OPINION | CCI’s resource allocation is lopsided. IndiGo’s crisis shows why

Much of the push for additional competition regulation in digital markets hinges on the claim that network effects cause such markets to “tip” toward a single provider. This has led to a proliferation of ex-ante regulatory frameworks intended to pre-empt concentration. Yet the inevitability of tipping in digital markets is far from settled.

A growing body of research suggests that network effects online are often weaker and more contestable than assumed. Users frequently use multiple  platforms, switching costs tend to be low, and innovation cycles remain unpredictable. The rise of TikTok at Meta’s expense illustrates this dynamism vividly: despite not having access to the Indian digital market, which is the second largest in the world, TikTok surpassed Meta’s global revenues by $1 billion in the first quarter of this year.

Network effects can be more pronounced in older industries

In sectors like aviation, however, where entry barriers are typically higher and innovation cycles are less rapid, network effects have greater potential to entrench dominance.

IndiGo’s scale confers a set of advantages that reinforce one another: wider coverage, higher frequency, better connectivity, and (until recently) greater reliability. These advantages are capital-intensive and slow to replicate, making market tipping significantly more likely than in digital sectors. Higher traffic reduces unit costs and enables competitive fares that attract more passengers, which in turn justifies further network expansion. Competitors struggle to match this value proposition, creating a sizeable advantage for the incumbent.

India’s been behind the curve

Despite this, India has been slow to grapple with the competitive consequences of such concentration. The immediate policy responses following the IndiGo disruption—including selective route caps—have been short-term measures aimed at containing fallout rather than confronting the structural roots of the problem. They do little to address the lack of redundancies, high entry barriers, and systemic vulnerabilities that make the sector so sensitive to the failure of a single dominant airline.

CCI’s enforcement practice shows a ‘tech’ tilt

If aviation embodies network effects that warrant regulatory attention, why does it receive so little of it in India? The answer to this becomes clear when we analyse data about the Competition Commission of India’s (CCI’s) enforcement practice.

A perusal of the CCI’s final and interim orders between 2020-2025 shows that it has issued 16 such orders in tech cases, compared to only one in aviation. Notably, even this aviation case was not about IndiGo. Over the same period, 43 tech cases remained pending or were dismissed, compared with just three in aviation, underscoring a potential skew in enforcement activity.

To be fair to the regulator, the CCI’s emphasis in tackling tech cases versus those in aviation seems disproportionate, in part, because “technology” is a broad category that encompasses diverse businesses, from social media and search engines to app stores. Naturally, this generates a higher absolute number of disputes than a narrow sector like aviation. Additionally, since digital markets are rapidly evolving, they draw greater regulatory attention as innovative business models and practices emerge.

However, the imbalance extends to the CCI’s market studies as well -- over the past five years; it has released four market studies focused on digital markets, but none on aviation. Indeed, the last time the CCI appears to have examined the aviation sector for a market study was around 2007-08, when IndiGo held just an 8.8 percent share of the total passenger traffic. The industry has transformed drastically since then, making the absence of its scrutiny more striking.

In addition, the CCI’s institutional choices serve as yet another important instance of the visible imbalance in its regulatory prioritisation. For example, last year, the CCI approved the creation of a dedicated Digital Markets Division to support investigations into digital markets. In contrast, sectors like aviation do not receive any additional analytical bandwidth.

Resultantly, we have a regulatory ecosystem that is overly attuned to digital markets, even though there are several qualifiers to the power of network effects in this sector.

IndiGo should be a wake-up call

Conversely, it appears that signs of market failure in aviation have been apparent for some time now. AirHelp’s 2024 study ranked IndiGo 103rd out of 109 global airlines — making it one of the world’s worst performers on key customer service indicators. Yet policy conversations have largely overlooked the structural fragilities of India’s aviation sector: inadequate redundancies, limited competitive discipline, and deep structural entry barriers shaped by network effects.

The IndiGo crisis should therefore be a wake-up call. India’s competition regime must widen its gaze beyond digital markets and adopt a more holistic approach that prioritizes consumer welfare wherever concentration risks are apparent — especially in sectors where the social and economic stakes are far higher than likes and followers.

(Meghna Bal is Director of the Esya Centre. Shweta Venkatesan is a Fellow at the Esya Centre.)

Views are personal and do not represent the stand of this publication.