ecosystem. The government’s decision not to rush into digital competition law is a welcome move. Given the complexities of the digital economy, a hasty implementation of an ex-ante framework could do more harm than good. Instead, a continuously evolving ex-post approach, complemented by targeted interventions where necessary, is a more prudent strategy.