AUTHOR DETAILS: This article is written by Raunak Kumar Singh, BA.LLB (Hons), 3rd year, University of Lucknow, during his internship at LeDroit India.
KEYWORDS:
•Digital Competition Act.
•Systemically significant digital enterprises.
•Competition law in India.
•Ex-ante Regulation.
•Big Tech Regulation.
•Digital Markets.
ABSTRACT:
The Digital Competition Act is a proposed law designed to tackle the growing anti-competitive practices in digital markets. The law particularly focuses on large tech companies (systemically significant Digital Enterprises) that have become highly influential in the market.
As the dominance of big tech companies has grown, the limitations of the existing Competition Act,2002, have also been exposed. Hence, this new law aims to prevent the abuse of market power by such companies by establishing ex-ante rules, ensuring that competition is not harmed in the future.
This article explains the need for this law, its key features, international perspectives (such as the EU Digital Markets Act), and industry response to it. The draft will give more powers to the Competition Commission of India (CCI) to regulate digital monopolies promptly.
This article also provides some legal precedents, key court judgements, and international comparisons to understand how this new law will impact the Indian digital market.
INTRODUCTION:
The 21st-century economy is based on data, algorithms, and digital systems. Digital markets in India have expanded rapidly, leading to a handful of big tech companies dominating key sectors such as e-commerce, search engines, social media, app distribution, and fintech. These companies are often referred to as gatekeepers because they control the online pathways that are essential for both businesses and consumers.
The digital economy is also affected by network effects—the more people use a platform, the more profitable and powerful it becomes. This often leads to a “winner takes all” situation, leading to monopolies. Examples include Google’s dominance in search and advertising or Amazon’s dominance in online retail. Initially, they promote innovation, but over time, these companies stifle competition, misuse consumer data, and limit choices.
The existing Competition Act, 2002, was enacted at a time when digital platforms were not so widespread. This law is mainly based on ex-post measures—that is, action is taken only when an anti-competitive act is committed. But in the digital world, damage is done so fast and cleverly that action taken later is often too late.
Given these challenges, the Government of India proposed a Digital Competition Act in 2024 based on the recommendations of the Committee on Digital Competition Law (CDCL). This new law will work ex-ante, that is, by making rules in advance, so that abuse can be prevented, especially by large digital companies.
Therefore, the need for this law was felt when problems like excessive control of some companies and a lack of competition came to the fore, along with digital innovation. Now India needs a law that can maintain fair competition in the digital market for the future.
Need for a Digital Competition Act in India:
India’s digital market has grown rapidly, and now big tech platforms have become an important part of business, communication, and content. But this growth has also brought many problems. Big international companies like Google, Meta (Facebook), Amazon, and Apple have been accused of self-preferencing, predatory pricing, monopolizing data, and acting as gatekeepers. This weakens competition in the market and harms small businesses. These problems have made it clear that the Competition Act, 2002, is not capable of handling the special nature of digital markets.
The current law is based on the ex-post model—that is, action is taken only when an anti-competitive act has been committed. But in the digital world, such damage is done very quickly, and by the time the government or the commission takes action, it is too late. For example, a platform showing its products higher in search results—this causes immediate harm to smaller competitors, which is difficult to correct later.
Recognizing this shortcoming, the Ministry of Corporate Affairs (MCA) formed the Digital Competition Law Committee (CDCL) in February 2023. This committee recommended in its 2024 report that a new law should be introduced that sets rules ex-ante to prevent companies from doing wrong, especially those digital companies that are very large and influential (Systemically Significant Digital Enterprises – SSDEs).
Such a law is also needed because the European Union’s Digital Markets Act and the steps taken by the UK and Australia make it clear that there is now a need to control digital companies in advance across the world. India will also have to move in this direction to protect its startups, maintain fair competition, and encourage innovation.
Therefore, the Digital Competition Act is not just a law but a foundational safeguard that will ensure that India’s digital future remains fair, competitive, and pro-innovation.
Summary of Draft Digital Competition Act:
The Digital Competition Act, proposed by the Committee on Digital Competition Law (CDCL) in its 2024 report, is a major shift in the approach to regulating Big Tech in India. The draft law seeks to strengthen the existing Competition Act, 2002, and adopts an ex-ante framework to take into account the characteristics of digital markets.
The main objective of the law is to identify and regulate certain large digital companies, called Systemically Significant Digital Enterprises (SSDEs). These companies will be identified based on their number of users, market share, access to user data, and their impact on other businesses.
Key features of the draft act:
• SSDEs will be subject to certain prescribed rules to ensure fairness, transparency, and non-discriminatory behavior.
• Self-preferencing, improper data use, forced tying/bundling of services, and blocking third parties from accessing platforms or app stores—all will be prohibited.
• Companies will have to comply with these rules even when there is no evidence of harm yet that is, the law adopts a policy of preemptive prevention.
The draft also proposes to create a special “digital competition division” under the Competition Commission of India (CCI), which will include technical experts who understand digital markets.
While the current law takes action after any wrongdoing, this new law will focus on preemptive monitoring and prevention in the digital sector. The law is inspired by international rules, especially the EU’s Digital Markets Act, but has been adapted for India.
Overall, the Draft Digital Competition Act represents a modern shift in India’s regulatory thinking moving away from general competition law and adopting special and protective measures for the digital sector.
Core Concept: Systemically Important Digital Entities (SSDEs):
Central to the Act is the concept of SSDEs. These are large digital companies that have enormous market power and act as gatekeepers in services such as e-commerce, social media, digital advertising, and app distribution.
According to the CDCL report, the criteria for identifying a company as an SSDE will be:
• Number of active users.
• Turnover and market capitalization.
• Access to and control over user data.
• Dependence on other businesses.
• Ability to exert influence in the digital market.
Such companies will be subject to certain regulations, such as:
• Not to prioritise their products in search or rankings.
• Not to misuse data collected from business users.
• Maintain transparency and interoperability.
• No coercive selling of services
The aim is to maintain a level playing field and fair competition in the market, as has been done in the European Union’s Digital Markets Act.
Ex-Ante Regulatory Framework:
The most important feature of this Act is that it adopts ex-ante regulation that is, companies will be forced to follow certain rules in advance, so that there is no harm in the future.
Harm in the digital market can happen very quickly, such as changes in algorithms or misuse of data. Instead of taking action later, like the old laws, this law will control in advance.It aims to ensure that big companies:
• Do not bias rankings.
• Do not misuse data.
• Give fair access to third parties..
• Do not forcibly sell services together.
This model matches Europe’s DMA and the UK’s proposed Digital Markets Unit (DMU).
Global perspective:
Digital markets across the world have similar problems—dominance of big tech companies, monopoly of data, and weak laws. India’s proposed act has taken inspiration from the EU’s DMA and the UK’s DMU.
Laws like the DMA impose clear restrictions on large services, such as:
• Prohibition of promoting their products.
• Mandatory data portability.
• Algorithmic transparency
India’s model is similar, but tailored to the country. It ensures that India understands the needs of indigenous startups and consumers while staying globally connected.
Regulatory powers and enforcement mechanisms:
The Digital Competition Act proposes to create a special division, “Digital Competition Division (DCD)” under the CCI (Competition Commission of India), which will have experts in technology, data, and digital economics. The key powers will be:
• Identification and investigation of SSDEs.
• Power to enforce regulations.
• Market analysis and audit.
• Penalties and corrective action for violations
Also, there will be a provision for appeal through NCLAT. This will also provide justice to companies and maintain transparency in regulatory action.
Industry concerns and criticism:
While the Act is being appreciated, many large companies and startups are also raising some concerns:
• Excessive control: This may restrict companies’ freedom of operation and increase costs.
• Impact on innovation: Pre-imposed rules may stifle innovation.
• Ambiguous definitions: Terms like “self-preferencing” or “unfair data use” are not clear
Startups also say that this law may clash with existing rules like the IT Rules, 2021, and the Digital Personal Data Protection Act, 2023. Therefore, they suggest that the government should create a “sandbox model” or different rules based on the market.
Balance between innovation and control:
The biggest challenge of this law is to rein in big companies, but also promote innovation. Therefore, this Act will apply only to SSDEs, so that small digital players can operate without any hindrance. The government should also:
• Create sandboxes to test policies.
• Adopt a flexible audit system.
• Taking feedback from the public and industry to formulate policies
This will make the law a facilitator, not a hindrance, and promote a fair digital ecosystem.
Conclusion:
The Digital Competition Act is a big step towards ensuring fair competition in the digital space for India. The law seeks to protect startups, encourage innovation, and empower consumers by keeping big tech companies in check.
But its success will depend on how the government strikes a balance between regulation and innovation, incorporates industry views, and keeps it flexible to the changing market.
Ultimately, the law will redefine competition in India’s digital market and ensure that India’s digital future remains open, fair, and consumer-centric.
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