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Business News/ Opinion / Columns/  Opinion | India’s competition policy must keep up with emerging threats

Opinion | India’s competition policy must keep up with emerging threats

The Competition Act of 2002 is inadequate to deal with abuses of monopoly power in a changing business environment


The combined market capitalization of just four companies—Facebook, Apple, Alphabet (Google) and Amazon—is greater than the gross domestic product (GDP) of India. In the US, in China and, of late, in India, corporations which have a disproportionately large share of their consumer markets are rising. The current regulatory architecture is woefully inadequate to comprehend and determine whether this corporate concentration gives rise to monopoly power.

The dictionary definition of monopoly is “a market situation where one firm, or a group of firms acting in concert, controls the supply of a good or a service". Historically, the economic implication of this has been synonymous with high prices and the restriction of output. The intent and structure of regulation around the world has therefore attempted to mitigate or break up monopolies in an attempt to negate this abusive pricing power.

Even though competition laws have been around for 2,000 years, the design and intellectual roots of the current framework for competition policy and anti-monopoly regulation, called anti-trust in the US, can be traced to justice Louis Brandeis of the US supreme court (1916-1939). Brandeis, using Madisonian principles, argued that there should be a democratic distribution of power and opportunity in the political economy and that “industrial liberty" must go hand-in-hand with political and religious liberty. With significant inputs from the Chicago school, this “Brandeis philosophy" has morphed into one of consumer welfare, measured principally by the price paid by consumers as the test of policy effectiveness. The laws codified in the US before World War II were transferred to Germany and Japan after the war and became the basis upon which competition policy was documented in the European Union (EU) and beyond.

In the US and Europe, the increase in corporate concentration has led to a lot of discussion about the limitations of current law. The EU, and its competition tsarina, Margrethe Vestager, have used existing competition regulation to examine the “abuse of market concentration" with some zeal. Most recent rulings on disrupting competition and the abuse of market power in the international arena have come about in the EU. Landmark rulings came in 2004 against the “lack of interoperability" of the Microsoft operating system and in 2017 against Google’s Android operating system. In the US, discussion among a group of thinkers called “the New-Brandeisians" is pushing lawmakers to jettison short-term price effects as the sole determinant of abuse. Lina Khan, a leading competition attorney, in a Yale Law Journal article titled Amazon’s Antitrust Paradox, wrote that “it doesn’t matter if companies like Amazon are making things cheaper in dollars if they are using predatory pricing strategies to dominate multiple industries and choke off competition and choice".

Competition policy in India is governed by the Competition Act of 2002. This Act establishes the Competition Commission as the arbiter of any activities that may have an “adverse effect on competition in India". The Act is now inadequate to deal with the changing business environment in telecommunications, technology and e-commerce, and the government’s own role in distorting competition. The same deficiency that plagues the rest of the world, namely a requirement of “dominance" and a test of price “increases" restricts the commission from challenging abuse.

Today, consumer data and behaviour is the “asset" around which a monopoly or an oligopoly can exist. Private corporations or the government can abuse this asset by monopolizing it to deliver a range of goods and services. A government may abuse its power to regulate by preferring large domestic corporations over foreign ones, or by interfering in pricing. In India, you are beginning to see emerging corporate concentrations in consumer industries related to data and e-commerce and payments. The government’s role has been schizophrenic; for instance, on one hand, creating the only truly interoperable backbone in the world for payments (the Unified Payments Interface), but on the other interfering directly in the payments industry by abolishing the merchant discount rate, and promoting a government-created consumer app called Bhim. The long-standing Indian interference tradition has led to landmark interventions that include the nationalization of banks (1969), abolishment of front-end loads for mutual fund sales (2009) and the wide-spread subsidy for LPG sales (until it was changed recently).

The government has put out a draft e-commerce policy for discussion that brings up some of these issues—such as predatory pricing and consumer data abuse. This limited update of competition policy is wholly inadequate. An updated competition policy in India must simultaneously focus on the objectives of free and fair competition, consumer welfare and the abuse of monopoly power wielded by government and companies. The Competition Commission must have the authority (and the will) to investigate and charge the government with “distortion of competition" if it interferes micro-economically with pricing or arbitrarily favours private companies with regulation.

PS: “The greatest dangers to liberty lurk in the insidious encroachment by men of zeal, well meaning but without understanding," said Louis Brandeis.

Narayan Ramachandran is chairman, InKlude Labs. Read Narayan’s Mint columns at

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Updated: 05 Aug 2019, 11:00 PM IST
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