Digital Giants Need A Code Of Conduct

Monopolies are not per se bad in the digital arena. Rather, stakeholders should commit firms to adopt ethical practices

- V Sridhar/udai Mehta

December 5, 2019 was the 39th anniversary of the adoption of the United Nations Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices by the UN General Assembly. These later encouraged and guided countries across the world to develop their own competition policy and law.

India enacted its Competition Act in 2002 and set up the Competition Commission of India (CCI) in 2003. The commonly held view is that competition is the most effective market structure to ensure low prices and high quality for the benefit of the consumers. However, in industries such as landline telecom services and electricity distribution, economies of scale and scope are large enough to warrant low levels of competition, even monopolies. The economists held forth the view of having a “natural monopoly” in landline telecom service even in the US until competition was introduced through Telecommunications Act 1996.

Monopolistic behaviour

The same conundrum of whether competition is required — and if so, how much — haunts regulators worldwide in the case of digital platforms as well. Digital platforms are characterised by network effects, that result in near-monopolies in most cases. As per the United Nations Conference on Trade and Development (UNCTAD), the top 10 global companies by market capitalisation in 2009 included only one technology company and three oil and gas companies; however, in 2018, the list included five technology companies and two consumer services companies (Amazon and Alibaba), which are large online marketplaces. The list also included Facebook and Google, who are both the dominant players in their relevant markets.