ICLE Response to MDI Gurgaon Stakeholder Questionnaire
Brief Profile of the Respondent and Their Organization
ICLE is a nonprofit, nonpartisan global research and policy centre that develops the intellectual foundations for sensible, economically grounded policy. It applies law & economics methods to public-policy debates and has extensive expertise in competition law and digital-market regulation.
Which of the following digital services does your Organization provide, if any, based on the current definitions set out in the Schedule I to the DCB? (Select all those services which are applicable and write NA if not applicable)
ICLE does not provide a Core Digital Service and is not a market participant in any category listed in Schedule I. We respond as an independent research organisation.
ICLE previously submitted comments to the MCA on the April 2024 Report of the Committee on Digital Competition Law and Draft Digital Competition Bill. We have also filed submissions on digital-competition regulation with authorities in the European Union, the United Kingdom, Australia, Brazil, Canada, Japan, South Africa, Vietnam, and the United States. We seek to ensure that competition law rests on clear rules, established precedent, robust evidence, and sound economic analysis.
What challenges do you face as a service provider in the digital services as provided under the Schedule I of the Draft DCB?
Not applicable directly, as ICLE is not a digital-service provider. Comparable regimes nonetheless illustrate the challenges these rules can create for regulated firms and, more importantly, the businesses and consumers that rely on them.
The principal challenge under the EU’s Digital Markets Act (DMA) has been pervasive legal uncertainty. Gatekeepers report that the DMA leaves key concepts undefined and that the European Commission has offered conflicting interpretations. Apple observed during its compliance workshop that, when no two parties agree on what an obligation requires, the resulting ambiguity undermines the rule of law. The Commission has largely declined requests for guidance, leaving regulated firms to interpret a terse statute without meaningful direction.
Compliance costs present a second challenge. The European Commission originally projected that DMA compliance would cost all gatekeepers combined roughly €10 million annually. Amazon has since reported costs several orders of magnitude greater than that estimate. Meta has involved more than 11,000 employees and devoted nearly 600,000 engineering hours to compliance. Google assigned approximately 3,000 employees to work full time for two years on compliance with a single article. These demands divert resources from product improvement and weigh most heavily on firms with smaller compliance budgets.
Regulatory fragmentation presents a third challenge. The DMA was intended to create a single European rulebook, yet firms still face parallel national proceedings concerning conduct that the DMA squarely covers. The DCB risks creating similar duplication alongside the Competition Act, 2002, the Digital Personal Data Protection Act, the Information Technology Rules, foreign-direct-investment policy, and sectoral regulation.
Response on Core Digital Services (CDS)
Whether the following CDSs, provided under the Schedule I of the DCB, should be included in the CDS list or not? Please state your reasons accordingly.
Preliminary note on our answers below. Our answer is “No” for each of the nine services. Competition problems can plainly arise in these sectors, and the Competition Commission of India (CCI) has active proceedings in several of them. Our point is narrower and more important. Listing a service ex ante substitutes the question “What kind of product is this?” for the question that should determine whether intervention is warranted—whether a particular firm possesses substantial and entrenched market power in a properly defined relevant market that actual or potential competition cannot discipline within a reasonable period.
Abandoning market power as the organising principle of enforcement is an arbitrary choice with predictable consequences. Without a market-power requirement, an authority may pursue cases regardless of how many citizens or businesses the alleged conduct affects. It will also systematically condemn conduct that is pro-competitive or competitively neutral. As Petit and Radi? explain, the market-power screen filters out claims involving mere transfers of surplus between firms rather than genuine harm to the competitive process. Removing that screen is the largest single source of false positives in the DMA’s design and would produce the same result under the DCB.
The category-based approach also rests on the questionable premise that digital markets tend inexorably towards entrenched monopoly. As Herbert Hovenkamp observes, little empirical evidence supports the claim that digital-platform markets are winner-take-all. Nor are network effects, zero prices, and multisidedness unique to digital services. Print newspapers operate in multisided markets, while broadcast radio has long offered zero-price services. Treating nine heterogeneous service categories as a single regulatory object obscures far more than it clarifies.
In your opinion, should any other emerging digital service(s) be added to the list of CDS in the DCB?
No. The list should not be expanded. We urge particular caution regarding artificial intelligence, the service most often proposed for inclusion in comparable consultations.
AI is neither a single technology nor a single service, and no clearly defined “AI market” exists. The AI stack extends from semiconductors and cloud computing to data preparation, model training, and deployment, with distinct firms, business models, and competitive conditions at each layer. Large-language models for text generation do not belong in the same service category as computer-vision systems for medical imaging. Nor should autonomous drones and self-driving cars form a single category merely because both use AI. Grouping these disparate products under one label offers no more analytical value than referring broadly to “food markets.”
Generative AI has also not reached what David Teece termed the paradigmatic stage of development. The dominant service architectures remain uncertain. Subjecting today’s most successful services to rigid rules could impede experimentation with alternative features, business models, and platform designs. As with Web 2.0, startups rather than incumbents took the early lead in generative AI. Users also multihome freely across competing assistants at essentially no cost.
Designating AI could distort assessments of market power in both directions. An artificially broad market that includes products consumers do not regard as substitutes may conceal dominance in genuine niches. At the same time, claims that AI is both vast and dangerously concentrated often reflect technological anxiety more than economic analysis. The better approach is a principled inquiry under the Competition Act 2002, conducted case by case and focused on the relevant consumers, the product at issue, and its actual substitutes.
What are the implications of the Draft DCB on these services and their stakeholders particularly in terms of competition and market entry?
The Draft DCB would have four principal implications.
- The DCB would prohibit pro-competitive conduct without an efficiency defence. When regulators design rules under imperfect information, the evidentiary burden should decline only as confidence in harm rises. Competition law therefore gives enforcers greater latitude to challenge practices that are always or almost always harmful, such as price fixing. None of the conduct covered by the DCB falls into that category. No consensus holds that self-preferencing, tying, or bundling is generally anti-competitive. In multisided markets, vertical integration and self-preferencing often reduce transaction costs, improve the user experience, and strengthen investment incentives. A per se prohibition that provides no consumer-welfare or efficiency defence imposes a steep, and potentially irrational, price for administrative expediency.
- The DCB would make market entry harder for the smallest participants. The DCB’s intended beneficiaries—micro, small, and medium enterprises (MSMEs) and startups—depend most heavily on platforms’ reputations and goodwill among end users because they have yet to establish their own. Rules that impede a platform’s ability to curate content, vet applications, and integrate services can degrade platform quality and drive away users. That, in turn, makes it harder for new entrants to reach a critical mass of customers. The DMA’s experience illustrates the risk. The accommodation sector experienced a shortfall in direct bookings through Google Hotel Ads, while traffic shifted towards intermediaries, several of which were themselves large platforms. The regime created clear winners and losers, with small businesses among the losers.
- The DCB would cover Indian firms and could deprive Indian consumers of valuable services. The DCB’s thresholds would capture domestic enterprises such as Paytm, Zomato, Ola, Nykaa, MakeMyTrip, Flipkart, and Meesho. The EU’s experience shows what consumers could face. Compliance uncertainty delayed the launch of Meta’s Threads and Google’s Gemini in the EU. Apple withheld Apple Intelligence, iPhone Mirroring, and enhanced SharePlay. Google removed integrated maps and hotel and flight results from search. Clicks from Google advertisements to hotel websites fell 17.6%, while searches for mapping services rose 21% without producing a corresponding gain for rival map providers. Users still preferred Google Maps. The intervention merely made it harder for them to reach it.
- The DCB would add another regulatory layer to an already regulated sector. Digital platforms in India already fall under the Competition Act 2002, foreign-direct-investment policy, the Digital Personal Data Protection Act 2023, the Information Technology Rules, and sectoral regulation. The CCI also has active proceedings against Google, Amazon, Meta, Apple, and Flipkart. Nobody argues that platforms should stand above the law. The relevant question is whether the costs of a special per se regime are justified when existing instruments already incorporate time-tested analytical tools and procedural safeguards.
Response on Quantitative and Qualitative Thresholds
What is your opinion about the quantitative thresholds provided under the DCB?
Our answer is “Yes” in every row for the same reason. Each metric measures size, but none measures market power. A large firm may face vigorous competition, while a smaller firm may possess durable power in a narrow market. Turnover, market capitalisation, gross-merchandise value, and user numbers indicate commercial scale or success. Using them to trigger ex ante obligations would penalise success itself.
This approach marks the DCB’s sharpest departure from the trajectory of Indian competition policy. The Raghavan Committee’s 2000 report helped move Indian competition analysis away from blunt structural presumptions and towards careful assessment of economic effects, paving the way for the Competition Act 2002. Designating firms based on size without analysing competitive effects would move Indian law back towards the approach of the Monopolies and Restrictive Trade Practices Act 1969. India should not take such a consequential step based on thresholds modelled after a European regulation whose results remain contested.
Merely raising the thresholds would not solve the underlying problem. Quantitative thresholds should serve only as a preliminary filter for identifying candidates for a substantive market-power assessment. They should never establish a sufficient condition for designation. Firms should also have a meaningful opportunity to rebut designation under the same evidentiary standard that the Commission applies to its own analysis.
11. What could be the threshold for Active End Users (If a user has conducted the transaction in a financial year)?
We selected “Any other” for this question and the next three questions. Proposing a specific figure would wrongly imply that a particular number of users, merchants, or amount of revenue makes a firm suitable for ex ante regulation. The appropriate threshold depends on the competitive conditions surrounding the service at issue. No single figure can reliably capture market power across nine heterogeneous categories.
If the DCB nonetheless retains a bright-line screening filter for administrative convenience, the threshold should be no lower than the highest option offered—more than 25 crore active end users. It should count genuinely active users who rely on a single service, rather than registered accounts, and should serve only to identify candidates for a substantive market-power inquiry. Crossing the threshold should trigger a designation proceeding, not designation itself.
12. What could be the threshold for annual revenue?
“Any other,” for the reasons stated above. If the DCB retains a revenue-based screening filter, it should set the threshold at or above the highest listed band—INR 30,000 crore—and measure only revenue attributable to the Core Digital Service in India, rather than group-wide turnover. Using group-wide revenue to assess a single service would capture diversified firms that lack market power in the market subject to regulation.
13. What could be the GMV (Gross Merchandise Value) threshold?
“Any other.” We recommend eliminating GMV rather than recalibrating it because it is the least informative of the four metrics. GMV measures transaction volume, not the platform’s economic position. It may rank a low-margin marketplace above a highly profitable service with substantially greater pricing power. If retained, the threshold should fall within or above the highest listed band and serve only as a screening filter, combined with an assessment of the platform’s commission rate and the realistic alternatives available to its merchants.
14. What could be the Business User threshold?
“Any other,” at or above the highest listed band. The number of business users primarily measures how many Indian enterprises have chosen to use a platform. Treating a high user count as a trigger for regulatory burdens would make serving more small merchants a liability. If the DCB retains this threshold, it should focus on the proportion of merchants that lack a realistic alternative route to market, rather than their absolute number.
15. According to you, should any other quantitative threshold be used for the designation of an SSDE with respect to CDS? Or should any threshold be dropped?
Thresholds to drop. The DCB should remove global turnover and global market capitalisation. Neither reflects competitive conditions in India. Both also introduce volatility and legal uncertainty while operating, in practice, as proxies for nationality. Their inclusion risks making the regime appear to pursue industrial policy rather than competition policy. The DCB should also remove gross merchandise value for the reasons stated in response to Question 13.
The threshold to add. As a necessary condition for designation, the DCB should require a finding that an enterprise possesses substantial and entrenched market power in a properly defined relevant market that actual or potential competition cannot discipline within a reasonable period. The United Kingdom adopted this approach in the Digital Markets, Competition and Consumers Act (DMCC), which requires market power to be both “substantial” and “entrenched.” Authorities must establish each element separately—an important distinction because virtually every firm possesses some degree of market power.
Why this matters more than calibrating any numerical threshold. Without a market-power requirement, the Commission could pursue cases regardless of actual harm to citizens or businesses. The predictable results would be more false positives and excessive deterrence of lawful conduct. Error costs are asymmetric in dynamic markets. As Frank Easterbrook argued, and as ICLE scholars have explained in the context of digital platforms, wrongly condemning pro-competitive conduct can chill innovation in ways that are difficult to detect and even harder to reverse. By contrast, competition tends to erode market positions unsupported by genuine advantages.
Two further additions. First, the DCB should create a de minimis carve-out for enterprises below a meaningful share of the relevant Indian market. This would prevent the regime from capturing firms that are large in absolute terms but competitively insignificant in the market at issue. Second, the DCB should impose a statutory sunset and require periodic review, allowing designations to lapse unless current evidence justifies their renewal. Digital markets can change quickly. A designation imposed in 2026 based on 2024 data may address a competitive problem that no longer exists.
16. What is your opinion about the qualitative thresholds provided under the DCB?
Preliminary observation: Most of the factors listed below can inform a market-power analysis. Our concern is the role they play under the DCB. The Bill treats them as a designation checklist untethered from any finding of market power, even though several describe ordinary features of efficient digital businesses rather than indicators of durable power. Where we answer “No,” the factor generally duplicates a measure of size, reflects an efficiency, or lacks a sufficiently determinate standard for consistent administration. This does not mean the factor could never prove relevant in a properly structured, effects-based analysis.
Additional Information:
Our answers above should not be interpreted as endorsing the eight factors marked “relevant” as stand-alone designation criteria. These factors belong within a market-power analysis under the Competition Act 2002, where the Commission can weigh them against one another and the evidence of competitive effects. Even sound factors will produce arbitrary outcomes when detached from that analysis because the framework does not specify how many criteria an enterprise must satisfy, how the Commission should weight them, or what evidence would suffice under each one.
17. In your opinion, should any other qualitative threshold be used for the designation of an SSDE with respect to CDS?
Yes. We recommend three additions that would turn the designation framework from a checklist into a substantive analysis.
First, a market-power requirement. The Commission should designate an enterprise only if it finds that the enterprise possesses substantial and entrenched market power in a properly defined relevant market and that actual or potential competition cannot discipline that power within a reasonable period. Relevant indicators would include substantial entry barriers, limited competitive pressure from rivals, weak responsiveness among market participants, and evidence of consumer harm.
Second, an efficiency and objective-justification defence. Jurisdictions that prohibit conduct without allowing efficiency defences tend to experience less innovation because pre-emptive rules replace careful, case-by-case enforcement and impede experimentation. Japan’s Mobile Software Competition Act, although narrow in scope, provides justification defences relating to security, privacy, and the protection of minors. The DCB contains no equivalent. The DMA’s failure to provide such a defence has become one of the most criticised aspects of its design—particularly when interoperability mandates conflict with platform security.
Third, a symmetrical and meaningful right of rebuttal. An enterprise should be able to challenge designation under the same evidentiary standard that the Commission applies when seeking designation. It should receive adequate time to prepare economic evidence, access to the material on which the Commission relies, an oral hearing, and a reasoned decision addressing its arguments. Under the DMA, qualitative factors may support the European Commission’s designation decision but cannot equally support a firm’s rebuttal. This asymmetry raises equal-treatment and due-process concerns that India can avoid through careful drafting. Because the DCB contemplates penalties calculated by reference to global turnover, its procedural safeguards should reflect the severity of those potential sanctions.
18. How does the Draft DCB impact your organization and what changes can be expected in the market dynamics? Please elaborate on three impacts in order of their priority.
ICLE is not a regulated enterprise and would face no direct effect. We identify below the three most significant effects on Indian market dynamics, in order of priority.
First, degraded services and delayed innovation for Indian consumers. We rank this effect highest because it would affect the greatest number of people while remaining largely invisible in enforcement statistics. Under the DMA, firms removed or degraded features to avoid exposure under self-preferencing rules and delayed or withheld new products entirely. Commentators have described a “digital curtain” separating European users from services available elsewhere. India faces even greater exposure because it remains underserved by many advanced consumer and business technologies relative to its peers, making the harm from each delayed or withheld service more severe. Policy should attract and nurture investment in digital infrastructure, not slow its deployment.
Second, false positives that burden Indian firms and MSMEs. A regime that designates firms based on size and imposes per se prohibitions will predictably condemn pro-competitive conduct. The burden will not fall solely on foreign firms. The current thresholds could capture domestic enterprises such as Paytm, Zomato, Ola, Nykaa, MakeMyTrip, Flipkart, and Meesho. MSMEs would bear substantial indirect costs through lower platform quality, less effective and more expensive customer acquisition, and reduced access to the integrated services on which they currently rely at no charge.
Third, enforcement costs and lost institutional capacity at the CCI. The DMA was presented as self-executing and collaborative, but it has proved to be neither. Observers widely regard the European Commission’s Directorate-General for Competition as understaffed for the task despite the European Commission’s substantial resources. Enforcing the DCB would require expertise in competition law, data protection, telecommunications, cybersecurity, and consumer protection. The government would need to develop or recruit those experts or divert them from other priorities. Resources devoted to supervising designated firms would then become unavailable for cartel enforcement, merger review, and other matters involving clearer competitive harms. Unless the government can demonstrate that each rupee spent enforcing the DCB would produce commensurate public benefits, it should redesign the regime.
19. What approach / criteria should the DCB follow for designating an entity as an SSDE?
We selected “Any other approach” because none of the four specified options addresses the central defect. “Both qualitative and quantitative thresholds” comes closest, but combining two sets of criteria that measure size and structure does not produce a meaningful measure of market power.
We recommend a three-stage process.
First, a quantitative screening filter. The DCB should set this filter high and use it solely to identify candidates for examination. Crossing it should create no obligations by itself.
Second, a substantive market-power assessment. The Commission should define the relevant market properly and use the qualitative factors as analytical inputs rather than boxes to tick. Designation should require a finding that the enterprise possesses market power that is both substantial and entrenched.
Third, a reasoned designation decision. The enterprise should have a meaningful opportunity to rebut designation under a symmetrical evidentiary standard, followed by meaningful judicial review. Any resulting obligations should target the specific service and conduct found to create competition concerns rather than apply uniformly to every designated firm.
This approach broadly follows the United Kingdom’s DMCC regime and represents its principal advantage over the DMA. The DCB should also allow firms to present efficiency and objective justifications for their behaviour, provide for full merits review, and require the Commission to trial remedies before imposing them permanently.
20. What strategies and measures can be adopted to address your concerns while ensuring a level playing field for all participants in the digital ecosystem?
- Start with the existing framework. The Competition Act 2002 is a functioning instrument, and the CCI has active proceedings against Google, Amazon, Meta, Apple, and Flipkart. Before creating a permanent ex ante regime, the government should determine whether existing law can address the same conduct case by case, at lower cost and with fewer unintended consequences. India’s Competition Law Review Committee concluded in 2019 that no special law was necessary.
- Invest in the CCI’s capacity rather than create new prohibitions. Frustration with the pace of enforcement motivates much of the support for ex ante The better response is to strengthen the Director General’s technical capacity by recruiting economists, data scientists, and engineers, while adopting procedural reforms that shorten enforcement timelines. Removing the analytical requirements that make enforcement accurate would sacrifice substance for speed.
- Preserve an efficiency defence. Whatever form the regime takes, firms should be able to justify conduct by demonstrating consumer benefits or other pro-competitive effects. This safeguard distinguishes competition policy from industrial policy and provides the most important protection against false positives.
- Remove regulatory barriers to entry. Licensing, compliance, and market-access rules can impede entry and expansion more durably than most platform conduct. Because the government directly controls these barriers, reforming them offers a more reliable way to promote entry with far less risk of regulatory error.
- Prevent overlapping proceedings and penalties. The DCB would overlap with the Competition Act 2002, the Digital Personal Data Protection Act 2023, the Information Technology Rules, foreign-direct-investment policy, and sectoral regulation. Without express coordination, firms could face several proceedings and penalties for the same conduct. Jurisdictional disputes would also consume enforcement resources better devoted to substantive analysis.
- Publish a cost-benefit analysis before enactment. The analysis should account for administrative expenses and the costs of both overenforcement and underenforcement. The EU adopted the DMA without such an assessment or clear measures of success. As a result, supporters and critics still lack a common basis for determining whether the regime works.
- Include periodic-review and sunset provisions. Designations should lapse unless current evidence supports their renewal. The government should also review the regime against defined outcomes, including consumer prices, service quality, innovation, and market entry, rather than the number of investigations opened or decisions issued.
21. What according to you are the best practices from regimes such as: EU’s DMA, UK’s DMCC, and Japan’s MSCA that India should incorporate in the new ex-ante DCB (assuming it is enacted and enforced)?
From the UK’s DMCC—the market-power requirement and tailored obligations. The DMCC offers the strongest of the three models, principally because designation requires both substantial and entrenched market power and a “position of strategic significance.” The authority must establish each element separately. It then imposes conduct requirements for each firm and activity rather than applying uniform obligations. The regime also includes a countervailing-benefits exemption, while the Competition and Markets Authority consults affected parties on proposed remedies before adopting them. One caveat remains. Implementation of the DMCC has begun to drift towards prescribing terms of trade rather than policing anti-competitive conduct. India should draw that boundary more clearly.
From Japan’s MSCA—narrow scope and justification defences. The MSCA covers only mobile ecosystems, including operating systems, app stores, browsers, and search, rather than attempting to regulate nine heterogeneous service categories at once. It also provides justification defences relating to security, privacy, and the protection of minors. Both features recognise what the DMA does not—openness mandates impose costs, and the regulated firm is often best placed to identify and explain them.
From the EU’s DMA—principally what to avoid. We do not recommend importing the DMA’s core design. Its per se prohibitions allow no efficiency justification. Its central concepts of “fairness” and “contestability” lack definitions precise enough for firms to demonstrate compliance, leaving regulators and rivals to define success after the fact. Compliance costs have exceeded official projections by orders of magnitude, while studies have found negative consumer effects in the areas examined. The DCB could usefully adopt the DMA’s practice of publishing compliance reports and holding public workshops. That transparency has value only if the regulator seriously engages with firms’ submissions rather than dismissing them as self-interested.
A general observation. The DMA does not rest on universal economic principles. It is an industrial-policy instrument designed around the EU’s particular strengths, weaknesses, and strategic priorities. Those conditions do not necessarily apply to India, whose digital sector remains at a different stage of development. India’s primary need is to attract and retain investment in innovative technologies, not to fine-tune the distribution of their rewards.
22. Are there any points relevant to this study which are not covered? Please specify and elaborate.
Yes. Several foundational issues require further examination.
The threshold question remains unanswered. The Committee on Digital Competition Law (CDCL) argues that competition investigations in digital markets take too long. Yet the time required may reflect the complexity of the inquiry. Digital markets often involve novel business models and zero-price products, meaning that conduct frequently has a plausible pro-competitive explanation. Competition law’s structured burden-shifting framework exists precisely to test those explanations. Achieving speed by abandoning that inquiry would impose substantial error costs on the market.
No cost-benefit analysis has been published. The government has not quantified the DCB’s expected benefits or estimated its compliance, administrative, error, and opportunity costs. Although this study focuses on thresholds, it must first ask what those thresholds are intended to achieve. We encourage MDI to treat the absence of a published cost-benefit analysis as a significant finding in its own right.
The DCB’s goals depart from those of competition law. Competition law protects the competitive process for the ultimate benefit of consumers. The DCB, like the DMA, appears more concerned with protecting individual competitors. Removing consumer welfare as the governing standard makes it harder to distinguish anti-competitive exclusion from a rival’s failure to offer a better product. It also invites firms to seek regulatory advantages that they could not obtain through competition. The European Commission cited stakeholder dissatisfaction as a principal reason for opening noncompliance investigations only weeks after the DMA took effect.
Institutional capacity requires a separate study. Policymakers expected the DMA to operate largely without continual regulatory intervention, but that expectation has proved incorrect. If enforcement has strained the European Commission’s resources, MDI should examine what the DCB would require from the CCI and what other enforcement work those demands would displace.
The analysis should include trade and investment consequences. Dollar-denominated, size-based designation thresholds will predominantly affect foreign firms. The DMA’s experience demonstrates how readily other countries may characterise such a regime as a trade measure rather than a competition measure. Whatever one’s view of the DCB’s merits, that perception carries real costs, particularly while India seeks to position itself as a leading investment destination.
A concluding observation. This study can make its most valuable contribution by asking the questions the EU failed to answer before legislating. What problem is the DCB intended to solve? How will the government measure its expected benefits? What costs will it impose? Will those benefits exceed the costs? If the evidence cannot answer these questions convincingly, the government should reconsider the need for the regime rather than merely recalibrate its thresholds.