This is the 1st part of a short explainer article series on the current crisis in Yemen.
Since 2015, Yemen has been at war on two different fronts, 1) The Civil War between the Iran-backed Houthi rebels and the UAE-Saudi Arabia backed government headed by Abdrabbuh Mansur Hadi, and 2) the war against the local terrorist outfits of Al-Qaeda and ISIS.
However, last year one more complexity was added to the conflict when UAE withdrew from the coalition backing Hadi government and later threw its support behind another secessionist force in southern Yemen, which seeks to re-create the State of South Yemen, as it was before the unification of Yemen in 1990.
As of early this year, it has added another layer to the war: the failing healthcare infrastructure and the rise of COVID-19.
The staggering cost of this war in the past five years has prompted the UN to name it the worst man-made humanitarian crisis in history, with Some 24 million Yemeni people - 80 percent of the country's population - requiring assistance or protection.
This series of articles seeks to build historical context to follow the current events in Yemen, believing much of the recent media coverage to have been ignored, or otherwise made wholly uncontextualized in the process of following the crisis for over a decade.
Yemen and the greater neighbourhood | Source: Google Map
The History
Much of the current conflict can only be understood as a result of the events of the latter half of the 20th century. Here is a brief look at the history that has shaped today’s wars in Yemen.
At the heart of several issues in the conflict is the fact that modern day Yemen was initially divided into North Yemen and South Yemen until 1990, when it was unified.
Yemen and the greater neighbourhood | Source: Wikimedia
North Yemen:
The Yemen Arab Republic (YAR), a coalition in North Yemen, overthrew the Mutawakilite Kingdom in 1970, which had been ruling since Yemen’s decolonization, in 1918. The YAR established their capital at Sana’a, a site which will often be the site of conflict in the following years. This part of Yemen, during the cold war was backed the countries aligned with the anti-communist block like Saudi Arabia, Jordan, the US, the UK and West Germany. The influence of Saudi Arabia and their relations with the US will come to play a greater role in the following decades.
South Yemen:
This referred to the region that was under the British Raj as the Aden Protectorate, since 1874. It consisted of two-thirds of present-day Yemen. In 1937 it became a Province of the British Raj, and in 1963, it collapsed and an emergency declared. The collapse was the joint effort of the National Liberation Front (NLF) and the Front for the Liberation of Occupied South Yemen (FLOSY).
Aden was used by the East India Company as a coal depot, and to stop Arab pirates from harassing British-India trade. Until 1937, Aden was part of British India, officially titled the Aden Protectorate.
Aden, like Sana’a will come to be the capital of southern Yemen, and the site of many conflicts.
This part of Yemen, during the cold war was backed by the Cummunist bloc countries like USSR, Cuba, and East Germany.
The Unification:
North and South Yemen united in 1990, after several years of conflict with one another. The leader of North Yemen, Ali Abdullah Saleh, was named President of unified Yemen in 1990. He was to continue ruling over Yemen for over three decades.
The unification of Yemen finally fulfilled almost a century of struggle that started during the British occupation and continued at different paces throughout the monarchy and cold war period. This unification also took away the privileges and power vested with many important tribes and people. Unlike the political forces, the armed forces of North and South Yemen were not unified at the time of political unification of the country.
The disgruntled former elites and the partisan army provided the fertile ground for the first civil war of Yemen which followed shortly after the unification.
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Are India's Antitrust laws effective at controlling monopolies?
On 15th of July 2020, Reliance Industries Ltd (RIL) held its annual general meeting of the shareholders. The chairman and managing director Mukesh Ambani, announced that global tech giant Google would be investing $4.5 billion in Jio Platforms. Facebook also has acquired a 9.99% stake in Jio Platforms. This is the first time in the world that both the global tech giants have invested in the same entity. These investments have boosted the confidence for Jio Platforms and also for India’s growth but there have been questions and speculations about the potential anti-competitive makeup of these deals.
The objective of this article is to explore the interpretation and the effectuality of Antitrust laws in India.
Anti-competitive practices are those business practices which firms engage in to emerge as the or one of the few dominant firms, who will then be able to restrict inter firm competition in the industry in a bid to preserve their dominant status. The Collins English dictionary defines antitrust laws as those laws that are intended to stop large firms taking over their competitors by fixing prices with their competitors, or interfering with free competition in any way. These laws focus on protecting consumer interests and promoting a competitive market. The word ‘Antitrust’ is derived from the word ‘trust’. A trust was an agreement by which stakeholders in several companies transferred their shares to a single set of trustees.
In present-day India, talking about market dominance Reliance Industries Ltd (RIL), resembles American company—John D Rockefeller's Standard Oil Company—of the early 20th century. Mukesh Ambani holds the highest ability to influence markets and policy in every sector in which RIL is present—petrochemicals, oil, telecom, and retail. Many industry experts and critics suggest that Ambani has used his political clout to twist the regulatory framework in his favor.
Gautam Adani, founder of Adani Group | Source: Twitter
Furthermore, economic power in aviation infrastructure is clustering into a few hands as well. In 2019, the Adani Group bagged the 50-year concession to operate all the six Airports Authority of India-operated airports—Lucknow, Jaipur, Guwahati, Ahmedabad, Trivandrum, and Mangaluru—which were put up for auction. The company also obtained a controlling stake in ‘The Chhatrapati Shivaji Maharaj International Airport, Mumbai’ from GVK Airports. Moreover, Adani Group is now set to construct the Navi Mumbai International Airport. The group is now eyeing Indian Railways while they have already established an alarming monopoly in green energy and sea ports. While Airports are natural monopolies, one private company controlling more than 8 important airports is not good news to airlines.
India has established antitrust laws to promote competition. For 40 years, India followed the Monopolies and Restrictive Trade Practices Act 1969 (MRTP). This act was based on principles of import substitution and a command-and-control economy. However, over time several amendments had to be made to the act. In 2002, the Indian approved a new comprehensive competition legislation. This is called the Competition Act 2002. The act focused on regulating business practices in order to prevent practices having an appreciable adverse effect on competition (AAEC) in India. The act primarily regulates three types of conduct: anti-competitive agreements (vertical and horizontal agreements), abuse of a dominant position, and combinations such as mergers and acquisitions. The act lists out the cartel agreements that it intends to prevent. This list includes price-fixing agreements, agreements between competitors seeking to limit or control production, market-sharing agreements between competitors and bid-rigging agreements. These agreements are called “cartel” arrangements.
The competition Act is enacted by the Competition Commission of India (CCI), which is exclusively responsible for the administration and enforcement of the Act. It comprises a team of 2 to 6 people appointed by the government of India. The CCI has previously handled high-profile cases. In 2018, CCI imposed a fine of Rs135.86 crore on Google on the grounds that Google misused its dominant position and powers to create a search bias. In another important case, the CCI, ordered a probe into Idea, Vodafone and Airtel when Reliance Jio owner Mukesh Ambani lodged a complaint against the three for forming a cartel and denying Jio the POI required for network connection, causing multiple call failures. The Cellular Operator Association of India was also probed for encouraging the same.
In some cases, the Competition Commission has been successful in tackling activities that are against the free competitive market. However, critics and economists believe that the act is now unable to adapt to the changing business environment in e-commerce, telecom, technology and the government’s role in distorting competition. Demonetization and GST drove the formalization of the economy. One consequence of them was that bigger, better organized players gained at the cost of smaller ones with lesser resources. The Insolvency and Bankruptcy Code (IBC) was designed to solve the problem of non-performing assets (NPAs) of banks. But consequentially, it has also led to a consolidation in many sectors.
However, CCI has expressed inability to consistently adjudicate punitive measures due to obligation in several cases. This points to the loopholes in the very provisions of the Competition Act 2002. In an Economic and Political Weekly (EPW) article, Aditya Bhattacharjea—an Economist—argues that even though the 2002 Act represents an improvement from the MRTP Act which was extremely restrictive, the present act also remains riddled with loopholes and ambiguities. According to Bhattacharjea, this creates unnecessary legal uncertainty, which acts in advantage of lawyers and law firms. For instance, the act allows the CCI to leave some scope of flexibility for “relative advantage, by way of contribution to the economic development.” Bhattacharjea argues that this may allow large firms to justify their anti-competitive practices in the name of development.
Mark Zuckerberg and Mukesh Ambani having online interaction after Facebook invested in Jio Platforms | Source: NDTV
Data portability plays a significant role in determining market power of certain firms. In 2017, the CCI closed cases against both WhatsApp and Jio involving allegations of predatory pricing and privacy violations. In both these decisions, the regulator did not consider the restrictions around data portability as a competitive advantage. The possible data leveraging advantage for the attempted monopolization could be the ‘portfolio effect’. Portfolio effect refers to increasing the range of brands, by bundling of telecom or messaging service and other service offerings or illegal vertical restraints, even predatory pricing. This in turn may lead to greater ability of further leveraging, deterring innovation and results in degradation of quality. Another possible advantage is explained as the theory of leveraging. The best example of leveraging is when Microsoft entered the media-player market by extending its quasi-monopoly on the operating systems market by taking advantage of the indirect network effects. In case of Facebook acquiring 10% of Jio’s shares, it is a concern that both entities could potentially use WhatsApp’s market dominance in telecom and social networking services and establish dominance in e-commerce market through anticompetitive acts.
There was a consensus among Indian policymakers at the time of the 1991 economic reforms that economic liberalization would eliminate the nexus between the business elites and the policymakers. On the contrary, the relationship between these two groups got further strengthened.
On the other hand, few critics and industrialists argue that extreme restrictions on growing companies hampers the progressive growth of the national economy. While RIL’s Jio looks like a cause for concern, the company has also saved Rs. 60,000 crores for annual savings in India. In addition to that, the entry of Jio to the telecom industry has led to a rise in data consumption and improved accessibility and affordability of the internet across the nation.
However, the concern still lingers as the question of whether this growth is a result of actual innovation or crony capitalism remains unsolved.
However, the fact that telecom, organized retail, ports and airports have two or three players controlling the bulk of the sector needs to be addressed. A healthy competition is quintessential for long-term growth and innovation. Harmful trade practices and cartelization does not only affect small manufacturers but also the general public.
The government, CCI and other lawmakers must closely examine the present laws and provisions and need to see if they are required to amend the act.
