Infant, Not Infantilism, Care

Context: India needs to acknowledge the network effect as the new source of monopoly power.

Limitation of Traditional definition of Monopoly: Monopoly was defined as a producer, or bunch of producers, gaining such a high market share that they could manipulate prices. However, it had limitations: 

• Market dominance through excellence or new technology without increasing price cannot be called a monopoly.

• Internet companies were considered anti-monopoly: as they provide goods and services for free, or at much lower prices than before.

• Considering technology monopoly to become obsolete because of intense competition due to the absence of tariff barriers on foreign challengers.

Need for Changing Definition of Monopoly

• Network effect: as a new source of monopoly power is provided by the internet. 
• It enables early movers to gain users at an exponential rate because of the self-reinforcing network growth.
• Creates a few technology giants with massive purchasing power (to buyout rivals) and high market share.
• It does not lead to an increase in price but creates barriers to entry of new competitors.
• Rise of Data as a precious commodity: Data collection does not increase the price but ensures massive advertising profits and reduce competition for early movers.

Way Forward

• Monopoly can be tackled with new technologies: For E.g. the early movers such as AOL and MySpace got killed in competition.
• Provide temporary protection (5-10 years) to domestic infant companies to enable them to create their own network effects. 
• Temporary protection must be lifted later on in favour of competition.
• World Trade Organisation (WTO)rules have always allowed infant industry protection in developing countries.
• The US, Germany and others used infant industry protection to catch up with the Industrial Revolution. 
• Chinese apps ban must be extended for at least five years for enabling sustenance and exponential growth of Indian apps companies through network effects. 

Conclusion: Infant industry protection must not be at the cost of cybersecurity, foreign policy, network-induced monopolies, and cronyism.