A news item—which may have been lost in the avalanche of various political, corporate and social fribbles that commonly flood the newspapers—is the announcement by Google that Android users have options to use search engines other than Google and that manufacturers of mobile phones would have the liberty to use/licence individual Google apps for installation on mobile phones.
The above notification by Google is the outcome of its losing very recently, before the Supreme Court (SC), its prayer to stay the order of the National Company Law Tribunal (NCLT) issued in October 2022, which had categorically held that the practice whereby Google mandated the use of all its apps and the search engine as a bundled application if a mobile manufacturer adopted Android operating system to power the instrument, was anti-competitive in nature.
The order of the SC is quite momentous and represents a significant milestone for the Competition Commission of India (CCI) in its endeavour to check the mind-boggling market dominance enjoyed by the company in the mobile phone software market.
The case of CCI was forcefully canvassed by a team of lawyers ably led by the additional solicitor general (ASG) N Venkataraman. In the absence of a stay, Google is compelled to implement the order of CCI directing immediate amendment of all the one-sided contracts with the mobile manufacturers resulting in a fait accompli situation, though the main appeal against the CCI order is still alive!
It is somewhat unlikely that the situation can be reversed even if Google finally succeeds as, in the interregnum, before the case is finally heard and disposed, significant competition in all the domain areas where Google existed as a monopoly can emerge and change the market dynamics.
The door has been opened successfully by the arguments of the ASG for new entrants to get a foot in and different competing products will vie for the attention of the consumers which hitherto were excluded from consideration by the nature of contracts Google had with the phone manufacturers.
Monopoly and market domination are nothing new and have been a feature of all economic systems since the industrial revolution. America, which perhaps represented the first formal free economic system beginning in the 18th century, was the home to the famous 'robber barons' like the Rockefellers, Vanderbilts, JP Morgan, Carnegie, George Pullman and many more.
In these cases, the entities controlled the critical economic resources of those times, being oil, steel, minerals, shipping, railroad and most vitally, finance and banking.
Such domination and accumulation of wealth are not achieved by enterprise alone. It takes unholy political connections, indiscriminate exploitation of natural resources, bending the laws to find convenient escape routes, subsidies and government support, etc. to achieve the size and scale that many of these enterprises did. The exploitation of labour, including the employment of slave labour, was equally a factor in this sordid saga.
The situation was no different in other markets and systems, and the emergence of Marxist-communist complexes in certain parts of the world led to a different type of State monopolies that a few privileged politicians and their cronies exploited to the hilt.
Japan, both under a monarchical system and later in a democratic format, had its 'zaibatsu' and 'keiretsu' format of a few business families dominating the entire spectrum of economic activity which combined political nexus and emerged into a hotbed of crony capitalism. Korea followed with its 'chaebols'.
India invented its distinct model of the heady nexus of 'lala, jhola, babu, neta , dada aur panch' (N Vittal, former central vigilance commissioner had coined this phrase.)
The business thrives if the right equation is struck with the politician and the bureaucrat, with the help of the right middlemen and strong-men, and an accommodating legal system!
The licence era pre-1991 was perfectly designed to achieve the outcome of inefficient private monopolies unhindered by the more inefficient public monopolies!
Since 1991, starting a business needs no government approval. Yet with the governments, both the Union and the states, being the major spenders both on revenue and capital, playing favourites through preferential contracts, pointed changes in tax, customs and trade laws to help an identified business and, more recently, schemes like the production linked incentive grants, create a strong political and bureaucratic bias to support and help business.
What nourishes the favourites is the easy availability of capital through the State-owned banks to privileged borrowers as seen in the humongous write-offs in the recent years, and a facilitative environment to recycle the black and unaccounted money back into business, with the crypto electoral funding method operating as a strong foil.
The emergence of monopolies in India is no more a fictional fear but a grim reality, going by the statistics and the data on the concentration of wealth and resources.
At a time when much of the country was reeling under the loss of employment, destitute migrant labour moving in lakhs on the roads, and tens of millions surviving hand-to-mouth and on free government rations, the number of dollar billionaires increased from 102 in the year 2020 to 166 in 2022, a staggering 65% jump!
The richest 100 Indians have a wealth of Rs54.22trn (trillion), and the top-10, almost half of that, creating an invidious sub-set of 10 billionaires, who would be the envy of the other (poorer) 90!
During the same period of FY19-20 to FY21-22, the gross domestic product (GDP) grew to Rs232trn (nil %) from Rs230trn and the corporate tax collections to Rs6.35trn (14%) from Rs5.57trn. The indirect taxes of goods and service tax (GST), customs and central excise which, typically, cuts across the poor and the rich with no distinction, moved to Rs12.58trn (32.7%) from Rs9.48trn. In a sense, the high indirect taxes constitute an effective transfer of wealth from the poor to the rich.
Government policies over time may have helped in preventing a large mass from falling into abject poverty. Schemes like providing cooking gas, piped drinking water and some element of health cover for the poor are noteworthy. The free rations have helped prevent mass hunger and possible deaths due to a lack of food. However, insufficient data exists in the public domain on the extent of improvement in the overall well-being of the poorest 25% of the population who are still said to be living below the poverty line.
As shown in one of my previous articles, the corporate tax collections have trended lower in the past four years even after making allowance for the COVID-related loss of output, indicating a clear bias in the system for lower taxes and betting on higher investment and employment creation. Empirical evidence is absent of the effect of such measures to achieve the said objectives.
Effective measures to achieve proper transfer and better distribution of societal resources are key to achieving more sustainable and equitable growth in the coming years. In that respect, all distortions that enable the accumulation of wealth and economic power in a few hands should be dismantled.
Domestic monopolies are no better than foreign ones. At least the foreign monopolies get easily noticed as the regulatory framework in Europe and America is better designed for quicker action as happened in Google's case itself.
Atmanirbhar Bharat should not become an excuse to promote crony capitalism but should keep the fostering of competition and the encouraging of small enterprises at its core. Due vigilance, whether tax concessions and other incentives involving the transfer of government resources, is helping create a more equitable society.
To make the Republic stronger and vibrant, discouraging monopolistic and exclusionist attitudes not only in business but equally in politics, is essential. Governance and social structures should be the common commitment.
(Ranganathan V is a CA and CS. He has over 43 years of experience in the corporate sector and in consultancy. For 17 years he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)