Government Likely to Narrow Scope While Retaining Preventive ‘Ex Ante’ Framework; Big Tech Firms Expected to Remain Primary Focus

The Union government is preparing to refine the proposed Digital Competition Bill (DCB) before introducing it in Parliament, with significant changes expected to the financial and user thresholds that determine which companies fall under the law. While the government is considering raising these thresholds to reduce the compliance burden on domestic technology companies, it is reportedly committed to retaining the Bill's core ex ante regulatory framework, which seeks to prevent anti-competitive conduct before it occurs.

The proposed revisions come after extensive consultations with industry stakeholders, who argued that the original draft could unintentionally bring several fast-growing Indian digital businesses under a regulatory regime primarily designed for global technology giants. If implemented, the revised Bill is expected to focus more narrowly on dominant digital platforms while allowing emerging Indian companies greater room to innovate and expand.

Why India Needs a Digital Competition Law

India's digital economy has expanded rapidly over the past decade, with online platforms becoming essential gateways for consumers and businesses. Search engines, e-commerce marketplaces, social media platforms, app stores, cloud services, and digital advertising networks now influence millions of daily transactions.

Recognizing these structural changes, the Committee on Digital Competition Law (CDCL) recommended a separate legal framework tailored specifically for digital markets. Unlike traditional industries, digital platforms benefit from network effects, massive data advantages, economies of scale, and ecosystem integration, enabling dominant players to strengthen their market position much faster than conventional businesses.

The committee concluded that waiting years for investigations under existing competition laws could allow market dominance to become irreversible. Consequently, it proposed preventive regulation to preserve competition before harmful market practices become entrenched.

Understanding the 'Ex Ante' Regulatory Framework

One of the defining features of the Digital Competition Bill is its adoption of an ex ante regulatory approach.

Under India's current Competition Act, regulators generally intervene after anti-competitive behaviour has taken place. Investigations often require considerable time, during which dominant firms may continue expanding their market power.

The proposed Digital Competition Bill seeks to reverse this approach by imposing conduct obligations on designated digital enterprises before anti-competitive practices emerge.

The objective is to ensure:

• Fair competition among digital businesses.

• Greater consumer choice.

• Transparent platform operations.

• Protection for business users.

• Continued innovation within India's digital economy.

Who Will Come Under the Digital Competition Bill?

The proposed legislation introduces a new classification called Systemically Significant Digital Enterprises (SSDEs).

Companies designated as SSDEs would be those operating one or more Core Digital Services, including:

• Online search engines

• App stores

• Social networking platforms

• Operating systems

• Web browsers

• Cloud computing services

• Online marketplaces

• Digital advertising platforms

These businesses serve as critical gateways connecting consumers, merchants, developers, advertisers, and service providers across India's digital ecosystem.

Original Thresholds in the Draft Bill

Under the 2024 draft, companies could qualify as SSDEs if they crossed specified financial or user thresholds over the previous three financial years.

Financial Criteria Included:

• ₹4,000 crore turnover in India

• $30 billion global turnover

• ₹16,000 crore gross merchandise value (GMV) in India

• $75 billion global market capitalization

User-Based Criteria Included:

• At least 10 million end users in India

• At least 10,000 business users

The Competition Commission of India (CCI) would also retain discretionary powers to designate enterprises based on factors such as market influence, network effects, barriers to entry, and user dependence.

Why the Government Is Revising the Thresholds

Industry feedback suggested that the original thresholds could unintentionally include several successful Indian technology companies that are still in their growth phase.

Companies frequently cited in discussions include:

• Zomato

• Swiggy

• Ola

• Flipkart

• Oyo

Business groups argued that applying the same regulatory obligations to domestic innovators as global technology giants could increase compliance costs and potentially slow innovation.

In response, the government is reportedly considering higher financial and user thresholds so that the legislation primarily targets the world's largest digital platforms rather than rapidly expanding Indian firms.

Global Big Tech Likely to Remain Primary Focus

Although the thresholds may change, the Bill's overall philosophy is expected to remain intact.

Global technology companies with dominant positions across digital ecosystems—including firms such as Google, Meta, Apple, and Amazon—are likely to remain the primary focus of the proposed legislation due to their significant influence over digital markets.

The government's approach seeks to strike a balance between regulating powerful gatekeepers and allowing India's startup ecosystem to continue scaling without disproportionate compliance obligations.

Key Obligations for Designated Digital Enterprises

Companies classified as SSDEs would need to comply with several behavioural requirements intended to promote fair competition.

Among the proposed obligations are:

• Avoiding self-preferencing their own products and services.

• Preventing unfair tying or bundling practices.

• Ensuring fair treatment of business users.

• Refraining from unfair use of third-party business data.

• Allowing business users to communicate directly with customers.

• Supporting data portability and greater user choice where applicable.

Additionally, the Competition Commission of India would have powers to prescribe sector-specific conduct rules depending on the nature of the digital service.

Balancing Regulation and Innovation

One of the government's biggest policy challenges is balancing effective competition regulation with continued digital innovation.

While stronger oversight can improve market fairness and protect smaller businesses, excessive compliance requirements could increase operational costs for growing technology firms and discourage investment in innovation.

By raising eligibility thresholds, policymakers appear to be attempting to create a more proportionate regulatory framework that protects competition without placing unnecessary burdens on India's emerging digital champions.

What Investors Should Watch

The Digital Competition Bill could significantly reshape India's technology sector over the coming years.

Key developments to monitor include:

Policy Factors

• Final financial and user thresholds.

• Parliamentary debate and legislative timeline.

• CCI's implementation framework.

• Sector-specific compliance guidelines.

Business Impact

• Effect on Big Tech operating models.

• Compliance costs for digital platforms.

• Changes in marketplace practices.

• Opportunities for smaller competitors.

• Long-term implications for India's startup ecosystem.

Investment Perspective

The proposed Digital Competition Bill reflects India's evolving approach to regulating its fast-growing digital economy. Rather than relying solely on traditional competition enforcement, the government is moving toward a preventive framework designed to preserve market contestability before dominance becomes entrenched.

If the revised thresholds are adopted, the legislation is likely to focus primarily on large global technology platforms while providing greater flexibility for domestic digital companies to continue expanding. For investors, the Bill represents an important regulatory development that could influence competitive dynamics across e-commerce, digital advertising, online marketplaces, cloud services, and platform-based businesses. As Parliament considers the final version of the legislation, its implementation will be closely watched by technology companies, investors, regulators, and consumers alike.