Good morning [%first_name |Dear Reader%],

If you follow the tech universe closely, maybe you’ve seen the gazillion articles these past few months talking about the Indian government’s push towards ex ante regulation for digital markets. 

First, in June last year, the Parliamentary Standing Committee on Commerce urged the government to amend the two-decade-old Competition Act, 2000. Bringing in ex ante regulation was a key recommendation:

Then, in December 2022, the Standing Committee on Finance released a report on anti-competitive practices by Big Tech companies. This committee went a bit further—it proposed that highly influential Big Tech players should be identified, designated as SIDIs (Systemically Important Digital Intermediaries), and subjected to ex-ante restrictions to ensure fair competition.

A Committee on Digital Competition Law (CDCL) was consequently set up to look into the merits of having a separate competition law for the digital markets. And last Saturday, this committee concluded stakeholder discussions with a wide spectrum of entities—from tech companies like Amazon, Flipkart, Meta, Google, and Uber to the Digital News Publishers Association (DNPA), the National Restaurant Association of India (NRAI), and Alliance of Digital India Foundation (ADIF). 

Do you know what the CDCL’s recommendations were? 

Yup. Ex ante regulations. 

So, what exactly does that mean? And why does the government think it will reign in Big Tech and its abuse of market dominance?

The ex post problem

A quick internet search will tell you what ex ante regulation is. In simple terms, an ex ante framework is designed to identify market issues beforehand and then set down a bunch of rules telling companies how to behave. Enterprises would have to ensure that they are complying with listed conditions as soon as such a framework comes into force.

But what India has right now for antitrust regulation is all ex post. Meaning regulatory intervention follows only after a finding of abuse of market power. That can lead to some interesting problems when it comes to digital markets. 

For one thing, they can quickly tip in favour of one, or a handful, of firms, undermining competition and innovation. You don’t have to look very far for examples, daily life is littered with them. For instance, take one of the ecommerce giants, say Amazon. It controls which listings are visible on its marketplace and customers see sponsored products (for which sellers have paid a fee to Amazon) first.