CARTELS ARE BACK

More worrisome is the fact that the ‘alliance’ is sure to set a precedent for other sectors to follow suit, especially where a few choice players command a large chunk of market share. India’s growing telecom sector is sitting duck for a replay of such monopolistic tendencies. Leading GSM players like Bharti Airtel, Vodafone and Idea Cellular have even come under the MRTP scanner for allegedly colluding to raise tariffs. All three had simultaneously raised tariffs for STD, local calls, SMS and value-added services on a specific plan in August 2007. MRTPC suspected cartelisation in the sector and took suo moto cognizance that the three big telecom firms maybe distorting competition in the market.

Pradeep Mehta, Secretary General, CUTS International, believes that most cartels work under the guise of trade associations and points out that in some cases abroad, even trade associations have been charged for aid and abetting collusion. “Airlines, telcos, even banks (setting of bank charges and interest rates on savings accounts) have come under the scanner for cartelisation in India,” he adds.

Given that the three GSM players have now even come together to set up an independent tower company (Indus Towers), to boost their existing backend infrastructure, what stops them from let’s say discussing a call tariffs raise, apart from the nitty-gritty’s of the infrastructure business, over a cup of coffee. “I’m not against having alliances and agreements between competitors. But they should be at an arm’s length, purely on commercial terms. Tomorrow Airtel and Vodafone may have an agreement (eventually upping prices), saying our infrastructure cost is high,” avers Narula.

In any case, detecting and predicting cartels is always difficult, primarily because cartels are formed in secret between consenting competitors. The presence of cartels has always been an alleged reality in input commodities (cement, steel, trucking, tyres etc). For example, just over the last one year, cement prices have increased by around 15%, fanning suspicions of the presence of cartels. MRTPC even issued notices to 14 cement firms, including Grasim, ACC and Ultratech. The phenomenon becomes crucial especially given the huge proposed investments in infrastructure and construction. So while demand for cement may go up in the near future, cartels will ensure that proposed expansion may be sabotaged by artificial shortage. Another case in point is that of 5-Star Hotels and their obscenely high but surprisingly similar tariffs for foreign visitors. Where is the supposed competition?

Cartels are being hauled up every few days by regulatory commissions around the world. It is perhaps even more difficult to counter dominant players abusing their preeminence through their monopoly. In fact, recently the European Commission has levied its first ever and biggest fine of $1.4 billion on Microsoft for non-compliance of its order, which required the IT behemoth to disclose “complete and accurate” technical information enabling competitors to develop products compatible with its patented Windows system. Microsoft dithered and was slapped with the fine.

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Source : IIPM Editorial, 2008

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