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India Needs Genuine Anti Trust Legislation to Control Corporate Monopolies

By 03/08/2021April 29th, 2022No Comments
anti trust legislation

Anti Trust Legislation to Control Corporate Monopolies

When one takes a picture of the entire world, it becomes quite clear that the problems of concentration of economic power, monopoly, and restrictive trade practices are present in almost all the democratic countries of the world. However, with increasing globalization and industrialization, competition among companies and countries is becoming vigorous and complicated leading to monopolistic tendencies.

Monopoly market, a market where avarice and profit-making drive decision making, social welfare usually takes a backseat. Apparently, Adam Smith’s free-market economy pivots around the quintessential prospect of minimal government intervention so that markets can self-regulate and operate rationally. Unfortunately, in most cases, such an unregulated environment allows the rise of monopolies through organic or inorganic growth.

During the time of license raj, monopolies and the Restrictive Trade Practices Commission were denounced by all shades of liberal opinion. However, even after the British raj, monopiles persisted due to India’s socialistic and archaic structure. However, such a detestable taste in expansion and restricted entry in the market was altered in 1991 through LPG policies.

Need for Antitrust laws

It is no news that the exponential rise of big techs like Google, Apple, Amazon, Facebook, etc. mimics the dominance enjoyed by these particular trusts in various vulnerable markets. Over the past years, according to their conduct and corporate behavior, many of these firms have systematically engaged in predatory conduct to drive out competition by various ways of “killer acquisitions”.

Though the monopoly situation of Microsoft was buried long ago in 2001, the embers have again been fanned with a growing consensus that big tech now wields overwhelming power, so much so that they cause tangible harm to competitors and consumers alike. Given Amazon’s alleged report of mistreatment of its employees, with plummeting social welfare, such monopolies need curtailment.

Now, if the problem is considered in the Indian context, such firms do operate in India too, to such a large extent that they are increasingly taking over the e-commerce and welfare sector in India. Given the precarious presence of such tech giants in the country, it is time that India starts considering a revamp strategy for its anti-trust laws.
As aforementioned, the impact of the west’s events in India cannot be, by any chance, downplayed.

Given the globalized era that we live in, the Competition Commission of India (CCI) has a penchant to mirror the US and the EU antitrust authorities. Thus, given the EU and US antitrust bodies’ stringent stand against tech giants like Facebook, WhatsApp, etc., there is a high probability that the CCI might initiate investigations to assess the detestable dominance of big tech firms in India and assess the requirement for a breakup of various power-wielding corporations.

But are India’s Antitrust laws ready for such significant change? Perhaps not. The western countries were the first to introduce the mammoth Competition laws to mitigate unfair advantages that money mongers enjoyed and to divest monopolies to protect the competitive integrity of relevant markets. But the story of the Competition Commission of India is quite different.

It is to be noted that the Indian competition law is not bothered about dominance by any single money monger or player in the market. The competition commission of India only objects to the use of such prominent power by an entity to unfairly control the market and manipulate prices for their products and services.

This particular denial of the competition act of 2002, to weed out the prerequisites for the determination of unfair dominance is in sharp contrast to the western antitrust laws which emphatically view every move by companies to consolidate their position with suspicion. Such a western approach has its merits, which kills unfair monopolies in their nascent stage.

Moreover, Section 28 of the Competition Act, 2002 which effectively empowers the CCI to divide a dominant firm to ensure that no firm can abuse its dominant position is ill-planned and doesn’t lay out a coherent, robust foundation for the act. This is due to the fact that the said section does not effectively require the CCI to make an actual finding of abuse to direct a firm’s division. It is to be noted that just mere apprehension of abuse by a dominant firm is sufficient to trigger the operation of this provision.

Thus, it is quite surprising that the robust foundation on which CCI laws are based is ill-defined and thus ill-omened. The Act itself does not effectively provide any guidance for determining justifiable triggers. Mere apprehension, in many cases, can lead to unjustifiable and ill-omened divestment because many firms go for mergers and acquisitions to expand capital and to earn large-scale benefits and economies of scale, which as a matter of fact is good for the economy. But a mere apprehension of an unjust takeover can have debilitating consequences.

Thus, such apprehensions, can in many cases also lead to slower growth, a restrictive business environment, and the threat of being mishandled. Given India’s NPA crisis, acquisition and merger seem to be the perfect ways out for various debilitating firms, thus mere apprehension as a base of divestment and antitrust procedures does not speak well of the antitrust laws in India. But on the other hand, this lack of guidance severely expands the scope of this provision and strengthens the CCI’s power.

But even after such ‘turbo-charged anti-competition law, Indian corporates have grown immensely and have associated themselves with everything that is undesirable in corporate clout. The reason why such leniency takes place in dealing with the big fish is politics and lousy policy formulation.

Some glaring examples of the same are Reliance Jio and ‘Salt to Steel’, a nice catch line associated with Tatas for a long. There is hardly any activity that one can cite, where these group entities are not present in India. In fact, Reliance has expanded so much across India that even the agriculture sector has not been spared of its charms. Reliance’s hold on the agriculture sector has already become all-pervading, with no specific sphere of activity, that one can think of, which has been spared.

Reliance’s footprint in the country’s agricultural sector might be new but Mr. Anil Ambani is leaving no stone unturned to sweep the market with his all-pervading presence. As a matter of fact, Reliance has launched an all-encompassing ‘farm-to-fork business’, which offers to deliver on many grounds like providing prominent help with the delivery cycle from harvest to the store by sourcing nearly half of all vegetables and fruits required for its retail chain. It is to be noted that this has grown by leaps and bounds through meticulously planned acquisitions and yet CCI has never been apprehensive about it.

Thus, all in all, in view of the fast-paced development, the recent surge of investigations by the CCI against big techs like Google and Amazon and the growing power of Ambanis, Adanis, and Tatas in the country can significantly and effectively act as a catalyst for the CCI to test the waters within the realm of its powers.

Thus, in order to maintain a balanced equilibrium between encouraging healthy competition and ensuring companies adhere to Anti-Trust laws, it is imperative to set a strong narrative against global giants operating in India according to their whims and fancies and therefore it will be interesting to witness how a genuine Anti-Trust Legislation to control corporate monopolies will take effect in India.

 


Tags: corporate monopolies, restrictive trade practices, anti trust legislation, monopolistic tendencies, monopolistic competition, monopoly market

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