India’s economic rise is being written increasingly in digital ink. At present, we host over 110 million micro, small, and medium enterprises (MSMEs) and more than 140,000 recognised startups, making us one of the largest and fastest-growing hubs of entrepreneurial activity across the globe.
Stable and predictable competition rules help create a level playing field where the smallest startup can compete with the largest incumbent on its merits. It underpins investor confidence, supports long-term business planning, and enables innovators to take calculated risks without fear of being squeezed out by entrenched market power.
Insights from Global Experiences
The rise of large digital platforms has created entirely new types of markets, such as online advertising, which operate differently from traditional markets. These new markets bring their own set of competition challenges, and globally, governments are racing to address these issues, often through strict ex-ante regulations aimed at curbing the power of large players and protecting consumers. However, international experience shows that ex-ante digital competition frameworks can stifle experimentation or create barriers that only large incumbents can navigate.
For instance, the EU’s Digital Markets Act (DMA), while aimed at regulating gatekeepers, has triggered concerns about high compliance costs and harder market entry for startups, diverting limited resources away from innovation. Reportedly, the DMA and DSA alone could imply an immediate cost increase of €71 billion ($80 billion) on European companies, equivalent to 0.3 percent of EU GDP. The increased compliance costs has promoted several startups to relocate outside the EU to escape onerous obligations. It is further speculated that the DMA and its counterparts may be contributing to Europe’s slower venture capital growth relative to the US, thereby hampering its competitive edge in emerging technologies. The EU is now reviewing the DMA as part of the statute’s built-in evaluation process, but this review has also been shaped by growing concerns that the current rules may be unduly harming smaller players and burdening innovation.
In the United Kingdom, the Digital Markets, Competition and Consumers Act (DMCC) was billed as a faster, more agile alternative to traditional competition investigations. It sets a statutory deadline of up to 12 months to designate a firm with “Strategic Market Status” (9 months, extendable by 3), and requires conduct requirements to be imposed “as soon as reasonably practicable.” But in reality, if an enforcement investigation is triggered, the Competition and Markets Authority (CMA) can take another six months from the formal opening of the case to issue its findings, meaning that meaningful obligations may take considerably longer to bite. By contrast, India’s ex-post framework, particularly through its settlement and commitment mechanism, has already shown how outcomes can be achieved with far greater agility. The CCI’s resolution of the Google–Android TV case, for instance, was concluded in about twelve months from the investigation report demonstrating that with sufficient institutional capacity, settlements and commitments can deliver swift, effective remedies without the drag of prolonged designation processes.
India’s Crossroads: Balancing Regulation with Innovation
The above experiences bring out a simple but crucial lesson, competition frameworks must be carefully designed to avoid having a chilling effect on innovation. Ex-ante regimes may inadvertently reward incumbency, as only the largest firms can absorb the cost of compliance, while younger, nimbler companies are either forced to scale back ambitions or seek friendlier regulatory climates abroad.
India now faces this very design choice with the proposed Digital Competition Bill (DCB). The Bill’s sweeping ex-ante obligations on designated “Systemically Significant Digital Enterprises” have drawn scrutiny for their potential to introduce structural rigidities. Recently, the Minister of State for Corporate Affairs announced that the government is considering conducting a market study to build an evidence based foundation. This aligns with the Parliamentary Standing Committee on Finance’s recent report, which called for robust market studies before moving ahead, ensuring that any framework is grounded in empirical evidence rather than hypothetical harms. Notably, this represents a marked shift from the Finance Committee’s 53rd report of December 2022, which had proposed an ex-ante style law without underlining the need for such an evidence-based foundation.
The Finance Committee has also recognised that the success of India’s competition regime, whether it be ex-ante or ex-post depends on the institutional capacity of the CCI and effective inter-regulatory coordination, particularly in the digital economy where jurisdictional overlaps are frequent. It has recommended substantial investment especially within the newly established Digital Markets Division (DMD), to equip it to conduct complex market analyses, engage with emerging technologies, and collaborate seamlessly with sectoral regulators. The Committee has further stressed the need to leverage competition policy to safeguard the interests of MSMEs, enabling them to compete on fair terms in rapidly evolving markets. Without such institutional strength and coordination, even the most well-crafted legislation risks becoming either ineffective or disproportionately burdensome.
A Pro-Innovation Regulatory Framework
The combined weight of international experience and domestic scrutiny points to a clear takeaway- haste in designing digital competition regulations can carry unintended, and often irreversible, consequences. The UK and EU examples show that even well-meaning regulation can, in practice, create barriers for innovators. Without a clear, evidence-backed understanding of how our digital markets function and where genuine competitive harms lie, any regulatory intervention risks being either an ineffective gesture or an overcorrection that curbs investment and innovation.
For India, three guiding principles stand out: first, basing interventions on rigorous, ongoing market studies that identify real competitive harms; second, ensuring obligations are targeted, minimising unnecessary compliance burdens on smaller players; third, allowing space for businesses to innovate and grow. By grounding the future competition policy in evidence, ensuring institutional capacity within the CCI, and learning from the EU and UK experiences, India can safeguard market dynamism while addressing genuine anti-competitive risks. The opportunity is to learn from others’ missteps and design a regime that is uniquely suited to India’s fast-evolving digital economy, one that preserves our status as a global hub for startups and innovation
