👍👍👍👍👍Be mindful of ‘consequences’ of regulatory actions: CEA – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/economy/be-mindful-of-consequences-of-regulatory-actions-cea-tells-cci-regulators/article66576628.ece

Chief Economic Advisor V Anantha Nageswaran asks regulators to remove/lower entry barriers in industry

Chief Economic Advisor V Anantha Nageswaran addressing the 8th national conference on ‘Economics of Competition Law’, organised by the Competition Commission of India (CCI), in New Delhi, on Friday | Photo Credit: PTI

The Finance Ministry on Friday struck a note of caution to competition authorities and regulators, asking them to be mindful of the “unintended consequences” of their regulatory actions as they can also end up harming new entrants.

Flagging the “law of unintended consequences” and the maxim that the “road to hell is paved with good intentions”, Chief Economic Advisor Anantha Nageswaran simultaneously told the Competition Commission of India (CCI), policy makers and regulators to remove/lower barriers to entry in industries to ensure a level-playing field.

Speaking at a CCI-organised conference, Nageswaran said both in the technology space and traditional industries, policy actions should be taken keeping in mind their unintended consequences.

Few examples

On the traditional industries, Nageswaran noted that dominant firms in markets engage in “unsustainable practices” such as excessive control over critical input supplies, destruction of habitats and creation of pollution. He said these actions can be brought under the purview of anti-competitive practices as well.

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In the technology space, for example, regulators implement data and privacy norms granting users complete access to their data. In such situations, users can end up choosing only the large players since they place a greater degree of trust in them. “This will ultimately lead to the loss of competition across similar platforms, concentrating power in the hands of few firms. What we do with good intent… will actually end up perpetuating existing dominance rather than ending them,” the CEA said.

Combined efforts

There is a scope for cooperation between regulators and competition agencies, said Nageswaran. “Through combined efforts, regulators and competition agencies can lay down the framework that can prevent the erection of barriers to entry,” he said, adding that it is the lower entry barriers that would keep the industry competitive.

The CEA also wanted competition authorities to ensure that “incumbency advantage” is not abused by firms. “Because once they are fully grown, they build a moat preventing others from competing in the same market. As the CCI had pithily said, dominance is not bad, it’s abuse of dominance (that is bad),” he said.

He also urged regulators and competition agencies to mutually agree upon the ex-ante and ex-post balance between the two so as to avoid producing outcomes that work against either of their actions. Regulatory oversight is not just about prices remaining competitive or displacing monopolies, he said, adding that an eye also need to be kept on systemic welfare or the lack of it that markets create or do not create.

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