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‘Cartelization is a serious violation of competition law’

‘Cartelization is a serious violation of competition law’
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First Published: Sun, Apr 06 2008. 11 03 PM IST

Cost focus: Vinod Dhall, acting chairman, Competition Commission. (Photo: Ramesh Pathania/ Mint)
Cost focus: Vinod Dhall, acting chairman, Competition Commission. (Photo: Ramesh Pathania/ Mint)
Updated: Sun, Apr 06 2008. 11 03 PM IST
With prices rising and allegations of cartelization doing the rounds, the focus is on the Competition Commission of India (CCI) that is expected to tackle this and other anti-competitive issues. Acting chairman of CCI Vinod Dhall spoke to Mint on this and other issues. Edited excerpts:
Don’t you think the government’s recent attempt to control prices will encourage black marketing and some sort of cartelization, especially in foodgrains, cement and steel? And won’t this be difficult to address in the absence of a fully functional CCI?
Cartelization is when enterprises collude to fix prices, indulge in bid rigging, or share customers, etc. But when prices are controlled by the government under a law, that is not cartelization.
Cost focus: Vinod Dhall, acting chairman, Competition Commission. (Photo: Ramesh Pathania/ Mint)
On the other hand, if after price control is removed, enterprises continue to come together to fix prices, etc. They will be open to the charge of cartelization. Cartelization is a serious violation of the competition law, and is liable to heavy penalties. If CCI had been fully functional, it would have been possible to investigate complaints of cartelization, or investigate such instances on its own motion.
The Competition Act contains strong provisions against cartels. It also has the leniency provision to incentivise a party to a cartel to break away and report to the Commission, and thereby expect total or partial leniency. This has proved a highly effective tool against cartels worldwide.
What are the constraints that CCI faces now, if complaints of cartelization are made?
While the law has been enacted, the enforcement provisions have still to be notified by the government. Before these provisions can be notified, the government has to appoint more members, and the staff has to be sanctioned, recruited and trained. These activities will take some time, perhaps till the end of the current year.
Are there provisions in the Competition Act against monopolistic prices ?
There are provisions in the Competition Act against abuse of dominance. One of the abuses is when a dominant enterprise “directly or indirectly imposes unfair or discriminatory prices” in purchase or sale of goods or services.
Thus, excessive pricing by a dominant enterprise could, in certain conditions, be regarded as an abuse and, therefore, subject to investigation by the Competition Commission if it were fully functional.
However, it should be understood that where pricing is a result of normal supply and demand, the Competition Commission may have no role.
Do you agree that in the past, whenever the government has tried to control prices, firms have resorted to hoarding? Wouldn’t a functioning CCI have come in handy in today’s situation?
Inflation and inflationary prices are legitimate concerns of the government. While the Competition Commission has no direct role in controlling prices, action by the commission against anti-competitive practices like cartelization or abuse of dominance can contribute to lowering prices, and thereby, fight inflation.
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First Published: Sun, Apr 06 2008. 11 03 PM IST