Not a policy maker

Don't strain the competition regulator, bolster it

The government reportedly wants to broaden the scope of the Competition Commission of India’s (CCI’s) duties. Currently, the CCI, which is governed by the Competition Act of 2002, serves as an anti-trust body that examines whether competition law is being breached and if companies have formed illegal cartels. It has limited investigative powers — it must go to a magistrate for approvals for searches and seizures — but it can impose fines on those it concludes have violated competition law, and has done so in several high-profile cases. The question that the government wishes to open is whether the CCI is doing enough: Should it act more like a regulator, and not as an examining tribunal? This might be a reasonable view to take, and certainly, the Competition Act is due for review, given the increasing complexity of the Indian economy. Yet, the government’s stated intention to also involve the CCI in policy making deserves to be questioned. It appears that the government would like to see the CCI act, essentially, as a think tank for the Union and state governments. It would under this mechanism investigate policies for their effect on competition. It could then revise and re-formulate these policies or proposed policies to ensure that they do not stifle competition.

While the government’s intentions may be laudable, diluting the role of the CCI is not the way to go about it. It is good that there is a desire for policy making at both central and state level to become more aware of competition aspects of policy, but this should not be the CCI’s job. As things stand, the CCI has been rendered under-resourced. The number of members on the panel was recently halved to three. It has also been behind the curve on competition in several sectors. For example, the telecom sector has posed significant problems of late and the CCI has not been able to deal with them. Doesn’t the entry of a challenger with pockets deep enough to launch predatory pricing schemes require action to preserve competition? To expand the role of the CCI under these circumstances is quite unwise as it will burden it with more responsibilities when it is clearly not quite managing with its existing duties. 

Any such proposal of getting the CCI involved in policy making also violates basic principles of institutional design. The CCI will have to pronounce on whether companies are violating competition law. But can conflict of interests be avoided if the CCI itself is involved in making policy in the first place? Will the CCI not be inhibited in hauling up constituents who claim to be following a policy that it itself preferred or recommended? These are questions that must be answered. Certainly, reform and expansion of the CCI are necessary. But what it needs is strengthening as a regulator, with greater capacity. The antitrust division of the US Department of Justice, for example, has hundreds of professionals on staff. And it does not just employ lawyers, it is also a major and desirable employment destination for trained economists. This is the direction in which the CCI should be going.