Competition framework for MSMEs to be drawn up

To help smaller units take remedial measures against restricitve practices.

The Federation of Indian Micro and Small & Medium Enterprises (Fisme) has commissioned a study on ‘Competition Commission Framework in India and MSMEs’. The study is expected to be completed in two months, and the report will be submitted in mid-August, Fisme Secretary General Anil Bhardwaj said.

The project is being supported by the United Nations Conference on Trade and Development (Unctad), the Department of Commerce in the Ministry of Commerce and Industry and the UK government’s Department for International Development (DFID).

The aim is to give micro, small and medium enterprises (MSMEs) an idea of how to leverage the new Competition Commission of India (CCI) dispensation to their advantage.

Bhardwaj said MSMEs are largely ignorant of their rights and responsibilities in the new competition policy regime. While CCI has taken some initiatives to create awareness through seminars, it is believed that the absence of documentation of instances and typology of restrictive practices is diluting its efforts.

The study has two aims. The first is to compile a list anti-competitive practices in order to help MSMEs identify practices of this kind that affect their own enterprises, and let them know the remedial measures available under the law to mitigate their hardships, as well as the processes to be followed for initiating action.

Secondly, the study will suggest to MSMEs, CCI and other stakeholders an actionable agenda for effective advocacy, to instill competition principles in public policies in India.

Four tasks will be taken up in the exercise. The first will be a study of competition policy frameworks in India and abroad from the perspective of MSMEs, and the capturing of best practices and any special dispensations for MSMEs that may be in use in other countries.

The second will be a classification of various types of anti-competitive practices (with a view to developing a typology) that MSMEs encounter at the hands of dominant corporates and entities, relating to public procurement, raw material supplies and public policies.

The third will be a study of the rights and privileges of MSMEs under the CCI dispensation, and measures that MSMEs could take to mitigate their grievances against anti-competitive practices.

The fourth will be to identify existing mechanisms in place — agencies, experts, law firms and service providers in the field — and deficiencies, if any, from the perspective of MSMEs.

Rising protectionist tendencies in the wake of the global financial crisis and the resulting slowdown in India, which have restricted Indian MSMEs’ access to competitively priced inputs and access to public procurement, have lent the issue a sense of urgency.

Fisme believes that besides the big-ticket mergers and acquisitions that competition policies invariably probe, there are three MSME-specific areas as well which need attention. One is that cartelisation by large producers of raw material and inputs often have negative fallout on MSMEs. Many forms of anti-competitive practices are prevalent in supply chains.

Anti-competitive practices are also quite common in public procurement, where MSMEs could be crowded out by stipulating unrealistically stringent conditions during pre- and post- tendering processes. Third, abusive monopolies could be created through executive orders for supply of certain services which MSMEs are made to buy at exorbitant prices or in unfavourable conditions.

The CCI, established by the Competition Act, 2002 on 14th October, 2003, became functional only in 2009. It is mandated by law to prohibit anti-competitive agreements that cause or are likely to cause appreciable adverse effects on competition in markets within India, prohibit abuse of their dominant position by enterprises or groups and regulate combinations where the total value of assets or turnover of the parties to a combination does not exceeds the limits prescribed in the Act.

The CCI is also mandated to create awareness and impart training on competition issues through advocacy, and render opinions on competition issues on a reference or otherwise as prescribed in the law. It is also responsible for taming anti-competitive elements flowing from public action — be it policies or laws of the state or regulations of the statutory authority.