*Oorja Newatia, Rachna Prakash, Arya Harishankar, Shashwat Shankar and Shauryaveer Chaudhry

This podcast episode explores the growing significance of effects-based analysis in abuse of dominance cases under Section 4 of the Competition Act, 2002. Ms. Raveena Kumari Sethia, Principal Associate at Shardul Amarchand Mangaldas, breaks down the distinction between form-based and effects-based approaches, highlighting the latter’s role in preventing overregulation and ensuring a fact-sensitive assessment of market impact. Drawing on recent jurisprudence from the Google Android, Google Play Store, and Schott Glass cases, the discussion unpacks how courts and the CCI are moving towards evaluating actual and likely effects of conduct rather than penalising dominant firms for form alone. The conversation also addresses the importance of theory of harm, evidentiary challenges, institutional capacity-building for the CCI, and the tension between ex post effects analysis and ex ante regulatory frameworks like the EU’s Digital Markets Act.

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Rachana: Today, we’re joined by Ms. Raveena Kumari Sethia, a lawyer and educator whose work spans across legal practice, teaching and community initiatives. Ms. Sethia is a Principal Associate at Shardul Amarchand Mangaldas in New Delhi, where she works with the competition law team. She also serves as a visiting faculty member at Jindal Global Law School and West Bengal National University of Juridical Sciences. Beyond her professional practice, she’s committed to pro bono teaching and mentoring. To this end, she’s the co-founder of the Apji Vijay Singh and Rani Aruna Kanwar Foundation, which works in the fields of sports, animal welfare and the empowerment of women, children and marginalized communities. An alumna of Jindal Global Law School, she completed her LLM at the University of Cambridge as a Justice Prathiba M Singh and Cambridge Trust scholar. She’s also gained experience with other leading law firms in India and abroad, including a training contract offer from Herbert Smith Freehills in London and a stint with Trilegal’s competition team in Mumbai. We’re so glad to have her with us today to talk about the effects-based analysis under Section 4 of the Competition Act and its growing importance in India.

Ms. Sethia: Thank you so much for having me and for that introduction.

Oorja Newatia: Just to start off for the audience that is less familiar with the subject, what is the effects-based approach under Section 4 and how is it different from the form-based analysis?

Ms. Sethia: The idea, in very simple terms, is that in abuse of dominance cases, understanding the effects of the conduct in question is crucial before arriving at a conclusion on whether there has been any violation of the law. I understand this is a podcast with a platform wider than simply students of competition law or people who would have experience with this topic, so just to even take a step back from that aspect, the role of competition law in our country is to ensure that there is effective competition across all levels in any industry. So, it’s a sector agnostic law which seeks to stop anti-competitive practices and behaviour, and promote competition as well as work towards the benefit of consumers.

Towards that end, certain types of conduct are regulated and certain types of conduct are prohibited. If there’s a company which is dominant (for example, it’s a really large company, it’s a leading player in its market, its closest competitor is very far behind from it, it has very high market shares, consumers are dependent on it, etcetera, it may be classified as a dominant company in a particular relevant market under the law), then there is a special responsibility of sorts cast on it to act and behave in a certain manner.

So for example, if there was conduct, or if there were things that another regular player could do in the market and get away with, a dominant company may not necessarily be able to engage in the same conduct or the same practices with the aim to achieve the same outcome. If a dominant company under the law engages in certain type of conduct, which includes, for example, denying market access to a competitor, imposing unfair restrictive agreements, engaging in discriminatory behaviour, etcetera, then such conduct comes under the scanner of the regulator and they may be penalised for such actions.

So far, under competition law, the standard legally has been that you must only establish what the relevant market is, which is what is the market in which this company is operating, where it’s supplying its products, where it’s supplying its services. Secondly, you must see whether that company is dominant or not based on its market strength, closest competitor, dependence on consumers, how much power do consumers have, etcetera. Once you’ve established that you only had to see whether they’ve engaged in any conduct which is prohibited under the law.

For example, if they had entered into a one sided sort of agreement or they had engaged in discriminatory behaviour vis-à-vis two customers at the same level, then that itself would have been enough to say they have abused their dominance, which is a violation of the law, which could have resulted therefore, in penalties, or in cease and desist orders and in certain extreme cases, even remedies being imposed on them. That was the standard legally and even till recently when the Competition Act was being amended and there were discussions among the Competition Law Review Committee, they took the conscious decision to say that the law itself is flexible enough right now for the regulator to be able to see conduct on a case by case basis, so they did not really change the legal standard applicable to a great extent.

What the effects-analysis requirement does is that it now mandates a fourth limb in abuse of dominance cases, which means now not only will you see the relevant market, not only will you see dominance, not only will you see what the conduct is, but you will now also have to assess what has been the impact or likely impact of such conduct on the market. This is something that has been done by the CCI on an ad hoc basis, on a case by case basis, but it isn’t something that so far was a required mandatory sort of standard to be fulfilled in all sorts of abuse of dominance cases.

So that’s something new that we see here, which is something brought about by firstly the NCLAT in the Google Android decision of 2023, followed up by the Google Play Store decision of 2025, and of course, the Supreme Court’s Schott Glass judgement also in 2025. The trend has been towards now seeing the impact of what this sort of conduct is and this is different from what we understand to be a form-based approach, which is essentially a tick mark approach where you see that this is the market, this is the dominance, this is the conduct and that’s it. You don’t need to go a step further to see what the impact really has been.

So that’s the difference between the two. The idea behind the form based approach also, it’s not an illogical standard, it’s just a standard which has a higher burden. The reason for the higher burden is that if you are a dominant company and you’re really big in the market, then the law expects you to behave in a certain way and therefore a lot of legislatures around the world don’t want to give dominant companies that little window where they think that they can even engage in such conduct and maybe get away with it.

The form-based approach sort of puts them at a higher threshold so that they don’t even try doing this. However, the effects based standard is a more rule of reason based approach where you will now see what the conduct is. Has it really resulted in anything? Is it likely to really result in anything? If not then that conduct also should be acceptable. It should be okay despite the company being dominant. So in very simple terms, that’s really the difference, and that’s what the jurisprudence has evolved to be.

Rachana: You were talking about how, prior to some of these decisions, this used to be more on an ad hoc case to case basis and the Schott Glass case seems to change that. And the CLRC report approved of this approach, given that such analysis may not always be necessary in every single case, for example, what in your opinion are some of the disadvantages of mandating this analysis for every single inquiry under Section 4?

Ms. Sethia: I don’t think there’s a disadvantage per se. I think what will have to happen is that a regulator now will really need to see the types of conduct coming before it, and then see the manner in which it can assess the effect or the impact.

This actually is beneficial for the market in a way because it avoids over regulation, which is the largest problem when you look at competition cases. A lot of times you see there are cases that come in, we as practitioners experience this a lot, that there is conduct. Undoubtedly, nobody can say that the conduct in a broad sort of manner doesn’t exist, but at the same point of time, we end up seeing circumstances where that conduct occurred due to a very specific, objective, justifiable reason and honestly did not result in any impact on the market whatsoever.

So when you get those sort of cases, you feel like they’re going to be penalised for no reason and we will be in litigation for years and decades to fight this out and argue our point and eventually it will all become infructuous because of the passage of time. What the effects based standard really does is it saves that regulatory energy and time to a great extent in terms of not reacting to potential conduct or conduct which could have this sort of hypothetical impact without there being any evidence of that sort.

It also shows that these companies and dominant players aren’t being penalised for innovation simply because they are large players, simply because they’re doing something which is innovative or different or have a first mover advantage simply as compared to their competitors. So it’s really something which is going to help in terms of leading to an appreciation of on ground facts by the regulator.

To give you an example, in the ONGC case, there was a one sided contract where ONGC would have these agreements with ship owners and it would take the services of the ship owners for certain drilling activities that had a one sided termination clause where for termination of convenience only ONGC had the power to terminate the contract. The counterparty did not have this power. And that clause was in the contract. It was one sided. On the face of it, it could have been abusive depending on the way one saw the facts.

However, the CCI (and this is before all this effects based analysis came into being in the last two years) itself realised that this clause has been there for 35 years and it was never exercised by ONGC. It was only exercised one time in 35 years just because of the way oil prices were fluctuating around the world and the economic devastating impact it had on drilling activities. So they had to terminate those agreements because they couldn’t afford to do the drilling. It was a logical justifiable action, especially for a company which is like a PSU in that sense. So they have to preserve government resources. They can’t just act brashly because they need to continue with contracts despite suffering a loss.

There was a CAG report which actually noted that it would have been beneficial them to sort of stop that engagement or contract because it was leading to losses for the exchequer. So there was a lot of justifiable evidence that was placed on record and the CCI actually agreed in that case and said yes, this is not abuse of dominance. This has been done for a specific reason. It’s a one time thing and it in its way did that effects analysis really without it being on the books.

Sometimes, even if a clause appears to be one sided, or you’re tempted to take that form based approach, looking at effects can really help in reducing such over regulation, and it can provide a better platform for application of competition law in the manner that it’s intended to be. If something is done for a genuine, objective reason, and it’s not to exclude a competitor or cause an anti-competitive effect, it need not necessarily be penalised because of rigidity in the law.

I think that’s where this is going to really help when there’s no real disadvantage to it per se. Of course, the manner in which effects are assessed will depend on case basis, which gives enough flexibility to the regulator in any case. But this is something that the CLRC noted the CCI was doing anyway on an ad hoc basis, they felt like it was not required, perhaps in all cases and that could have been their assessment based on the way jurisprudence had developed till that time. However, that doesn’t mean that it cannot be done.

Just because it wasn’t mandatory doesn’t mean it shouldn’t be. So in my view, I think you can conduct that same analysis even as far as purely exploitative abuses are concerned as well. Or even conduct which on the face of it appears to be anti-competitive as well you can apply the same standard and you can see how it plays out in those facts and then assess the scenario.

Shashwat: I just wanted to ask this from the point that you talked about flexibility and sector agnostic thing. So while the court in the Schott Glass case, it mandated demonstrable evidence of harm to establish abuse of dominance, it did not necessarily lay down a framework for how this analysis has to be conducted in the first place. So do you think that the court missed them up by not deploying a framework, or do you think that a detailed framework, if the Court had established it, would you know, risk having an overly rigid standard for future enquiries on a case by case basis?

Ms. Sethia: Yes, I think the court moved away from setting a specific standard or a bright line test for a reason. And that is because you cannot really, if you are applying the standard to all sorts of cases, you cannot really have a bright line test. It will have to depend on the nature and type of conduct it will have to depend on the facts at hand and, you know, even those sort of economic and social circumstances surrounding that conduct as well. A PSU may do something based on guidance or a mandate from a presidential directive or from another Department of the Government, so that social context also sometimes becomes important. And like in ONGC, the economic context becomes important. So unless you take all of them into account, it is very difficult to have a bright line test, which would universally be applicable.

I think they deferred or they sort of restrained themselves from applying a test for that particular reason. And they also probably must have felt that the regulator is best equipped to deal with things on a case by case basis depending on the facts that come before it.

However, that said, the principles in Schott Glass are very clear. Just for context, they found that this framework for conducting an effects based analysis is already available in what they call the legislative signposts within the law itself. They found it not only in the preamble, they found it in the way Section 4 is worded. They found it in the way there is a, you know, implication under section 19 as well. And they also sort of found it in the way that they were generally able to see that this whole concept of there being this effect on the relevant market or a relative advantage in the way that the text is worded would itself ensure that this had to apply in a contextual sort of manner. So they found that this inherent power to conduct this analysis already exists. They found that you must do it as well in every case because it is something which is built into your law which gives enough power and flexibility to the regulator to be able to see what the facts at hand are and how they want to sort of apply this.

The way the jurisprudence has developed through Schott Glass and not just Schott Glass, but even through the decisions of the NCLAT in the Google cases has now helped us as practitioners and even dominant companies understand what is it that they are looking for. So just to summarise what the principles we have understood from this are is that they must, number one, have been conduct. You cannot penalise a company when there is no conduct that has taken place. Number two, such conduct should have actually resulted in, you know, actual or even likely anti competitive effects. So that is the other thing that the NCLAT has helped us clarify that effects need not have always manifested in the market, but that they could also be likely as far as the conduct has occurred that much flexibility exists with the CCI.

In this way jurisprudentially even though Schott Glass is silent a little bit on this aspect, the Google cases by the NCLAT and Justice Bhushan have helped to clarify that and take it one step further. So using this as the framework now, today the CCI can actually conduct an analysis where it sees has this conduct occurred or not, number one, what they are complaining about. Number two, if it has occurred, does it have any actual effect? If not, number three, does it have any likely effect? And if there is not any actual effect or likely effect based on the evidence at hand, then they are well within their rights to dismiss such a complaint and find that there in fact has been no abuse of dominance. So I think based on these sorts of jurisprudential principles, when they are brought together, while you do not have a bright line test, you do have sufficient guidance and tools to be able to apply them on a case to case basis.

The trick actually is in terms of what the evidence should be when you are conducting an effects based analysis. That is something that nobody has really commented on. What do you need to really see? Because in our investigations with the CCI what we typically see is that the CCI conducts third party outreach, so they will have responses from certain competitors or customers or other analysts, etcetera. Secondly, they will have evidence of what your market shares are or how conduct like price would have fluctuated or market shares would have fluctuated. Third, they would have evidence based on market reports and market studies based on how the market is really sort of functioning. So these are the things that they typically rely on. Now the question and the trick really is whether simply because they have done this outreach is that enough for them to say that they have satisfied their burden, or is the manner in which that outreach is done and the weightage given to the correct sort of responses from the correct responders also equally important? And I would think the latter plays the biggest role. You could reach out to 10 people, but if you do not ask them the right question, then you would never get the right answer that you need. That is number one and number two, those 10 people may even respond to you with an agenda of vindictiveness in mind. So you need to be able to filter that out to actually be able to see which out of these is a genuine response that genuinely from with some sort of reliable evidence or some sort of reliable even theory of harm, is able to establish that the conduct in question is problematic. So that really is where I think this becomes tricky rather than simply, you know, putting a bright line test.

Shauryaveer: Maam, to what extent can non price metrics be relied upon to demonstrate harm for abuse for dominance? For example, within the sports industry, especially in commercially structured leagues such as the Indian Premier League, how should exclusive broadcasting rights and franchise related restrictions be assessed under an effects based approach when they are mostly justified, nonetheless, lead to long term market foreclosure, heightened entry values or a distortion in fan engagement which these days are the focus of franchise based brands and team competitiveness. Would these effects satisfy the demonstrable evidence requirement under section four of the Competition Act, even when no immediate harm to consumers can be demonstrated?

Ms. Sethia: Well, that is interesting. So I think when you are looking at non price factors, it is very important to assess them because not all non price factors are as relevant. That is one thing. But two, when you have digital markets for instance, then you have to see that some of these products are being provided to users absolutely free of cost. So you have to weigh that benefit against whatever you think is the problematic conduct and then assess really what the impact is going to be on competitors or consumers. So for example, if you have a scenario where there is a zero price product in the market which is able to be used by consumers for free and actually benefits them for whatever reason. Then you have to assess in contrast to that what are the non price factors that you are looking at and how do they really impact competitors. Have they hindered entry for competitors? Has someone actually come and complained to you about certain conduct? Has it resulted in some sort of denial of access to any player in the market? Has it actually resulted in restriction of any kind on technology or on, you know, any sort of proprietary information without which a competitor would not be able to function and then weigh that against the benefit that consumers obtain from that product being free, because tomorrow you do not want to over regulate, you know, and just say that you are offering something to somebody for free. However, we think that you know, because you are doing because you are collecting, for example, you know, basic contact information or because you have access or you are present in multiple different markets that itself is sufficient for you to be, you know, abusing your dominance and result eventually in not any new competitor or any landscape changing in the market, but that product no longer remaining free for competitors. That is something that you do not want then. Eventually you have to weigh in a systematic manner and see what the pros and the cons are.

To take your example of broadcasting rights, for instance, in that scenario you have a situation where you know there will be one player that will have these exclusive rights. However, you need to see is that a long term contract? Is it really going to impact other players in the market? Are they not going to be able to secure the same contract on a level playing field? You know in the next cycle, is there evidence of the same person getting those rights again and again? Is there evidence of there being no competition in the market for those rights? Is somebody actually complaining and saying that I am not able to sustain in the market as a general broadcast player just because I do not have access to this transient agreement for this game, which is going to only be there for a limited period of time. And accordingly, you sit and you assess because you want users to be able to also access that game through a platform which enough users are using. Otherwise there is no benefit in that contract going to somebody like Lionsgate play, for example, that hardly has a user base in India. So you end up making the product or that watching experience more expensive for users in certain cases. So I think you would have to assess this looking at all of the facts and really see what the actual or likely impact of that arrangement would be. And especially where you have an auction seasonally, it is not just like a long term contract, but something only for a year, six months, two years, three years. Is it really something that you can say would hinder entry in the long run for all players? Is it something that is locking in viewers or even, you know, the IPL for example with that player or not? So you would have to see it holistically.

Rachana: The next question that we have for you is about the theory of harm and how important it is and how it plays into effects-based analysis. It is important for competition authorities to clearly articulate this theory, and what risks are we looking at if such a step is overlooked but is insufficiently theorised or developed? The connected question is about how this connects to the question of evidence that you were talking about, that so far the kind of evidence that we look for is fairly underdeveloped. Can this theory be of any assistance or guidance in that regard?

Ms. Sethia: Yes, I think it is important to have a clear theory of harm, because without that, it is frankly an endless ghost chase, right? And without knowing what you are looking for or without trying to identify the type of harm something has caused, if you simply conduct an investigative exercise without any signpost for yourself or without any contours for yourself, then you do not know what you are looking for. The exercise becomes very misguided and it ends up becoming an overall wasteful experience for the regulator as well. So it is important to start with some theory of harm.

I think once you have the theory of harm, then there is an investigation, of course, that will be conducted. I think that investigation under the premise of that theory of harm. If they come across certain additional evidence or if they come across certain additional facts that lead to the development of a new theory, that is always, of course, some flexibility that they have to go through. They have that path available always. However, if that is not the case, then at least they are coming to some conclusion, either yes or no, regarding that one theory of harm, at least.

So we have seen a lot of cases that come in where, for example, the prima facie order is very broad-based, and the investigations then therefore end up taking a very different turn from what is probably intended. The investigators are not able to articulate the right questions or reach out to the right parties or conduct a thorough enough analysis, due to which then the CCI has very limited relevant material to rely on while coming to an actual answer or to come to an actual decision on that theory or to come across even that analysis. A lot of times in those cases the analysis is quite random because they do not know what to rely on beyond that point.

Those are the decisions that often end up getting appealed so often, and you see the NCLAT and erstwhile COMPAT turning them down. Schott Glass itself is one example where the CCI just relied on the wrong metric to be able to say that there is abuse of dominance when there was ample evidence to show that there was no such foreclosure in the market, the conduct was objectively justified, the discounts given were on a reasonable volume basis, and there was no issue frankly. That is why in that case, even COMPAT rejected the CCI’s opinion because they said this is just not based on any analysis at all.

So you need to have some theory to start with so that your investigation and then eventual material becomes relevant. And this theory can be broadly exploitative or exclusionary. And then within that, you have your subsets of the particular sort of harm that you are looking at within that conduct, right? Why is it exclusionary? What have they done? Is it through contracts? Is it through conduct in the market? And you build it on that basis and forward. But if you do not have that theory to start with, or that signpost to start with, it is a random goose chase which is just not helpful at all.

In terms of the evidence requirement, I think the evidence ends up playing out significantly once you have that theory of harm in place. So for example, if it is exclusionary conduct, which means that a new entrant is not being allowed to enter or an existing competitor thinks it is not able to sustain, you would look at certain types of evidence. For example, you would see: Are market shares declining? Are the contracts that they have with other people in the market reducing? Is there evidence that they are being taken over by one player and the other? Is there evidence that there has been no new entry or the market has been stagnant for decades? Is there evidence that only the leading dominant player is able to secure contracts and agreements? So your questions would be framed in a manner depending on the theory of harm, and therefore your evidence that you collate will also correspond with that. However, if you do not do that exercise, then you might ask 25 questions and you might get 25 different data metrics, but all of them might not be helpful in any assessment.

Arya: Throughout our conversation, you have mentioned the challenges that the CCI’s investigation may face, including the somewhat unclear evidentiary burden that they may have to prove. In this context, how can the CCI strengthen its institutional capacity, both in terms of technical expertise and procedural tools, to effectively carry out complex effects-based analysis? Should there be a specific timeline involved to prevent delays in investigation?

Ms. Sethia: Right. I think that is very important and I think it is something that the CCI itself is cognisant of as well. So I think in terms of the tools that they have at their disposal, they already have the ability to reach out to special experts on a case-by-case basis, and I do think they must make the most use of that to start with. Because there are a lot of cases that play on different markets, and a lot of times what happens is that because the CCI is a broad regulator (they are not a sectoral regulator), it may end up missing crucial points which are specific to an industry and therefore ignore on-ground evidence relevant for the case.

That gap can really be fulfilled when you get somebody who is an expert in a sector to come and explain to you: “This is really how this works.” And so, to a great extent, you might be able to understand why parties engage in certain types of conduct. To give you an example, there might be an industry where there is a dominant player for sure, but rather than engaging in conduct that is actually detrimental, it might be engaging in conduct that actually helps players in the industry. And because it is engaging in that sort of conduct, other competitors feel compelled to also have similar terms that are helpful for those customers, which they might not want to have. So you have to see how the industry dynamics really play out, and why are they doing things that they are doing? Is it because of a demand from customers? Is it because it is an industry norm or not? So that would help clarify a lot of this information asymmetry problem that we see often in regulatory decisions.

The second thing that I think they really must do, which will save them a lot of time as well and make the investigations faster, is that they must encourage communication with the opposite party in question. So you are already investigating somebody and you can send them questionnaires and you can go on and on in that saga. But genuinely having more open conversation in a way, or engagement in a way with them, or giving them the opportunity to present upfront, even sometimes before coming to a prima facie view itself, will really help in saving judicial time and resources. You need not even launch an investigation in a lot of cases where, if you just invited them to start with, they would be able to come and give you a clearer picture and just dispel any issue upfront.

The CCI does do it, but it does it on a case-by-case basis. So even before launching an investigation, they may call you to present arguments either in a written way or orally, but they may not call you either. So in a lot of cases where they do not call you, is the ball really being missed? That is the question, right? They could have just saved that time if they had given you that chance to engage. So engagement with that opposite party becomes very important because it helps you overall to understand the company and industry better. And it also helps you save your own time and resources where they really are required, right?

I think apart from that, the investigation endeavours really need to be structured. So you have a number of diverse officers in the DG Office, and the DG is their investigative arm. So they have a number of diverse officers; different officers get a lot of different cases to investigate, and they have quite a free range in terms of how they want to conduct that investigation. However, I think internal training and internally making DGs understand what the current law is, what the metric is, what are the right questions to ask or not ask depending on a certain set of facts or circumstances, would really help streamline the investigation process significantly and lead to the correct sort of answers at least being solicited. As I told you, in a lot of cases, if you are asking the wrong question or you are asking it to the wrong party, then it is not, it is just volume. It is not really of any value.

So to get that value out of this process, it is important that they know who to ask and what to ask. And for that, if they engage a little bit with the opposite party or with a technical expert in that sector, they might be able to appreciate and understand what is relevant for that sector, which is missing right now in a lot of investigations. They are very, very shallow and it is very easy to pinpoint holes in them. And it is unfortunate because the CCI otherwise is actually one of the best regulators this country has. So if it could just strengthen that DG investigative arm through better internal training or have an appreciation for relevant evidence or relevant facts on an industry-by-industry basis (even if not more narrowly than that). I think that would definitely lead to better outcomes.

And I think in terms of timelines of investigation, having fixed timelines is something that they do try. Every prima facie order will give a DG about 60 days to give a report. But unfortunately, that is not something that realistically can happen, especially in a large case, especially in a case which involves an industry with multiple players. So it is not really a practical thing that they can do in a way. But you do want DGs to have flexibility while not being dragged into investigations for years and years on end.

As I said, if there is a way to streamline the process a little bit internally, if they understand what the priorities are, what they need to focus on, that might automatically lead to quicker investigations. Having a strict timeline is not always helpful. We have seen it in some cases where the DG would just give us two days or five days or seven days to collate thousands and thousands of data sets, and eventually that would result in not only human inaccuracy in collection, but then also disregarding of that data set, which is otherwise crucial pieces of evidence to be able to disprove any allegation against you. So you do not want that sort of inflexibility with the DG as well. You want them to have that time to be able to allow the opposite party to at least get the right data and give it to them. At the same point of time, as I said, if they focus their resources on just asking the right question, reaching out to the right party, that itself will save them a lot of time as well.

So I think in that way, if they get those experts, they do internal training and they appreciate the industry that they are looking into, we might see much better, quicker and effective outcomes through this regulatory process.

Oorja: We have one last question for you, ma’am. This is regarding the ex ante framework. So the ex ante framework under the EU’s Digital Markets Act and India’s Digital Competition Bill, which has now been withdrawn, marks a stark departure from the effects-based approach. So in your opinion, is that the right direction, or do we need to move beyond effects-based analysis in cases of gatekeepers?

Ms. Sethia: Yes. So I think that’s something that we as a nation as well wanted to look at, which is ex ante regulation, and from news reports, I understand that they might want to withdraw the draft Digital Competition Bill in its current form.

Ex ante regulation sounds good on paper, but it is not without its challenges. We’ve seen implementation in other jurisdictions, and we’ve seen the challenges and issues that it’s facing. So even where big tech companies or companies which are designated as gatekeepers are coming up and they’re offering these commitments to ensure that they are on the right side of the law, there are always disgruntled parties, and that engagement and that process of bringing them to where they need to be is going to be very time-consuming and it’s going to take forever.

One thing that we must appreciate is that a lot of these companies are actually companies with worldwide operations, and some of them may have certain units in certain areas and other units in other areas. So without understanding and appreciating how their internal dynamics, servers, interconnections work, it’s unfair to give them very broad-based parameters and say, “Oh, you must comply with this and you must do it in 60 days for our country,” without seeing whether it would really impact their global systems or their global mechanisms. And if there is a law which is effective in being able to tackle such conduct through an ex post regulatory mechanism like the effects analysis, for example, then that ex ante regulation may in certain cases end up being futile as well.

So if it has to be introduced, it should be introduced with enough clarity and safeguards, with a mechanism where the company has the ability to approach the regulator and say, “What you think I am a gatekeeper, but if you look at the facts, I’m really not,” or “I was a gatekeeper a year ago, but now look, the market has changed. Digital markets are dynamic. Today, I’m not,” or “You had a problem with this conduct. Let me explain why that is not true. I don’t do it.” And I should have the power, you should have the power, to revoke the designation yourself.

Even if it is true and I’m able to show you that I’ve made some changes or that there is enough dynamism in the market, then you have to be able to give me that window of appreciation. Without all of that, which is what the draft in its current form was, that sort of broad-based over-regulation is what would end up penalizing companies for innovation. And in fact, the opening paragraph of Schott Glass warns against that approach. It actually says that you shouldn’t be penalizing companies just because they’re big and they’re innovating, because everyone understands that innovation is the cornerstone for any country’s development. And at the end of the day, you don’t want to penalize companies just because they had a first-mover advantage or, on paper, they have a higher market share, especially when you look at digital industries where you can see players like TikTok, for example, just blowing up in a short frame of time, and there will be somebody else right after and somebody else right after. It’s just a question of having that product which grabs attention in a way versus another one.

So I don’t think it’s something that is a sure-shot success to have ex ante regulation or a sure-shot requirement. I think it’s something that any legislation should think about very deeply, and while thinking about it, have enough safeguards or have enough fallback provisions for the gatekeeper to be able to come and contest that analysis as well, or to be able to have the flexibility for the regulator to withdraw the designation and the company to be able to come and have flexibility to argue against that designation.

Otherwise, it could just lead to chaos and no better outcome. So you must see it in light of the context of what the law, especially competition law in any jurisdiction, intends to do, and ours intends to promote competition and also help consumers. So if that’s being achieved through the current mechanism in an evolving way, then we need to really assess for ourselves whether we need any more regulation or not.

Oorja: Yes, alright. With that, we come to the end of this broadcast. Thank you so much, ma’am, for taking time from your busy schedule to talk to us. It was a very enlightening conversation.

Ms. Sethia: Thank you. Thank you, guys. Thank you for doing this on a Sunday. And I’m again sorry for how long it’s taken us to record this. So thank you so much and good luck to all of you. And yes, let me know when this airs or is edited or whatever. I’ll be happy to reshare it as well.

Oorja: Thank you so much, ma’am.

Rachana: Thank you.