There are a number of consumer-centric industries in India that have developed into duopolies. 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 this by empowering new entrants rather than laying constraints on incumbent giants. An emerging yet effective tool towards this is the Open Network for Digital Commerce, or ONDC.
Formal duopolies–where two companies control all of the supply in a market–won’t be created thanks to the vigilance of the Competition Commission of India. However, there are industries such as transport, telecom, e-commerce, and other highly consumer-focussed sectors where two companies are currently acquiring overwhelming market share.
This is not unexpected. Indeed, it’s not even unwelcome. India needs big companies in each sector. This is why the government’s approach — to empower other, smaller entrants rather than clip the wings of the giants — is a welcome one.
Two of the 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 sectors where the government has indirectly created a mechanism to break the dominance of the two incumbents.
The ONDC platform, set up in December last year by the Ministry of Commerce and Industry, allows sellers and buyers to directly communicate with each other. Recently, ONDC has been creating waves by gradually emerging as an alternative to Swiggy and Zomato in the food delivery space.
The dominance of these two food delivery apps, and the fact that they use their own delivery drivers, has allowed them to impose high commissions on restaurants using their platforms, something that the restaurant owners have been protesting against. And while several restaurants in India’s metros opted out of these platforms, they eventually returned for the extensive reach and accessibility offered by these two platforms.
ONDC, although still nascent, can be a potential alternative for restaurants in bypassing the food delivery apps. Restaurants will have to organise their own delivery, but the ONDC facilitates this as well. And the restaurants are free to negotiate better deals with companies like Dunzo, Shiprocket, or Loadshare that can deliver the food for them. If this takes off, it could also increase competition in the delivery space as well, further allowing restaurants to negotiate more effectively. In all of this, customers stand to benefit.
The ONDC platform stands to do the same for the e-commerce space as well. At the moment, a consumer looking for a product on Amazon or Flipkart can choose from only those items that are available on these platforms. Once ONDC is adopted widely, consumers will have access to products across platforms, thereby giving them more choice in terms of products as well as prices.
Amazon and Flipkart haven’t signed on to ONDC yet, but there is considerable unofficial pressure from the government to join.
Also read: Next big thing in food delivery or ‘over-hyped’? All about Modi govt’s ONDC e-commerce initiative
A road to democratisation
While the government has only laid the groundwork for increased competition in food delivery and e-commerce sectors, without entering the market itself, for smartphone operating systems, it is taking a somewhat more direct approach.
At the moment, the dominance of Apple’s iOS platform and Google’s Android OS is nearly absolute. This has allowed them to set the terms of the agreement with app developers. In October last year, the Competition Commission of India ordered Google to allow users to delete pre-installed apps, revealing a major way Google was stifling competition.
Now, a new ‘indigenous’ mobile operating system, BharOS, has been developed by JandK Operations Private Limited (JandKops), a non-profit organisation incubated at IIT Madras. While the government wasn’t directly involved in the development of BharOS, its support is evident in the fact that Union Ministers Ashwini Vaishnaw and Dharmendra Pradhan launched the mobile operating system and have been vocal cheerleaders.
Although Bharat OS is based on Android, it incorporates features that increase competition among app developers and provide consumers with more choice. In BharOS, no apps will be pre-loaded, allowing consumers to download exactly the ones they want, and allowing app developers to thus compete on a level-playing field.
It will be a mammoth task to make inroads into either Google’s or Apple’s market shares, but it’s good to see the government trying nevertheless.
If you want to see even more direct government involvement in increasing competition in a sector, look no further than telecom. The merger of Vodafone and Idea was meant to create a behemoth that could hold its own against Reliance Jio and Bharti Airtel. This did not come to pass.
Instead, Vodafone Idea came close to bankruptcy, and has survived only because the government agreed to convert its dues into equity. In essence, the government secured the survival of the telecom industry’s sole viable third player by acquiring a one-third stake in it.
The government’s overall approach is right. Rather than exerting control through the Competition Commission of India and thereby deterring companies from doing business and expanding, the government has instead taken a more light-touch approach by creating an environment that fosters competition.
For example, there are a few other sectors where duopolies are emerging, but where the government won’t take action, and rightly so. In civil aviation, the combined market share of Indigo and the Tata-owned airlines came to a little more than 80 per cent in the January-March 2023 quarter. Given Go First’s current troubles, this combined market share will likely increase further soon. The only way the government can address this is by entering the aviation sector once again, a laughable notion given how desperate it was to exit it.
When it comes to ride-hailing apps, Uber and Ola are similarly dominant. Here, too, it’s highly unlikely the government will do anything to break this hold. Consumers’ hopes lie with newer entrants like BluSmart, which has gained from the government’s renewable energy push.
And this is how it should be. This approach fosters competition by reducing entry barriers and creating new opportunities rather than curtailing the legally dominant players. This increases the size of the pie instead of simply redistributing the slices.
The author tweets @SharadRaghavan. Views are personal.
(Edited by Prashant)
To read the opinion piece in Hindi, click here.