This is the 2nd part of a short explainer article series on the current crisis in Yemen. To read the 1st part of the series click on the link.
After the overthrow of the monarchy in 1968, Yemen existed as two countries — North Yemen and South Yemen. These two countries united in 1990, after several years of conflict with one another.
Unified Yemen: Simmering discontent between North & South
A unified government was formed and the work on constitution progressed, however the relations continued to be strained between the two regions. It's important to note that unification was finally achieved after the defeat of the former Marxist state of South Yemen at the hand of North Yemen with active collaboration of Saudi Arabia.
South got a raw deal in the post unification reconstitution and re construction of the country. The government controlled lands, enterprises and other resources in the South were confiscated and given to the ruling elites belonging to the North. However some political representation and economic benefits were given to the southern elites as well.
1st Elections of Unified Yemen: Cracks in unity
The first elections to elect a new parliament of unified Yemen began in 1993. This election was won by the pro-Unification group led by the former President of North Yemen, Abdullah Saleh. The Yemen Socialist Party (YSP) which represented the interests of former South Yemen, was able to win only 54 of the 301 seats.
After losing the democratic election, the leader of YSP, Ali Salim Al-Beidh, withdrew to his base in Aden. He refused to return to the capital unless his grievances of economic marginalization of the south and violence against his party members did not end. This conflict among the ruling elite impacted the general security situation and created an opportunity for the tribal leaders to make a space for themselves as well.
This sense of marginalisation and victimhood of Southern leadership and assertiveness of tribal leadership created a fertile ground for the first civil war of Yemen.
The First Civil War of Unified Yemen
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 political differences between the pro-unification forces and the southern faction led by YSP reached the Northern and Southern armed forces as well. The political infighting soon turned into armed conflict where the armed forces used heavy equipment and air power against each other.
Southern faction leaders withdrew from the reunification and on May 21, 1994, established the Democratic Republic of Yemen (DRY). However they failed to win recognition from the international community. After heavy fighting in the southern part, the government forces captured Aden on July 7, 1994. This led to the collapse of resistance and thousands of political and military leaders left the country. They tried to revive the secessionist movement from Saudi Arabia, but failed to make any impact.
The Ceasefires were called from nearly all sides, including the USA and Russia. The war finally ended in 1994, with Abdullah Saleh being elected as president after an amnesty signing with the Yemen Socialist Party leaders.
However, the YSP was left toothless post-elections, a grievance that would later lead to the forming of the Southern Seperatist Movement (also known as al-Hirak) in 2007.
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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.
