The Competition Commission of India, or CCI, is a young regulator. Since Ashok Chawla , a former finance secretary, took charge as the chairperson of the competition watchdog in 2011, the anti-trust body has been in the news for reasons ranging from fining 11 cement makers to encouraging whistle-blowers.
In an email interview, Chawla defends the CCI’s decision to penalize the so-called cement cartel and insists that all markets, including commodity markets, must function in a fair and transparent manner. On various industries’ demands for exclusion from the CCI’s ambit, the government will have to take the call but Chawla’s view is there should not be a blanket exemption for any sector. Edited excerpts:
How many complaints does CCI have now and how many investigations are on? What’s the nature of these complaints and investigations?
So far, we have received 322 cases, out of which 242 cases have been disposed of, including 142 cases that have been disposed of without investigation at prima facie stage.
There are 29 cases in which the director general is conducting investigation. These cases are from a wide array of sectors ranging from film and entertainment to real estate, petroleum and gas, textile, information technology, steel, coal, pharmaceuticals and sports. The allegations under investigation include both anti-competitive agreements as well as abuse of dominant position.
How many orders are you expecting to pass this year and which sectors could they pertain to? Will you be levying only fines or will there be other forms of penalties as well?
It will depend on how many cases we receive in 2013 and completion of investigation. We expect the investigation reports pending with the director general to be received in three to five months in some important cases like alleged abuse of dominant position by Google (Inc.), some real estate matters, allegation of cartel in steel companies, allegation of abuse of dominant position by Coal India (Ltd) against power manufacturing companies, and alleged cartelization by the jute manufacturers’ association.
At present, the commission is contemplating to pass an order in sports-related cases, and some cases related to real estate, entertainment industry and alleged anti-competitive conduct of some pharmaceutical associations.
As far as penalties are concerned, the Competition Act provides for those in Sections 27 and 28. Other than monetary penalty, the law provides for a cease and desist order, modifications of the agreements, and division of enterprises.
We have issued cease and desist orders in many cases, as well as ordered for modification of agreements in DLF (Ltd) cases and the Paper Merchant Association matter.
Do you believe that Indian industries and markets need more regulations?
Regulation means different things for different people. Regulation by government through its own departments or agencies directly under its control has always existed. For example, DGCA (directorate general of civil aviation) in aviation sector, railway board, etc. However, the last 20 years or so have seen the emergence of independent statutory regulating agencies. These agencies differ from the conventional regulating system as they are separated from the executive wing of the government and enjoy a fair degree of autonomy.
Whether more regulation is needed or not would essentially depend on the evolution and state of play in economic activities, but one thing is for sure that we need more effective oversight and regulation; otherwise the purpose is defeated.
CCI is 4 years old but it has been more active only in the last one year.
It is not fair to say that CCI has been active only in the last year. Yes, we have passed some significant orders in the last one year and imposed fines in different sectors, and that has increased the visibility of our work. The initial years after the Section 3 and 4 provisions got notified essentially went into the prima facie and investigation stage.
Further, the combination provisions got notified only in mid-2011. In the last one year, we have changed our focus on advocacy efforts, wherein we are concentrating actively on the stakeholders—the public sector units, procurement authorities, industry associations, and top industrial players—towards sensitization of the Competition Act.
The commission would continue with its enforcement function as laid down under the Act. It has to act independently and transparently without thinking whether the decisions are bold or not. If there is a violation and the Act prescribes for a penalty/remedy, it will need to be enforced as per the rules and regulations.
The banking and insurance sectors have demanded exclusion from the ambit of CCI. Have more sectors made similar demands?
Recently, a notification under section 54 has been issued for public comments, exempting the shipping industry (domestic and foreign parties) operating in India, from the provisions of the Competition Act for a period of one year in respect of vessel-sharing agreement (VSA) and voluntary discussions agreement (VDA).
This is subject to the following conditions: (a) during the one-year period, the directorate general of shipping (DG- shipping) shall monitor operations of the agreements and for that purpose shall require compulsory lodging of the relevant documents in its offices; and (b) on completion of one year, DG-shipping shall hold a joint review of such agreements with the CCI to see if these agreements have caused any appreciable adverse effect on competition.
This is the only sector in which exemption is under consideration by the ministry of corporate affairs.
Other than railways, banking and insurance, it appears that no other sector has asked for exclusion from the Competition Act. On demand of exclusion in any sector, as per section 54 of the Act, the central government has to take a call. Our view is that there should not be blanket exemption for any sector. It would depend on the specific issues in that sector, as was the case in shipping. Or, for that matter, in banking.
Why have you imposed high fines in some of your orders? Is the objective to make an example of those cases so that it has a corrective impact on businesses as a whole?
The levy of fines depends on a lot of factors, including some mitigating and aggravating factors. That’s the reason you may find that in some cases the fine is higher than the others. Further, in cases of cartels, fines are higher as that is the most pernicious form of anti-competitive activity. The Indian law recognizes this and has provided for imposition of higher fines in such cases.
How do you look at your success ratio—30 penalties out of over 200 investigations?
Success ratio cannot be defined by the number of cases in which we have issued penalties. It is the quality of the investigations and orders rather than the number of investigations carried out. There are a number of cases which have been closed at the prima facie stage itself (around 140) as these did not have competition issue.
It is important to note here that we have to appraise all information/cases filed under section 19(1). If information is filed, the commission is under an obligation to look into that and form a prima facie view. This increases the number of cases but the cases actually involving competition issue may not be many. We are trying to improve this ratio by our advocacy efforts and educating the people on the mandate of the competition law.
Is the director general of shipping well-equipped to investigate cases well?
The director general is adequately equipped technologically. As far as manpower is concerned, there are some issues on the number of officials with the DG office. As the officers are recruited on deputation with a limited tenure, the issue of continuity is vital.
Your fines against cement cartelization are being called unfair. Those who criticize it say cartels are the accepted norm of many commodity markets.
In the cement matter, we have imposed a penalty of 0.5 times of net profit for 2009-10 and 2011-12. As per law, the fine could have been up to three times of its profit for each year of the continuance of such agreement or 10% of its turnover for each year, whichever is higher. So, to say that the fine against cement cartelization is unfair may not be correct. All markets, including commodity markets, are to function in a fair and transparent manner.
Do you see operational overlaps among various regulators?
The Act provides for a mechanism of reference by statutory authority—including sectoral regulators—to CCI and vice-versa. However, such a reference is not mandatory in nature. The proposed Competition Amendment Bill 2012 seeks to make this aspect mandatory. Even now we have interactions with other regulators at an informal level.
The role of sectoral regulators and CCI is distinct. While the technical regulations are within the sphere of sector-specific regulators, in cases where there is a competition issue involved, CCI comes into picture. The sectoral regulators could play an important role as far as sector-specific knowledge is concerned. As such, there is no overlap due to the role differentiation between CCI and various regulators.
What is your take on whistle-blowers? You have said that if any company was worried about being a part of a cartel it could blow the whistle on it. How successful has that campaign been?
Whistle-blowers have an important role, especially in cartel cases. It is difficult to find a cartel as it is entered into in secrecy and nobody would come forward to depose against the same. We have a leniency provision under the Act as well as regulations in place where if one of the cartel members approaches the commission, he may be offered 100% immunity on the imposition of a fine subject to adherence of leniency regulations.
Leniency has been an important tool in the hands of competition agencies throughout the world. However, in India, the leniency provisions have not seen much response. May be it is early as the cases in which fines are imposed are few and are still in appeal stage.
What are the challenges that CCI faced in the last couple of years?
For any organization, there are some challenges in the initial years of its functioning.
One of the challenges was to meet the deadlines in the Act in disposing of the combination cases. It is worth noticing that we have met the deadline in all the cases before us under combination regulations.
Then, there are some routine challenges like manpower constraints, especially trained professionals in competition law. We are spending enough resources in training our officers both in-house and outbound training.
One of the significant challenges before the commission is to create awareness about mandate of competition law and weed out the frivolous cases. The commission is working towards promoting a competition culture in the economy.
How do you visualize the future of CCI?
With the growth of the economy, there is a need to have an effective competition regulator in the economy. CCI’s vision is to foster and promote competition in markets for the healthy growth of enterprises, benefit of consumers and towards the economic development of India. Given this wide sweep, it can be expected that CCI will be one of the most important economic regulators in the next 10 to 15 years.