New-Look Digital Competition Bill May Spare Startups

India’s much-anticipated Digital Competition Bill has taken a notable turn in its revised draft, signaling a more balanced approach to regulating Big Tech while offering a potential breather for startups and MSMEs. The updated version proposes thresholds and definitions that may exclude smaller digital enterprises from stringent compliance requirements, allowing them to innovate without being burdened by disproportionate regulation. The bill, aimed at curbing the dominance of large digital gatekeepers, introduces an ex-ante framework to prevent anti-competitive practices before they occur. This marks a significant shift from traditional, reactive competition law enforcement. While global giants operating as "Systemically Significant Digital Enterprises" (SSDEs) will face preemptive obligations—such as data use restrictions and platform neutrality—smaller players, including most startups and MSMEs, are likely to remain outside its immediate ambit.

This approach may serve as a timely relief for India’s 6.3 crore MSMEs and growing startup ecosystem, both of which are increasingly reliant on digital platforms for survival and growth. These enterprises often lack the legal bandwidth and financial muscle to navigate complex regulatory frameworks. Shielding them from over-regulation could help maintain the momentum of India’s digital economy, where agility and experimentation are key drivers.

However, neutrality in the bill’s design remains critical. Any exemptions must be clearly defined and periodically reviewed to prevent regulatory arbitrage. Critics also argue that smaller players should not be entirely excluded from oversight, as some could scale quickly and impact market dynamics. A tiered, risk-based framework could be a more effective way to balance innovation with fair competition. For MSMEs, the bill’s direction presents an opportunity to operate on a more level playing field. If implemented judiciously, it could limit the market-skewing power of tech giants, open up digital space for new entrants, and reduce dependency on a few dominant platforms. Combined with digital public infrastructure and supportive government policies, this move could further empower MSMEs to compete and grow sustainably.

As the Digital Competition Bill evolves, the challenge will lie in ensuring it protects competition without stifling it. Sparing startups and MSMEs from early regulatory burdens seems to be a step in the right direction—one that recognises their role as engines of innovation and employment in India’s digital future.