With the rising digitalisation of markets, the proposed Digital Competition Act (DCA) can provide a much-needed reform. Large digital markets have emerged in India, and can grow further given its mammoth internet-user population. These markets are dominated by a few players who operate on both the supply and demand sides. Their innovations often manifest as anti-competitive practices.
The 2002 Competition Act’s ex-post approach—the regulator acts when abuse of dominance occurs—was adequate for the earlier, almost exclusively physical markets. However, digital markets need a different regulatory orientation, an ex-ante approach to prevent the building of dominance as they are driven by network effects and get skewed much faster in favour of dominant players or incumbents. The ex-post approach is simply ineffective here, with its time-consuming processes. Also, where the existing law does take an ex-ante route, in approval of specific mergers by the Competition Commission of India (CCI), it doesn’t impact the digital markets much—the acquisition of smaller start-ups by the hegemons often doesn’t meet the thresholds for notification before the CCI.
Of course, digital markets have many avatars (the metaverse markets are different from plain vanilla platforms) and law can’t always play catch-up. But, the current state of the digital markets needs a DCA-like fix. The Act must not prevent genuine competitive advances, but companies must realise their innovation can’t be geared towards monopoly.
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