‘Competition is the antitheses of regulation’

‘Competition is the antitheses of regulation’
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First Published: Sat, Mar 24 2007. 01 11 AM IST
Updated: Sat, Mar 24 2007. 01 11 AM IST
Countries all over the world have enacted ‘competition’ legislations to protect consumer interest and encourage companies to act fairly with their stakeholders. India too has a Competition Bill in the making. Rughvir S. Khemani, competition policy advisor to the World Bank Group and co-director of the International Bar Association’s Global Forum on Competition, was in India and spoke to Sangeeta Singh of Mint on issues related to competition in India and elsewhere, and what he expects from the Competition Commission of India (CCI). Excerpts:
The forthcoming Competition Bill is attracting a lot of attention from various quarters. Is the Bill the need of the hour, or just hype?
It is certainly not hype. At least 104 countries across the world have a competition law in place with a lot of them enacting it in the early 1990s. Besides, countries such as the US have had a competition law since 1890 and Canada since 1889. These laws have evolved over time and are periodically revised in accordance with the changing needs. It’s high time India also got a formal statutory body to safeguard consumer and broad public interest. This will also encourage corporations to adopt best market practices. India’s business dynamics have changed as has its need to adhere to international best practices. That’s where a sound competition law will help.
You have been advising CCI on various sectors. Can you tell us a little bit about this?
The World Bank, along with UK’s Department for International Development (DFID), has been providing technical assistance to build capacity of CCI on the request of the Indian government. We are also partnering with Indian research and academic institutions to conduct competition and regulatory impact assessments of selected sectors.
We have been working in sectors that contribute significantly to GDP (gross domestic product), have strong linkages with other sectors and those having an impact on domestic consumers, especially the poor. The sectors include pesticides, cement, sugar, inter-city passenger bus services, trucking, energy (electricity, oil and gas), telecommunications and food grain distribution.
As of now CCI only has an advisory role? Do you think it has been able to make an impact?
I would say the role of CCI is that of advocacy, as also advisory, on issues related to government policies and regulations that unnecessarily limit competition. Secondly, I do think CCI has already been able to make an impact in this regard. For instance, six to eight months back, CCI raised concerns about a proposal by the Indian department of posts to make distribution of courier packets under 300gm its exclusive right. This would have virtually killed the private courier industry, which, aside from loss of efficiency and consumer choice, could have resulted in significant job losses. The proposal has since been abandoned, I believe. It also recently told the Reserve Bank of India that it needs to encourage competition in the banking sector and remove high entry barriers for foreign banks.
So do you think CCI will have much more teeth than the Monopolies and Restrictive Trade Practices Commission (MRTPC), the body that it will eventually replace?
The Indian economy has changed drastically since 1969 when the MRTP Act was enacted. MRTPC imposed a heavy regulatory burden on business, which was counter-productive and impeded competitiveness. Today, the business dynamics have changed in favour of promoting competition to increase consumer welfare and economic efficiency. The Competition Act and the role of CCI, when it is fully functional, are suited to achieve these goals. Even in developed countries like Canada, the competition law was totally overhauled in 1986, with subsequent revisions. The same has happened in the UK, among other countries. Competition law and policy evolve over time to keep abreast of market developments.
But don’t you see a dichotomy in the Indian system? On the one hand the government plans to encourage competition, while on the other, it is increasing the number of regulators.From processed food to warehouses, every sector is going to be plagued by regulators?
Yes, to some extent, as competition is the antithesis of regulation and the role of CCI will be to prevent anti-competitive practices. But in a democratic set-up, both can coexist. Regulators sometimes tend to tilt towards a particular interest group, especially industry that is being regulated. Here the role of CCI becomes important as it has to act as an ‘honest broker’. CCI will have to play the referee’s role and watch out for over-regulation.
And ensure that where there is an overlap in functions, competition is not unnecessarily impeded.
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First Published: Sat, Mar 24 2007. 01 11 AM IST