Beware of emergence of monopolies
Healthy competition is good for a market economy—yet it has the tendency to move towards a monopoly or duopoly. Competition, which is the essence of a market economy, could itself be the victim in a dog-eat-dog economy with a few large players taking control of specific sectors.
Technology and digitisation—seen as great levellers—have ironically helped the emergence of monopolies across the globe. India is witnessing a similar trend across different sectors with one or two large cash-rich corporations slowly but surely emerging as sector leaders dwarfing competitors. The consolidation in India Inc. has only been hastened, earlier by a slowing economy (since 2016-17), and later by the pandemic. In some sectors, the capitulations of companies could partly be attributed to policy uncertainty or regulatory arbitrariness as well.
Once vibrant, the telecom sector is now trying hard to avoid a duopoly of Reliance Jio and Airtel. Vodafone Idea is barely hanging on by the skin of its teeth. After ignoring this for years, and even supporting the rise of a particular player, the Centre seems to have woken up to the need to prevent monopolisation of the sector. In our start-up ecosystem, Byju’s has been one of the success stories, but as it goes on an aggressive expansion spree—both domestically as well as internationally—the signs of monopoly emerge.
It has so far made eight acquisitions in 2021 and 13 since 2017. Adani Enterprises is entering into every possible sector, is already the leader in some—ports and airports—and making deep inroads into others like power. Amazon and Flipkart have been in the crosshairs of the government and association of small retailers for anti-competitive practices. We are not even getting started on Google and Facebook, which are seen as a global challenge as far as competition laws are concerned.
The question of monopoly and competition is a double-edged sword, and it can cut both ways. Being overly sensitive about anti-competitive practices or even monopoly can kill innovations and emergence of new efficient players. But ignoring tell-tale signs of anti-competitive practices for too long can also lead to undesirable consequences. The government should not take sides and address this issue.