Our article has been published by India Business Law Journal (IBLJ) and can be accessed at https://law.asia/ai-market-integration/

Microsoft’s CEO, Satya Nadella, points out that technology does not respect tradition; it only respects innovation. Artificial Intelligence is rewriting long-held assumptions about how digital markets operate and who can compete in them. As established tech giants integrate AI into their operating systems, browsers and everyday digital tools enter an uncertain era. The debate is no longer about incremental upgrades. It is about entire categories blending into each other, and about whether competition authorities can tell when integration is genuine innovation and when it begins to narrow opportunities for others.

AI is replacing product categories with interactive, unified interfaces. Markets that once built products in silos now witness a single innovation integrating multiple products to standalone devices and services. About a century ago, typewriters were self-contained word generators. Computers then unified word processing, storage and connectivity. Cameras, music players and GPS navigators are now built into a single unit. That same smartphone has replaced separate devices such as alarm clocks, calculators, scanners and voice recorders.

Economist Joseph Schumpeter famously called this process by which technology renders older forms of value creation obsolete, as creative destruction. This kind of creative consolidation enhances efficiency, improves the consumer experience, increases digital inclusion and reduces costs. Innovation is not confined to upgrading existing tools; it may also integrate and diversify. A camera does not require higher-resolution equipment; a browser does not need to become faster. They can evolve into something new through technological advances.

It is not anti-competitive for an innovative product to make an older one irrelevant; it signals that consumer expectations have shifted. Protecting standalone calculators against the rise of the smartphone would have done little for innovation or welfare. Various generative AI models along with their search engines can now search, summarise, draft and monitor in a single workflow, without requiring separate tools. Markets no longer categorise programmes into neat segments such as summarisation apps or search engines, but into broader classifications such as digital assistants or AI-native work environments. When consolidation improves efficiency, reduces transaction costs and enhances user experience, the resulting displacement of standalone tools is a pro-competitive outcome. It benefits consumers and encourages all players, incumbents and startups alike, to innovate rather than depend on regulatory protection.

The line between innovation and exclusion is crossed when integration is maintained, not by product superiority but by restrictive ecosystem choices, hampering competition through merit. Innovation may inadvertently mask obstacles to choice. In AI-driven markets, shaped by data accumulation and network effects, barriers to entry may form quickly, blurring the distinction between progress and exclusion. Competition authorities, particularly in a fast-growing digital economy such as India, should not second-guess product design choices but ask sharp, practical questions about conduct, intent and effects.

A dynamic, results-based assessment should focus on the two main aspects, conduct and effects, based on a practical understanding of commercial decision-making. For conduct, the question is whether design or ecosystem choices unintentionally limit alternatives. For effects, the enquiry has to be whether the integration expands consumer benefit and innovation or gradually narrows the possibility of competition.

Should consumers choose the integrated solution in an open contest, intervention may penalise efficiency. Excessive regulation sends the wrong signal that success through innovation invites only suspicion and that it is safer to be mediocre. For a country aspiring to be a serious AI hub, that will be dangerous. Solutions must balance protecting the process that allows better ideas to succeed against the temptation to shield every legacy business model hurt by integration. In AI-driven markets, this means being comfortable with creative consolidation while accepting that innovation is not an unlimited opportunity to limit fair competition.

Regulation must assess whether integration enhances performance or reduces competition. Getting the balance right will help the Competition Commission of India champion integration that advances progress, even as it intervenes when innovation restricts access.