Implementation of some norms may perpetuate existing market dominance: CEA

Chief Economic Advisor said that implementation of certain regulations by regulators could perpetuate existing market dominance as he cited the data and privacy norms in the technology space

Chief Economic Advisor V Anantha Nageswaran on Friday said that implementation of certain regulations by regulators could perpetuate existing market dominance as he cited the data and privacy norms in the technology space.

Delivering the keynote address at a conference organised by the Competition Commission of India (CCI), he emphasised that while competition drives innovation, there is also a distinction between competition and free markets.

He pointed out that competition agencies must be mindful of the unintended consequences of their actions.

"In the technology space, regulators implement data and privacy norms that guarantee users complete access to their data. In such situations, users can end up chasing only the large players since they place a great degree of trust in them. This will ultimately lead to loss of competition across similar platforms, concentrating power in the hands of few.

"What we do with good intent, with public good in mind, can actually end up perpetuating existing dominance...," Nageswaran said.

At the National Conference on Economics of Competition Law, he also said that excess competition itself would be undesirable, including in sectors like banking, insurance and securities.

"Competition factors that make other sectors more attractive "can actually be a cause for systemic instability in these sectors", Nageswaran said, adding that regulators and competition agencies should keep an eye on systemic welfare or lack of it.

Banking and financial services sectors are subject to norms that promote competition among existing firms to keep interest rates fair and prevent market dominance by dominant institutions.

Regulators and competition agencies can work in setting up the framework to prevent creation of barriers in the markets. There is always competition between competition regulators, and firms and markets, he noted.

"Benefits bestowed on society as a product of competition forces are often conflated with the effects of the operations of the free market... it is important to distinguish between free markets and competition," he said and mentioned about certain sectors in the US market.

According to him, telecom, digital services, health and pharmaceuticals sectors in the US have all displayed a failure of the ability of free market enterprises to create a genuinely competitive setting as posited by theory.

CCI's Acting Chairperson Sangeeta Verma, Member Bhagwant Singh Bishnoi and National Law University Distinguished Professor M S Sahoo, among others were also present.