Downsizing CCI: Reducing the number of members may not enhance efficiency

In the case of the CCI, the decision to reduce the number of members from seven to four (including the chairperson) may prove counterproductive

As a general principle, the maxim of “minimum government, maximum governance” is unexceptionable. In the case of the Competition Commission of India (CCI), however, the decision to reduce the number of members from seven to four (including the chairperson) may prove counterproductive. The corporate affairs ministry’s explanation for doing so is that it had sharply raised the assets and turnover threshold for mergers and acquisitions deals that would need CCI approval, which would reduce the workload of the competition regulator. It had also contended that the reduction would speed up the CCI’s work since all members in office have to sign on to an order, and four members would facilitate this faster than seven, especially by reducing the scope for dissenting judgments. The clinching argument was that the CCI’s reduced size approximated those of competition regulators in advanced jurisdictions in the UK, the US, Australia and Japan.

Emulating global best practices is also a desirable goal in principle but it applies only when objective conditions are similar. As far as the CCI is concerned, this does not arise yet. For one, the paperwork and processes that are required for companies to file for approvals remains voluminous. This may shrink, given that governments have been reasonably sensitive to corporate proposals for simplifying procedures. But the bigger question mark hovers over the issue of a deadlock. If seven members widened the scope for dissent, a quorum of four hardly diminishes. The question of procedures in the event of a 2:2 tie remains unaddressed. Since the law defines the chairperson as a member, the issue of a casting vote becomes contentious. Lawyers have pointed out that a chairperson casting a normal vote and a casting vote will not stand up in appeal. In other words, a reduction to four members may not serve the cause of efficiency the ministry aims to achieve.

The second possible problem with fewer CCI members is that this may not provide scope for the addition of sector experts. With technology adding manifold degrees of complexity to commerce, general expertise in corporate and M&A law increasingly needs to be supplemented by specialist knowledge. The requirement for sectoral expertise rises exponentially because of the global dimension of business today, where global M&As may have unique local consequences or standard global practices may impact Indian consumers differently. It is impossible for any one member to be a repository of knowledge on such a vast ambit of business, and no less improbable that four members will be vested with so much wisdom either. Sector experts working on a rotating roster of cases may serve the cause of the competition regulator better than a truncated CCI, even if this structure does not conform to any global template.

The government has also argued that the CCI needs to be downsized so that the director-general’s office, the CCI’s investigation arm, can be expanded. The director-general’s office, with just 14 people, down from 19 in 2015-16, is undoubtedly understaffed and urgently needs more people to perform this critical role. However, the two — the CCI and the DG’s office — have distinct functions so it is difficult to see why expanding one should preclude enlarging the other. Where the CCI is concerned, enhanced efficiency does not necessarily mean minimum government.