Who protects us from monopolies?


India is witnessing a sea change in the way it does business. There is no more evidence of this than in the aviation sector. Whereas government owned Indian Airlines (IA) and Air India (AI) used to enjoy monopolies, this is no longer the case. Competition has come and brought in its wake a completely changed scenario.

Jet and Sahara are India’s two premier airlines occupying between them 45 per cent of the market. Jet has 33 per cent, and Sahara 12 per cent. Now, Jet is swallowing Sahara. There has been a mega deal between the two airlines involving the buyout of Sahara by Jet.

This deal has led to allegations of a monopoly getting vested with Jet. The government is saying that the deal will come under close scrutiny, and will be allowed only if it is not anti-consumer. Is government intervention justified? Is there a da-nger of Jet becoming a monopoly? Before we answer this, let’s ask the government;

• Where were you when IA and AI enjoyed monopoly domestically and internationally respectively for four decades after independence?

• Was monopoly your concern when you decried that only government can run airports, and duty-free shops?

• Did you bother about the public when government had a monopoly over broadcasting on radio and TV? All India Radio and Doordarshan, did not have to compete in the market place. Why?

• Where is your concern about the people, when the railways – an inefficient, and corrupt organisation with the worst record in the world for traveller’s safety – is still run as a government monopoly?”

• Did you care how much people had to pay extra because the government run monopoly, MMTC, was given exclusive rights to import metals, minerals and other goods?

• Did you care how the consumers suffered because the government exclusively ran the phone system for decades?

• Have you seen the infrastructure bottlenecks caused by government monopoly organisations providing electricity, road, and port facilities?

Granted that government is the reason for monopoly, is it also possible that monopolies form in the private sector if government doesn’t intervene? No. Monopolies happen only by government granted special privileges. In the marketplace competition rules, and the consumer always has a choice.

Coming back to Jet and Sahara. It is true that Jet and Sahara combined will have a greater market share. This does not make it a monopoly and is no cause for concern. Indian skies are full of competing airlines. Besides IA, there is Kingfisher, Air Deccan, Go Air, and Spice Jet to name a few. India could get even more competition. Again, it is the government which did not allow foreign airlines to come in. A collaboration between the world class Singapore International Airlines and the Tata Group was halted by it. The way to promote competition is to let any airline which wants to serve the customer do so.

Is it legitimate to stop mergers? No. It is upto companies to decide their future? Company’s shareholders, management and founders have that right not the government. An airline which stops operating or goes bankrupt does not serve any public purpose. Consider Air Nepal. Having lost money it is grounded, awaiting a fresh injection of funds. Does it help the Nepali traveler? Would it not have been better if it had merged with a bigger, stronger company?

In the face of worldwide competition, it is irrelevant which company merges with which, or who acquires whom. Daimler, the German maker of the Mercedes Benz, acquired US’s Chrysler. Far from creating a monopoly, the merger destroyed value. The combined Daimler-Chrysler became worth less than what Daimler alone was worth. It is Toyota which is dominant in the world markets.

The government should not intervene in business decisions. It is private shareholders money at risk, and even if they are wrong, it is their right. Just like you and I have a right over our money — including to spend it wastefully — so do companies have a right to buy others or sell themselves without third party interference.

The government policy should be strictly hands-off since it itself is the biggest source of monopoly power. For ending monopolies the government of Nepal must sell its undertakings, allow competition in all sectors, permit foreign investment and duty free trade.

(The writer can be contacted at: everest@mos.com.np)