[Draft] iamai submission to Committee on Digital Competition Law

Impact on Investment: Size or scale-based applicability of regulations will not only impact larger players in the market, but will also impact start-ups. Regulations that kick-in as soon as certain financial/size-based thresholds are met, will disincentivize start-ups from scaling in order to avoid additional regulations. This can impact their ability to raise capital through venture funding, as the thresholds under the ex-ante regime would act as ceiling to the potential scalability of the business. This in turn will reduce valuations, and impact the ease and profitability of investor exits.

Impact on Innovation: Companies invest significant resources innovating on products and business models that improve overall efficiency of markets, and drive-up consumer welfare. Economic policy therefore seeks to assure innovators of opportunities to recoup their investments, through tools such as recognition of intellectual property rights, allowing companies to scale, and intervening only where market conduct leads to demonstrable harms. Ex-ante frameworks that proscribe otherwise pro-competitive conduct, or limit a company’s ability to scale or monetize their innovations, can directly impact the incentives to innovate.

Impact on Diversity: Unlike other jurisdictions, Indian markets are marked by high levels of diversity. For instance, online retail continues to witness new business models such as hyper-local delivery, direct-to-consumer (D2C), social commerce, etc. Each of these compete to be a consumer’s chosen channel of retail. Similarly, the diversity in consumer base in terms demographic (metropolitan, urban, rural), economic, linguistic and cultural metrics, has led to a similar diversity of business models in other sectors such as financial technology, social networking, etc. Targeting specific business models through a one-size-fits-all approach, can create enforced biases towards certain business models, which, despite affording less room for innovation, become the preferred operating and business model, solely due to lower costs of regulatory compliance. This will directly impact consumer choice and product diversity.