TeaHere in India there are many consumer-oriented industries which have developed into monopolies. In many of them, the government is directly or indirectly breaking the hold of the top two companies. What is even more welcome is that it is doing so by empowering new entrants rather than banning existing stalwarts. An emerging but effective tool for this is the Open Network for Digital Commerce or ONDC.
Formal monopolies—where two companies control all supply in a market—won’t be created thanks to the vigilance of the Competition Commission of India. However, there are industries such as transportation, telecommunications, e-commerce, and other highly consumer-oriented sectors where the two companies are currently garnering huge market share.
This is not unexpected. In fact, it’s not even unwanted. India needs big companies in every field. This is why the government’s approach – to empower other, smaller entrants instead of clipping the wings of the giants – is a welcome one.
The two most visible sectors as far as customers are concerned are food delivery and e-commerce. While Swiggy and Zomato dominate the former, Amazon and Flipkart rule the latter. Food delivery and e-commerce are prime examples of such sectors where the government has indirectly created a mechanism to break the dominance of the two incumbents.
The ONDC platform, set up by the Ministry of Commerce and Industry in December last year, allows sellers and buyers to communicate directly with each other. Lately, ONDC is creating waves in the food delivery sector by slowly emerging as an alternative to Swiggy and Zomato.
The dominance of these two food delivery apps, and the fact that they use their own delivery drivers, has allowed them to charge higher commissions on restaurants that use their platforms, which restaurant owners are protesting. And while many restaurants in India’s metros exited these platforms, they eventually returned thanks to the wide reach and accessibility provided by these two platforms.
ONDC, although still nascent, could be a potential option for restaurants looking to bypass food delivery apps. Restaurants will have to do their own delivery, but ONDC also facilitates this. And restaurants are free to strike better deals with companies like Dunzo, Shiprocket, or Loadshare that can deliver food for them. If it takes off, it could also increase competition in the delivery space, allowing restaurants to negotiate more effectively. All this benefits the customers.
The ONDC platform does the same for the e-commerce space. At present, a consumer looking for a product on Amazon or Flipkart can only choose from items that are available on these platforms. Once ONDC is widely adopted, consumers will have access to products on the platform, giving them more choice in terms of products as well as prices.
Amazon and Flipkart are yet to sign the ONDC, but there is considerable informal pressure from the government to join.
path to democratization
While the government has laid the groundwork for growing competition in the food delivery and e-commerce sectors without entering the market for smartphone operating systems alone, it is taking a somewhat more direct approach.
At the moment, the dominance of Apple’s iOS platform and Google’s Android OS is almost absolute. This has allowed them to dictate terms of agreement with app developers. In October last year, the Competition Commission of India ordered Google to allow users to remove pre-installed apps, which revealed that Google was competing against it in a major way.
Now, a new ‘indigenous’ mobile operating system, Bharos, has been developed by JandK Operations Pvt Ltd (JandKops), a non-profit organization established at IIT Madras. While the government was not directly involved in the development of the trust, its support is evident from the fact that Union ministers Ashwini Vaishnav and Dharmendra Pradhan launched There have been mobile operating systems and vocal cheerleaders.
Although Bharat OS is based on Android, it includes features that increase competition among app developers and provide more options to consumers. In trust, no apps will be pre-loaded, allowing consumers to download exactly what they want, and thus allowing app developers to compete on a level playing field.
Making inroads into the market shares of Google or Apple would be a mammoth task, but it’s good to see the government trying nonetheless.
If you want to see even more direct government involvement in the growing competition in any sector, look no further than telecommunications. The merger of Vodafone and Idea was meant to create a behemoth that could hold its own against Reliance Jio and Bharti Airtel. It did not happen.
Instead, Vodafone Idea came close to bankruptcy, and was saved only because the government agreed to convert its dues into equity. In short, the government secured the existence of the only viable third player in the telecom industry by acquiring a one-third stake in it.
The overall approach of the government is correct. Instead of imposing controls through the Competition Commission of India and thereby preventing companies from doing business and expanding, the government has taken a more lax approach by creating an environment that promotes competition.
For example, there are other areas where dichotomies are emerging, but where the government will not act, and rightly so. In civil aviation, the combined market share of IndiGo and Tata-owned airlines rose to a little over 80 per cent in the January-March 2023 quarter. go first current problems, this combined market share is likely to increase further soon. The only way the government can address this is to re-enter the aviation sector, a ridiculous assumption given how desperate it was to get out.
When it comes to ride-hailing apps, Uber and Ola are equally effective. Here too, there is little chance that the government will do anything to break the hold. Consumer hopes are pinned on new entrants such as BlueSmart, who have benefited from the government’s renewable energy incentives.
And so it should be. This approach promotes competition by reducing entry barriers and creating new opportunities, rather than legally eliminating dominant players. It simply increases the size of the pie rather than redistributing the slices.
The author tweets to @SharadRaghavan. Thoughts are personal.
(Edited by Prashant)