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Should the CCI be abolished?

Business Standard  |  New Delhi 

Competition law requires expertise, but to be effective the Competition Commission of India needs real autonomy

Amitabh KumarAmitabh Kumar 
Senior Advisor, Regulatory, Competition & Tax, J Sagar Associates

It is unwise to scrap an expert body and let the responsibility of implementation lie with authorities that are not trained in the science of economics

A simple justification for not scrapping the competition law is that a large number of countries, around 106, have it.  One may argue that what is good for other countries may not be good for India, more so because we are a developing nation. However, this argument is weak because the competition law has been enacted by high- and middle-income countries as well as low-income countries.  This is proof of faith in a free market.   

Competition provides low prices, promotes innovation, ensures optimal allocation of scarce resources and facilitates consumer welfare. Since none of the acknowledged outcomes of competition are undesirable, there can hardly be a debate on whether to have a competition law or not.  It is possible to reap some of these benefits with a robust competition policy. But even that is unlikely to sustain in the absence of an effective competition law regime. 

Worried by the slow growth rate of its economy compared to other OECD countries, the Australian Government appointed a committee in 1992 to make the Trade Practices Act, enacted in 1974, more effective. The Hilmar Committee Report suggested changes in the competition law and in its implementation, which have reportedly yielded rich dividends.  Effective implementation of the competition law has similarly helped other countries improve their GDP growth rate. Thus having a competition law can bring tangible benefits to citizens. However, it is important to establish a body to implement the law.

The enactment of the Sherman Act in 1890 in the US is widely regarded as the birth of competition law.  It is interesting to note that it was a bi-partisan legislation for curbing the monopoly power of trusts, as American corporations had organised themselves.  The underlying thought was to usher in economic democracy to ensure political democracy.  Big corporations had acquired enough clout to influence political outcomes and, therefore, the need for having a law capable of curbing anti-competition behaviour of enterprises was felt.

The jurisprudence on competition law has developed around economic theory.  Competition assessment has evolved over the years and is based on economic analysis of the behaviour of business organisations.  As the theory of industrial organisations developed in economics, competition assessment developed in tandem and incorporated complex tools from the disciplines of economics and econometrics. Consequently, competition assessment has become complex and requires specialised knowledge.  Therefore, courts of law are not suitable for implementing a modern competition law because they do not have the required expertise. 

The Competition Commission of India  was established on the recommendations of a high-powered committee, which noted that the Indian judiciary is not trained in handling matters pertaining to competition law .  There is no reason to have a contrary view regarding the knowledge of the judiciary in this matter.  Even if the judiciary gains the required expertise over time, the decision-making process in courts is painfully slow in India.  Competition law is an economic law with a far reaching impact on the conduct of businesses. Time is essence in business decisions, as noted by the Supreme Court in the case of Competition Commission of India vs Steel Authority of India Ltd. It is, therefore, imperative to make quick decisions, which probably can only be expected outside the normal court process.  It will be unwise to scrap an expert body and let the responsibility of implementation lie with authorities that are not trained in the science of economics.  The intention of the legislature is clear in this regard.  The competition authority has been permitted to make regulations to carry out the purposes of the Competition Act and is not bound by the Civil Procedure Code.  

One may argue that decision making by the competition authority is slow at present. This can be attributed to (i) learning process, (ii) frivolous “Informations” filed and (iii) lack of adequate staff. 

Capacity can not be built overnight and every competition authority has taken its time to mature.  Let us not be impatient.

Pradeep S MehtaPradeep S Mehta
Secretary General, Consumer Unity & Trust Society International

The competition law needs to be amended to enable the Commission to work in an autonomous manner, without explicit and implicit government control

Yes and no. The current avatar of the Competition Commission should be overhauled keeping in mind some critical aspects and the Competition Act should be buttressed to ensure that it is effective and its utility is not questioned.

First, the procedure for selecting the chairman and members of the Commission needs to be re-examined. It should be ensured that it does not create parking lots for retirees from the government but attracts people who have the capability, competence and commitment to discharge the role that is envisaged for the Commission — which is to promote a healthy culture of competition in the country. Experiences from around the world tell us that one needs “champions” to take forward such regulatory bodies. Alas, this is not the case currently.

However, the opportunity to select a person with the required expertise and vigour to chair the Commission is now coming up. The search for a new chairman is on since the incumbent is demitting office in June. Can the selection committee not look for a person who is a trained economist or a lawyer or even a young civil servant with an understanding and experience of dealing with economic laws? Candidates should be in their early fifties and not in their sixties. This is not to say that retired civil servants cannot make champions. T N Seshan’s seminal contribution in cleaning up the election scenario as the chief election commissioner is an example. However, that was an exceptional case.

Second, the competition law needs to be amended to ensure its independence. This will be vital in attracting competent people who are willing to leave their comfortable jobs to join the body. For example, successful lawyers do join the bench at a considerable loss of income because the judiciary is empowered to work without fear or favour. The other incentive is the prestige that comes with judgeship.

Third, the law needs to be amended to enable the Commission to work in an autonomous manner. At present, the law allows explicit and implicit government control in terms of several functions, including staff appointments. The Indian Institute for Management, Bangalore, had done a study for the Competition Commission of India (CCI) suggesting good remuneration packages for engaging professionals. Unfortunately, the current recruitment drive is witnessing secondments from civil services, which do not necessarily provide the best people to deal with a new economic law.

It is not only CCI but all our economic regulators that suffer from these maladies. Most of them are beholden to the government, which controls them through various means, including foreign travel. In all such cases, foreign travel is an imperative to advance their knowledge – which is currently very low – and build contacts to deal with cases. Recently, many regulators have been pulled up by the Comptroller and Auditor General (CAG) for holding on to their surplus moneys, when the government had asked them to transfer it to the Consolidated Fund of India. Overall, the government oversight is so overwhelming that a former regulator once remarked at a Consumer Unity & Trust Society (CUTS) conference that they are but Joint Secretary (Regulation).

Fourth, overlap issues between the CCI and sector regulators need to be resolved permanently so that the integrity of our economic governance system is not suborned. For instance, why should the Reserve Bank of India alone deal with banking mergers, when it is a prudential regulator? Or for that matter why should the electricity regulator or the petroleum regulator deal with anti-competitive practices in their regulated sectors. They can certainly deal with ex-ante structural issues and technical issues but ex-post anti-competitive practices should be dealt with by CCI. However, they can certainly consult each other on a mandatory basis, and thus avoid jurisdictional gridlock. The relevant laws need to be amended.

There are other issues as well that need to be dealt with to make CCI a livewire agency with a good public buy in. Let us not throw the baby out with the bathwater.

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First Published: Wed, April 06 2011. 00:33 IST
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