The implementation of certain standards could perpetuate an existing market dominance: CEA

Chief Economic Advisor V Anantha Nageswaran said Friday that regulators’ implementation of certain rules could maintain existing market dominance as he cited data and privacy standards in the technology space.

Speaking at a conference organized by the Competition Commission of India (CCI), he emphasized that while competition drives innovation, there is a difference between competition and free markets.

He pointed out that competition authorities need to consider the unintended consequences of their actions.

“In the technology space, regulators are implementing data and privacy standards that guarantee users full access to their data. In such situations, users can only end up chasing the big players as they place a high level of trust in them. This will ultimately lead to loss of competition on similar platforms, concentration of power in the hands of few.

“What we do with good intentions and for the common good can actually lead to maintaining the existing dominance…” said Nageswaran.

prevent instability

He also said at the National Conference on Economics of Competition Law that excessive competition is inherently undesirable, including in sectors such as banking, insurance and securities.

“Competitive factors that make other sectors more attractive “may actually be a reason for systemic instability in those sectors,” Nageswaran said, adding that regulators and competition authorities should keep an eye on systemic welfare, or lack thereof.

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The banking and financial services sector is subject to norms that encourage competition between existing companies to keep interest rates fair and prevent market dominance by dominant institutions.

Regulators and competition authorities can work to create the framework to prevent barriers from emerging in the markets. There is always competition between competition authorities, companies and markets, he noted.

“Advantages accruing to society as a product of competitive forces are often confused with the effects of free market operations…it is important to distinguish between free markets and competition,” he said, mentioning specific sectors in the US market.

According to him, the US telecommunications, digital services, healthcare and pharmaceutical sectors have all demonstrated a failure in the ability of free market firms to create a truly competitive environment, as the theory posits.

Also present were CCI Acting Chair Sangeeta Verma, Member Bhagwant Singh Bishnoi and Distinguished National Law University Professor MS Sahoo, among others.