CCI: From Powerless to Powerful

With recent amendments, CCI has become more powerful and relevant in the Indian context

The recent order of Competition Commission of India (CCI) marks the emergence of one more regulator in India. All throughout in the past, despite the fact that CCI exists, it has remained broadly power-less. However, with the recent amendments, CCI has become lot more powerful and relevant in the Indian context.

This was demonstrated when the competition watchdog issued its order on the cement industry last week. With this, Indian businessmen have to be clear that now they have to deal with one more mother-in-law (that is, one more regulator) alongside RBI and SEBI.

The implications of CCI order are quite emphatic as the amount of penalty involved is a huge Rs 6,300 crore, which is quite sizeable even for rich cement companies. One more key implication of this order would be that the cement companies will be extra-cautious in fixing price of cement bags going forward. As they say, “once-bitten-twice-shy". Hence, the cement companies will remain to be extra cautious in fixing price.

The CCI order will achieve one more key objective of sending strong message to the companies in other industries that they have to be careful in product pricing going forward. Reports also suggest that the companies in the tyre industry are already being subjected to investigation.

Considering the sheer size of the penalty in CCI order will make sure that both the parties (that is, the regulator as well as companies) will go to the final extent possible of legal recourse. That is, Appellate Tribunal, High Court and Supreme Court. Neither of the party will be keen to give up till the last moment as the amount involved is quite large and also this order will set the precedent for the future CCI orders.

Hence, both the parties will go to the extreme possible limit of litigation jurisdiction. So, the legal overhang will remain on these companies and these stocks for several months. All in all, the CCI order on the cement companies has opened up new chapter in the Indian regulatory architecture. More importantly, CCI has moved up from being “powerless" to “powerful".