Swadeshi Jagran Manch has recently initiated a campaign against ‘Amazon’ and appealed for its boycott in India. Writes Shrijeet Phadke
Swadeshi Jagran Manch has recently initiated a campaign against ‘Amazon’ and appealed for its boycott in India. The reason behind it was alleged bribing by ‘Amazon India’ officials and their associates. However, this is not a standalone reason for ‘boycott amazon’. Some media reports are doing the rounds that Amazon India is making small and medium businesses skate on thin ice by following unethical practices in the market. The noteworthy point is that the world is rising against the imbalance in the concentration of wealth.
Amazon and other big gun tech companies are confronted with criticism in their backyard US for pouncing on and neutralizing small and medium scale businesses and availing public data for personal gains. A new debate has come up advocating a break into the dominance of actors in the market arena, who are reducing the free and fair competition to laughingstock.
All over the world, antitrust and anti-competitive laws and regulations play a role in controlling the free and fair market in the respective nation. However, these laws have limitations because the entire thrust is on the market, socio-political and cultural influence these big corporates exerts in the country are beyond the competition commissions. Therefore, far more holistic and exhaustive remedies are required to deal with this problem rather than simply throwing eggs in the basket of competition legislation.
Indian market is also facing the same threat not only from foreign players, but from Indian business houses as well. While India is dreaming of a $5 trillion economy globally, our few business houses have struck $596 billion that is more than half a trillion dollars pushing for lopsided growth. Last year, when COVID-19 was at its furious best and forced the closure of several small and medium scale industries in India, the number of billionaires increased from 102 to 140. This is against the grain of the start-up Indian government policy, aiming to promote and empower small and medium scale businesses.
Commonly, it is believed that the Competition Act 2002 is endowed with a sufficient power to deal with distortions in the market, but the visible shortcoming of the Competition Act in India is that it can throttle different combinations if they are anti-competitive, but it fails to prevent any company from thriving colossal on her strength. A glaring example is Reliance Jio, when it was a new entrant in the market. Jio offered a slew of freebies such as free voice, mobile data and roaming services, music and video streaming to customers to capture a telecom market in India. This was challenged before the Competition Commission of India by two informants, C. Shanmugam and Manish Gandhi. The commission came with the ruling favouring Reliance for not enjoying a dominant position in the market since Jio had only 6.4% of the market share. By posting a startling leapfrog in 5 years, the same Jio now concentrates around 35% of the telecom market in India. Therefore, without blowing out of proportion, it may be concluded that Jio is bound to become the dominant player in the telecom market. In that scenario, the Competition Act is devoid of any remedy to reduce Jio’s dominance. Supreme Court of America Justice Louis Brandeis, the antitrust crusader who coined the phrase the “curse of bigness,” once remarked that deep discounts are “the most potent weapon of monopoly—a means of killing the small rival to which the great trusts have resorted most frequently.” Therefore, the time has come to apply a mechanism to split potential companies into smaller companies.
The dominant position is abstrusely defined under the Competition Act 2002, which has left the decision of declaring any entity dominant in the market to the mercy of commission members. The amendment is necessary for the competition law to prescribe ‘market share test’ like other jurisdictions such as South Africa, where over 45 per cent market share is considered dominant. Whereas, in Israel, over 50 per cent market share is considered dominant. The loopholes in the competition law in our country is fomenting a dominance in the market for the players who have tremendous loss bearing capacity against the smaller ones.
In economics, the incentive is the driving force for any change in society. Now compare the incentives these large companies create for the common person being an employer or partner against the government, which is always perceived as corrupt, inefficient, coercive for her power to collect a tax and enforce the law. Hence, the natural inclination of a common individual is towards companies that pay him to earn his bread and butter. In such a case, big corporates are in the position to skew the policymaking. At the other end of the spectrum, small and medium businesses are limited in exerting their influence, despite being a significant market contributor in terms of revenue and employment. Their power to challenge government policymaking is limited. Thus, they could be termed as the least threat to democracy and a free & fair market.
Contemporarily, the government is concentrating all its energy against foreign multinationals and their associates in India because the clutch of revenue they generate in India is flown back to a foreign land where these companies have their origin. But the government should not discriminate between the domestic and foreign companies as its role is limited in the market mechanism. Intervention by the government is welcome only at the time of market failure, and that too is expected to be even-handed. However, we are witnessing a very different scene in India. Regional corporates enjoy freehand play, though the strategies they devise are the same as those of foreign conglomerates. This ‘ours v their’ game compromises the fundamentals of a free and fair market.
After 2008, when the financial crisis grappled the world, all big corporates learned that no government in the world would allow them to fail. A new trend developed thereafter to gorge the high amount of loans from the market and invest them in high-end projects. If a company fails to honour its commitment, the government would be forced to bail it out to avoid snowball effects in the economy. Small and medium scale businesses pose no threat like this. But they are adversely impacted because of the artificial scarcity of capital generated by these big corporates in the market because of the indiscreet concentration of capital in their hands.
The value and expanse of the Indian market is numero uno in the world.
Resultantly, the exploitative forces gravitate towards it from all directions. Therefore, the government must think on par like US or Europe regarding huge companies. AT&T, an American telecom company, had a monopoly in the sector, and it was broken into six small companies. On Dec. 9, prosecutors from the US Federal Trade Commission (FTC) and over 40 states did something unusual. They asked the court to break up Facebook in no uncertain terms. Among its proposed remedies, the FTC complaint lists the “divestiture or reconstruction of businesses (including, but not limited to, Instagram and/or WhatsApp).” It is a distant dream and chequered path for US authorities to divest or reconstruct Facebook or other tech leaders. However, a serious mulling is ongoing to split the corporates unduly wielding power in a market.
Indian picture is not rosy. Few giant companies are making inroads in every profitable sector. They can challenge government authority, scuttle policymaking and drag on-court matters for years. Policymakers should consider downsizing these companies to protect small and medium scale industries and ensure equitable market conditions. A wider debate is necessary for suggesting measures to stop Indian corporates from following their US peers. It is better to light a candle at the proper time than curse the darkness.
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