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Tuesday, October 27, 2020

Ensure fair play

Google vs Paytm lays out the challenge: Competition policy should safeguard competition, not particular competitors.

By: Editorial | Updated: October 9, 2020 8:48:42 am
repo rate, indian economy, rbi, reserve bank of india, mpc covid 19, coronavirus impact on economy, indian expressAlongside, the RBI announced a slew of measures aimed at ensuring smooth passage of the enhanced borrowing programme of both the Centre and states, reducing the volatility in interest rates, and easing the flow of funds to different segments in the economy.

Over the past few weeks, founders of Indian start-ups have begun to rally against the dominance of US tech companies such as Google in the Indian market. The immediate provocation was Google’s decision to levy a 30 per cent commission for all in-app purchases of digital goods in its near ubiquitous app system. Notwithstanding Google’s assertion that less than 3 per cent of the developers had sold digital goods over the last year, and of these nearly 97 per cent were already paying the fee, the move triggered outrage across the broader start-up ecosystem in India. Paytm launched its own app store to compete with Google’s Play Store. While Google has subsequently deferred its plan, these developments raise several tricky issues.

A recent report by the US House of Representative has said that Amazon, Apple, Google and Facebook have exercised and abused their monopoly power, with US lawmakers saying that these companies “had abused their dominant positions, setting and often dictating prices and rules for commerce, search, advertising, social networking and publishing.” In India, the smartphone market is dominated by Google’s Android platform. This places it in a unique position to dictate terms. Its products, such as Google Pay, are also in direct competition with Indian firms such as Paytm. Thus there are legitimate concerns over possible conflict of interest and abuse of its dominant market position. The fundamental question is: Has Google abused its market dominance? Are there barriers to entry? Is competition being thwarted? And what should be the deterrents to ensure that Google does not favour its own companies?

It must also be pointed out that this is not a licence-driven monopoly, but one driven by network effects. However, while barriers to entry may not exist, it is difficult for new players to enter, and grab market share, simply because there is not much space for multiple networks. But couching this debate in terms of self-reliance or Atmanirbharta, or erecting barriers or intervening to put in place price caps on commissions is not the answer. Policy should be driven by the principle of protecting competition, not competitors.

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