However, what's happening in the paint industry is more of an exception. Several of India's leading sectors, such as aviation, telecom, automobiles, cement, tyres, and media and entertainment have become oligopolistic over the years. As an industry grows and the large players grow larger, it is difficult for smaller (or weaker) players to keep pace with them in investment, tech adoption and management bandwidth. As a result, a few players end up commanding the bulk of the industry.
This market structure makes it vulnerable to collusion or cartelisation among sellers - either directly or indirectly - depriving the consumer of benefits accruing from price wars between players or healthy competition between them to roll out better products/services. The consumer hardly remains the king in an oligopolistic or a duopolistic market.
Take healthcare. The industry's ongoing consolidation, partly funded by private equity investment, has coincided with the country's rising medical inflation. Patients have not benefited from the consolidation in getting more affordable medical services. Instead, hospital chains, now bigger, are better placed to command a higher price from their patients.
Similar is the case of the aviation industry, where a handful of large players cater to the bulk of air passenger traffic, coinciding with a surge in airfares.
With its recent surge in M&A activity, the FMCG industry is also consolidating in a small way. Large FMCG companies are picking up stakes in direct-to-consumer (DTC) startups or buying out regional players in snacks and spices businesses. Cash-rich large companies find it easier to buy out their competition rather than compete with them in the marketplace.
It is not just consumers who bear the brunt of a consolidating industry. Other stakeholders, such as employees and suppliers, are impacted as their bargaining power is adversely impacted. Employees risk losing their jobs in the merged entity, and it may become unviable for small suppliers to do business on the tougher terms laid down by a large corporate client.
In her 2020 book, Break 'em Up, Zephyr Teachout highlights how the irresponsible business practices of monopoly businesses in the US drive economic inequality, wage disparity and the 'chickenisation' of the American middle class. Teachout makes a compelling case for reining in the growing clout of monopoly businesses across different sectors, such as technology, agriculture or finance, by breaking them up.
In India, former RBI deputy governor Viral Acharya mooted a similar idea last year. In a paper presented at Brookings Institution, he suggested, among other things, that the top five Indian conglomerates - Reliance, Tata, Aditya Birla, Adani and Bharti Telecom - should be dismantled as their market dominance could be responsible for keeping core inflation persistently at a high level.
While the unorganised sector is getting organised and the formalisation of the economy is underway at a steady clip, care must be taken to ensure that not a few business groups end up being the biggest beneficiaries of this shift.
Sectors such as pharma and banking in India have shown how consumers benefit and pay low costs when the industry has many players, ensuring the share of the market leader is not high. For instance, Sun Pharma, India's largest pharma company, has a market share of over 8%. It isn't coincidental that drug costs in India are among the lowest in the world.
Similarly, the banking sector has dozens of banks, ensuring accessibility and affordability. Unsurprisingly, RBI has not allowed corporate houses to own banks. Of course, a sizeable fragmented market calls for more scrutiny from the regulator to oversee many small players rather than a small number of large players. However, the benefits accruing to the consumers far outweigh the regulatory hassles involved.
As consolidation is underway across sectors, CCI's role becomes critical in shaping how big businesses become bigger, especially when addressing complaints against global tech giants.
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