The norm has always been that the Goliaths, in the form of big companies, have been predominant, with customers gobbling up their products and service and competition getting either easily acquired or easily crushed.
To be sure, you have had instances where regulators challenged them about this.
Think about Bill Gates at the Senate Judiciary Committee hearing in 1998, addressing whether Microsoft is a monopoly. 20 years later, in 2018, Mark Zuckerberg testified in front of the United States (US)
The norm has always been that the Goliaths, in the form of big companies, have been predominant, with customers gobbling up their products and service and competition getting either easily acquired or easily crushed.
To be sure, you have had instances where regulators challenged them about this.
Think about Bill Gates at the Senate Judiciary Committee hearing in 1998, addressing whether Microsoft is a monopoly. 20 years later, in 2018, Mark Zuckerberg testified in front of the United States (US) Congress and he was asked whether Facebook (now Meta) faces competition and whether its lack of competition was detrimental to the future of the software industry.
We even had US Senator Bernard Sanders, who was a Presidential candidate for the 2020 election, vowing to break up online giants such as Amazon, Meta, Apple and Google, if he were to become the most powerful person in the world. And let’s not forget former US President Donald Trump also asking for a break up of Big Tech, when Twitter and Meta, supposedly, took an “editorial” call to downplay unverified allegations about rival Presidential candidate Joseph Biden.
The search for competition
So, the worry exists. To become a monopoly and stay that way, behemoths acquired startups and employed practices that, to be polite, may fall within a grey zone.
Take the allegations against Amazon, for example. When third-party sellers on its platform were selling more products than those of the company, Amazon was allegedly belligerent, controlling their prices by offering certain conditions if those products were exclusively sold on its platform or penalising them if they offered better prices on competitor sites. It’s even been alleged that their algorithm is adjusted for their products to dominate searches and appear ahead of competitors.
There are concerns that anti-competitive practices curb and leash competition and innovation. The thinking is that regulators err on the side of caution through non-enforcement. There’s some kind of capitalistic notion that the market would correct itself and dominant incumbents would be disrupted by fledglings. That’s kind of what the free market is known for, right? Displacing and disciplining the status quo seemed to be the way to go. But, it seems like we’re being robbed of innovation and the promise of novelty that we may never actually get to experience. And some folks have had enough.
There was much fury and this led to the idea of bringing together a group of remarkable people and fighting the battles that we never could. That team, including Paytm founder Vijay Shekhar Sharma, Flipkart CEO Kalyan Krishnamurthy and OYO founder Ritesh Agarwal and more, recently met a parliamentary panel to discuss anti-competitive practices of global companies.
The Standing Committee on Finance was examining the digital economy to evaluate changes to competition law and take care of the issues that digital markets bring with them. Jayant Sinha, the chair of the committee, remarked “Digital markets operate differently from traditional markets, so the competition law also needs to be developed to address these needs.” Top execs from big tech, such as Twitter, Google, Meta and Amazon have been summoned by the parliamentary panel.
The Competition Commission of India (CCI), has probed e-commerce giants Flipkart and Amazon in the past for promoting specific sellers due to exclusive arrangements and special treatment by offering heavy discounts. Additionally, the antitrust watchdog has been told by startup founders that Google has an unfair advantage over its rivals, since phones with its OS are preloaded with the Play Store app distribution platform. Paytm founder Sarma was miffed about Google temporarily removing his app from its Play Store when it was running a scratch card-based cricket promotion, because it, allegedly, violated its gambling policies. This was unfair, argued the founder, especially since similar features were, supposedly, running on Google’s own payments app. One97 Communications President Madhur Deora remarked, “They have all the levers and can decide which app can be brought down and when. How is that not a problem?”
It’s also a great reminder of how Amazon and Reliance Jio are two sides of the same coin, which this columnist previously wrote about.
In June 2017, Amazon bought Whole Foods. The unexpected deal sent shares of several biggest grocers, including Walmart, down sharply. Kroger, another top grocer, lost one-tenth of its value on the day of the announcement. Call it the fear of being “Amazoned”, but its interest in expanding into a new business or even a half-baked mention of its plans has spooked investors in potential competitors.
Similarly, RIL has almost always wrested control in a market it has entered, mostly by financial muscle power and playing on economies of scale. It was telecom, which saw the industry roadmap getting rearranged when the company entered the sector with disruptive packages, which incumbents were forced to match—resulting in stiff losses, value erosion, mergers and even bankruptcies. Telecom companies, including Aircel, Telenor India, MTS, Tata Teleservices Ltd and Reliance Communications, part of the Anil Ambani-led Reliance Group, had to shut shop primarily due to the Jio effect, or got “Jio-ed” maybe. Remember the “Death by Amazon” index. Time for Death by Jio.
Is the monopolistic bug spreading?
That being said, while the overused allegory of David versus Goliath is in play, have the Davids relinquished their slingshots and, instead, armed themselves with machine guns? Have they become the very thing they set out to destroy? Are the new-age internet companies exhibiting anti-competitive behaviour by cartelising and hiking prices? Are they keeping consumer prices low or even free, using that strategy to assert dominance and then raise prices? Or just pure acquisition to kill competition?
In the last couple of years, CCI has ordered a probe into allegations of anti-competitive practices against food delivery companies such as Zomato and Swiggy for allegedly levying unilaterally determined commissions on restaurants. This would lead to entry barriers for new players, bundling of food ordering and delivery services without an option for restaurants to use their own delivery people and not being transparent with restaurants about customer detail.
Look at how prominent EdTech has become, even more so during the Covid-19 pandemic. Isn’t it fair to say that the kind of demand it had could have led to EdTech giants employing a strategy of “copy, acquire, kill” by indulging in a whole lot of acquisitions? Because that’s how BYJU’s is, kind of, gradually becoming a monopoly by making killer acquisitions, where nascent ventures are acquired and their projects are subsumed into the acquirer. There are terms like network effects, where the value of a product or service depends on how many users there are — so when BYJU’s acquires EdTech startups, its own brand value increases and markets tip, impeding competition.
There’s a section of the Competition Act 2002 that prohibits companies from utilising the position of market control to drive out equally competing ventures from the market. That dominance depends on whether BYJU’s falls within the confines of the relevant market. So, are the EdTech market and the status quo education market different markets or the same?
There have been cases, such as Snapdeal, where the CCI has concluded that online and offline markets are just different distribution channels and not separate markets. So, it’s a debate worth having — do new-age businesses, under the garb of disruption, qualify as a new market or are they a software update of the existing market?
That’s something that we’ve, collectively, learnt from the pandemic: we’re all in this together, but not really. There’s a pushing and shoving match to get to the front of the line and be as big as possible. The winner-take-all style of capitalism may have to be tempered to breed effective competition and innovation.
It’s an entrepreneur’s dream to have as much market share as possible and have as many people buy their products or services. But that ambition has to be checked, especially when it’s being fed by VC funding to grow at all costs, whatever it takes. Bulldozing anyone in the way seems to be a philosophy that has trickled down from Big Tech.
Dominant incumbents may not be going anywhere, but their measures and initiatives to tackle the competition may be looked at more closely through a magnifying glass. We are, now, seeing competition regulation become more inclusive in the face of robust growth in internet-led ventures. There’s the Competition Amendment Bill 2022 that’s set to give more teeth to the CCI. A revamp of the law seems to be warranted when there’s serious tech being injected into the interconnected market of the digital economy.
The over-quoted Harvey Specter from the TV show Suits once said, “You know who cries the hardest in the Miss America pageant? The winner. Because they know they can’t win and winners always want to win more”. Startups and unicorns have given us innovation and revolutionised much of what we do, even more so in the pandemic. But, somewhere down the line, they may have begun focusing on staying #1, rather than continuing to innovate. Going forward, the stranglehold may lose its power. Sweep the leg.
Shrija Agrawal is a business journalist who has covered startups and private capital markets before it was considered cool in India
The views expressed are personal
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