Even as India has been playing the Digital India card for a while now, it is only recently that attention has shifted to the digital economy architecture. The business history of the last decade clearly shows a tendency to “unlevel” the playing field. The draft Digital Competition Bill (DCB) positions itself as a bold step to create a level playing field for startups and empower users. It claims to dilute the power of big platforms and foster innovation.
Promise vs. Reality of the Digital Competition Bill
It seems the EU’s Digital Markets Act (DMA) has “inspired” this bill, pointing to recent shifts in consumer choice and developer access in Europe. However, a closer scrutiny exposes a bureaucratic intervention that neither nurtures genuine entrepreneurial dynamism nor dismantles platform dominance. The proposed fairness and innovation are just a cover. There lies the danger of replicating the form of global regulatory experiments without capturing their substance, which will lead to premature rules that stifle local innovators while doing little to discipline global incumbents.
To argue otherwise is to fall into the trap of conflating regulation with reform. India does need a competitive digital order, but the DCB, in its present avatar, is unlikely to fulfill that.
The DCB's European Inspiration
At the heart of the DCB lies the conviction that ex-ante regulation—rules applied before market harm occurs—can preempt abuses of dominance. This intuition is understandable; traditional antitrust enforcement is notoriously sluggish, as India’s own Competition Commission (CCI) has discovered. But transplanting the ex-ante framework without adjusting for institutional and market realities can lead to unintended consequences.
Europe’s DMA was crafted against the backdrop of mature markets, high per capita digital consumption, and powerful domestic regulatory institutions. India’s context is different. It is still in the throes of building digital infrastructure, its enforcement capacity is overstretched, and its tech ecosystem is dominated by global gatekeepers as well as powerful politically connected firms. A blunt, rule-based regime will likely ossify incumbency rather than dislodge it.
Take the example of browser choice screens in the EU. While Firefox and Brave have indeed gained marginal ground on iOS, the overwhelming dominance of Apple and Google remains unshaken. Worse, the compliance process of endless tweaks, deliberate friction, and appeals by gatekeepers has consumed vast regulatory resources. With lax enforcement everywhere, how can India fare better here?
Another promise of the DCB is its potential to drive innovation by controlling the giant platforms. This is unlikely to happen, as India has always allowed certain business groups to flourish even without the license raj. Furthermore, prescriptive regulation benefits the established players more.
The fate of Firefox OS is a case in point. It is true that entrenched mobile platforms suffocated Mozilla’s open-source experiment. Regulation alone would not have saved it. The project collapsed as much from weak developer traction, lack of carrier support, and consumer indifference as from Android’s dominance. Startups too face similar platform barriers and structural deficits: low R&D spending, shallow venture capital depth, and limited global reach. Regulation cannot replace such aspects.
Unintended Consequences of Ex-Ante Regulation in India
Ironically, heavy-handed rules may disincentivize precisely the sort of agile experimentation that startups require. Early-stage businesses will want to be free from compliance, data-sharing, and interoperability hassles, for instance. Global incumbents can absorb all that without any problem. The EU can afford such regulatory overhang because its startups operate within deep-pocketed ecosystems; India cannot.
Most digital regulations seem to be failing, especially when enforcement capacity lags behind corporate ingenuity. The DCB will take India into the same trap with rules that will produce neither innovation nor fairness. Early signs from the EU’s DMA point to modest gains in user choice but little structural change in market power. Developers report complex, slow interoperability procedures, while users remain locked into familiar defaults. The Australian News Bargaining Code, hailed as a victory for publishers over platforms, entrenched large media houses and left smaller, independent outlets with scant benefits. Korea’s App Store Law was designed to curb Apple and Google’s billing power, but developers still face restrictions.
Advocates of the DCB dismiss such concerns with “not regulating is worse.” This is a false binary. To regulate or not isn’t the issue, but how and when.
Striking the Right Balance for Startups
There is an inflection point in the digital economy with over 100 unicorns and a sprawling startup base. The challenge is not the scarcity of enterprise but the fragility of scale. What do startups need? A robust infrastructure (cloud credits, AI compute access, 5G rollout), non-“vulture” capital, IP frameworks that protect innovation, and public procurement pathways that give early customers.
Premature regulatory zeal risks diverting political and administrative energy away from these priorities. Worse, it signals to investors that India’s digital market will be governed not by innovation-friendly policies but by ever-tightening rules. Such a perception could dampen capital inflows.
The DCB needs modifications to prevent digital gatekeeping. The modifications must be tailored, phased, and innovation-centric. Consider the following:
- Avoid blanket rules; focus on targeted interventions: Instead of prescriptive rules for all “systemically significant” platforms, focus on specific, demonstrable abuses such as self-preferencing, exploitative data access, or coercive contractual terms. The Digital Markets Unit (UK) offers an interesting approach with a code of conduct for individual firms.
- Facilitate startups to drive innovation: Regulation must safeguard the interests of small firms, just as board regulation protects minority shareholders’ interests. Free them from complex compliance formalities. Create sandboxes for experimental business models to drive innovation without regulation.
- Empower and strengthen institutions first: The CCI and sectoral regulators lack capacity, expertise in digital forensics, and speedy adjudication mechanisms. Without this first, ex-ante regulation will never take off.
India doesn’t need a copy-paste version of Europe; it needs a playbook of its own. Rules without roots breed ruins. Innovation is oxygen; regulation should not be the chokehold. As one founder quipped, “If startups spend more on lawyers than coders, the digital future is already dead.”
(Muneer is a Fortune-500 advisor, start-up investor and co-founder of the non-profit Medici Institute for Innovation. X: @MuneerMuh.)
Views are personal and do not represent the stand of this publication.
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