Time to intervene

Should the Competition Commission take a look at the comings and goings in the retail space?

First, Reliance Retail bought out the retail assets of Kishore Biyani’s Future Group. Now it emerges that the company is offering a 40 per cent stake in its operations to American e-commerce giant Amazon for $20 billion (an estimated Rs 30,000 crore), which will give the retail division of India’s one-time crude-to-chemicals giant a massive opportunity in that dedicated space. Reliance was already a big player, not just in the low-margin grocery retail with Reliance Fresh but in electronics with Reliance Digital apart from holding the India franchise for several major high-street brands such as Hamley’s for toys, Marks & Spencer and several other clothing outlets. With the Future Group purchase, Reliance would have acquired a huge space in most premium malls with Shoppers Stop and Pantaloons. If the Amazon tie-up does go through, it would not only give Amazon an automatic path to its mandatory sourcing requirements in India, it would also give Reliance Retail a leg-up in its weakest areas, warehousing and online sales. It has tried hard but found attempts at integrating its telecom and retail play between Reliance-Jio and Reliance Retail to be quite tepid.

That said, if a deal between Reliance Retail and Amazon happens, this should be a valid case for the Competition Commission of India (CCI) to explore. Nobody is saying that either party has done anything illegal. However, it is contingent upon the CCI to prevent any monopoly in any sector in India. And a monopoly does not only mean that there is one player, it means that there is one “dominant” player and domination can often come with only a one-third share in such a fragmented industry as retail. A dominant player can dictate terms to suppliers and can starve out supplies to rivals as well as prevent them from getting good space in malls and many other practices. This needs the constant supervision of the CCI for whom defending consumer choice should be the ultimate priority and not just defending affordability. Unfortunately, many regulators believe that the latter is more important than the former which has led to the disaster called television news in India as the race for eyeballs has meant targeting the lowest common denominator for news rather than high-quality paid services. In retail, telecom and aviation among other sectors, particularly in the aftermath of the Coronavirus lockdown, as many companies find themselves in a tough spot, the CCI should be a defender of competition, consumer choice and thus, the overall economy.

Source: The Pioneer