Competition Commission set for sweeping powers under IFC

Revised draft IFC suggests financial regulators should take into consideration opinion provided by CCI while making regulations

The Competition Commission might wield sweeping authority during formulation of financial market norms, including powers to issue binding directions, if certain provisions in the Indian Financial Code become a reality.

To ensure fair competition in the marketplace, including at the time of framing of new regulations, the latest draft of IFC has mooted a raft of provisions that could eventually lend sharper regulatory teeth for the Competition Commission of India (CCI), the newest high-profile regulator in the country.

The draft IFC, on which the Finance Ministry has invited public comments till this week, has suggested that all financial regulators should take into consideration the opinion provided by the CCI while making regulations.

These would include all financial sector regulators in the country including RBI.

Besides, CCI would have powers to issue a "binding order" in case it feels there is a need to remedy the negative effect of a particular regulation of any financial sector regulator, as per the draft.

'Negative effect' means prevention, restriction or distortion of competition in a market for financial products or financial services.

"The regulator must take into account any comments that are submitted to it by the Competition Commission... If the regulator disagrees with any comments made by the Competition Commission, it must give the Competition Commission a statement in writing with its reasons for disagreement," the draft noted.

In case, CCI continues to remain of the opinion that a negative effect is created, then it "may issue binding directions to the regulator requiring it to take particular actions to remedy the negative effect".

CCI Member M S Sahoo said the provisions in the proposed IFC "requires the regulator, while making regulations, to factor in the principle that competition in the financial market for financial products and services is desirable in the interest of consumers"

"This will minimise distortion of competition from any regulation and (also) prevent excessive regulation. This would help in ease of doing business in the country and spur growth of financial markets," he told PTI.

CCI has the mandate to eliminate practices having adverse effect on competition and ensure freedom of trade in the domestic markets.

CCI is also required to give opinion on competition issues on a reference received from a statutory authority established under any law.