In what seems to be a shift in approach, policymakers at the Centre do not want to introduce any predefined rules on market behaviour of Big Tech that would hinder innovation or stifle creative disruption in digital markets.
Preserving space for innovation will remain top priority even as the Government is mulling introduction of an ex-ante framework under digital competition law to address the anti-competitive practices in digital spaces, official sources said.
It is felt that regulations must tread carefully, as overly rigid frameworks may stifle the very innovation that drives the growth of digital markets.
This could mean that India may not rush into framing a regulatory framework that rides on an ex-ante provisions as the main instrument for tackling the monopolistic behaviour of Big Tech in digital markets.
Overly restrictive
One of the primary concerns of policymakers is that ex-ante provisions, if overly restrictive, may create an environment of caution where companies focus more on compliance than on innovation. This risk is particularly acute in the digital economy, where the pace of technological change is rapid, and flexibility is often required to adapt to new challenges.
“We do not want the regulatory framework to impact innovation. Care must be taken that creative disruption is not stifled by ex-ante framework,” a senior government official said.
The Ministry of Electronics and Information Technology (MeitY), which recently took stakeholder views on the Draft Digital Competition Bill, is yet to finalise the note that it intends to send to the Corporate Affairs Ministry (MCA).
The MCA, after i receiving MeitY comments, is expected to steer the process by firming up a new draft of the Bill and expose it for public comments before preparing a Cabinet note, it is learnt.
Ex-ante regulations are seen to be crucial in addressing anti-competitive practices before they cause irreparable harm to smaller players and the overall market,
Over the last 18 months, there has been an intense debate in India on whether to implement an ex-ante framework to prevent monopolistic behaviour in digital markets. This has gained more traction with India’s digital market estimated to touch $1 trillion by 2025-26.
On their part, digital start-ups are very much in favour of inclusion of ex-ante provisions in the Digital Competition Law. They contend that this is the only effective way to protect digital start-ups from the abuse of dominance by global big tech firms.
Ex-ante provisions
Ex-ante regulation refers to rules set in place before problems happen. In the context of digital markets, it means creating guidelines to prevent big companies from unfairly dominating or harming competition, ensuring a fair playing field for all. These rules aim to stop issues like monopolies or unfair practices before they occur, rather than fixing them after the damage is done.
In digital markets, where a few dominant players often control significant portions of market share, these regulations can be crucial in preventing abuse of power, ensuring fair competition, and protecting smaller players from being crowded out.
Innovation dilemma
While ex-ante regulations have their merits, the potential downside is their impact on innovation. Digital markets thrive on constant innovation, and new entrants often disrupt established players by introducing novel ideas. However, strict regulations could inadvertently hamper this dynamism by making it harder for smaller companies to compete or by imposing compliance costs that stifle start-ups.