The monopoly of big tech has become a big issue with firms like Google, Apple, Meta, and Amazon having frequent run-ins with regulators in the European Union, US, and even India.
Last week, a US judge ruled that Google violated antitrust law, spending billions of dollars to create an illegal monopoly and become the world’s default search engine.
Prior to this, the US department of justice and 15 states had sued Apple for monopolising the smartphone market, hurting smaller rivals, and driving up prices. The lawsuit has accused the company of blocking rivals from accessing hardware and software features on its devices.
In India, the ministry of corporate affairs-led committee has recommended an ex-ante regulatory framework for digital platforms. Earlier, the Competition Commission of India had passed strictures against Google, and is still to pronounce its order against Apple in a similar case.
It is not only the big tech firms against which several start-ups have flagged monopolistic practices; in sectors such as telecom and civil aviation, apprehensions have been expressed about an emerging duopoly which could harm consumer interest.
But are monopoly and duopoly really that bad as is being flagged by several critics, experts, and regulators, be it in India or abroad? The answer is not that easy.
Before delving into the issue, it’s important to distinguish between two kinds of monopoly or duopoly — one that is state-induced, and the other that is born as a result of competition and innovation. The one that is state-promoted by restricting competition, giving protection to one or few players, is bad for the country and consumers. The monopoly of state-run television channel Doordarshan, state-provided telecom services, or Air India and Indian Airlines were rightly checked and discarded.
Similarly, the duopoly of Hindustan Motors and Premier Automobiles pre-1984 did no good to anyone. We can cite numerous examples across sectors until the 1991 liberalisation happened.
However, Google, Apple, Meta, or Amazon are not state-promoted, protected monopolies. They are all products of innovation and competition.
In fact, they continue to innovate and compete fiercely to stay ahead. For example, with competition emerging from MapmyIndia and Ola Maps, Google recently added new features in India to guide users on approaching flyovers and avoiding narrow lanes. Apple fights hard with Samsung to stay ahead in the mobile devices market.
A whole bunch of start-ups in the e-commerce space are challenging Amazon’s clout.
Let’s look at instances of fear of duopolies in India. It is said that with Jio and Bharti Airtel a duopoly will emerge who would raise tariffs, leaving consumers at their mercy. With the merger of various Tata Group-owned airlines, it’s feared that along with IndiGo, which has nearly 60% share, two airlines will dominate the market and control fares.
Do such fears have a basis? Not really. In telecom, before the arrival of Jio it was feared that Bharti and Vodafone operate in a cartel which the regulators need to break. But the two competed fiercely and despite Bharti being the bigger player, Vodafone had a larger share of premium and post-paid users.
With the entry of Jio, a new player became the leader based on innovation. Today duopoly fears may be expressed over Jio and Bharti, but the fact is that competition between the two often delays any tariff hike.
In civil aviation, before IndiGo it was Jet Airways which ruled the sky. It was joined by Kingfisher Airlines and for a while the two controlled the market. Still, a new entrant, IndiGo, changed the rules of the game. Today, both Jet and Kingfisher are dead, enough to assure us that a merged Air India and IndiGo would continue to compete fiercely.
Why is it that monopolies or duopolies born out of competition have a different trajectory than the state-promoted and protected ones? The answer is simple: the latter were inefficient, did not care about consumers, and most importantly had zero innovation. The moment the market opened to competition their dominance became history as consumers abandoned them.
Regulators may charge Google and Apple with monopolistic practices but do consumers feel the same? It doesn’t seem so. Consumers continue to swear by Google’s search engine and Apple’s products. Then who has problems with them? It’s emerging firms who have to operate in the ecosystem which is controlled by the big tech firms. The grievances may be genuine, yet challengers emerge. Generative artificial intelligence is dominated not by Google but OpenAI.
If home-grown MapmyIndia keeps Google on its toes, it means it has potential to be a challenger. There is an element of creative destruction in market-based economies that checks monopolies or duopolies.
Economist Friedrich Hayek was not disturbed by monopolies as he batted for free markets. He was only troubled if a monopolist had a capacity to withhold services that people were dependent on. The ability of a monopolist to set a price for essential products did not concern him. What needed to be checked, according to him, was different terms for different customers.
He explained that if a company was so efficient in producing ball bearings that it drove out competitors, it would not be a problem so long as it supplied to all seekers on the same terms.
Big tech firms pass the Hayek test. The lesson is straightforward: Regulate dominant firms but do not go overboard.
It makes sense to focus on specific pain points and address them rather than unbundle firms like Google as US authorities are suggesting, or have ex-ante regulations as India is envisaging.