After Sebi, CCI comes under parliament committee scrutiny

The committee sought a detailed note from the corporate affairs ministry earlier this month on the functioning of CCI.
The committee sought a detailed note from the corporate affairs ministry earlier this month on the functioning of CCI.

Summary

  • The review is expected to cover the effectiveness of competition regulation in the country in ensuring consumer choices and best market outcomes without stifling innovation. Congress party leader K.C. Venugopal heads the PAC.

After the stock market regulator, it is the turn of the competition watchdog to face scrutiny by the powerful Public Accounts Committee (PAC) of the Parliament this fiscal year.

The committee sought a detailed note from the corporate affairs ministry earlier this month on the functioning of the Competition Commission of India (CCI), a person aware of the matter said, marking the first step towards a performance audit. The ministry submitted the details by 27 September, the deadline set by the committee.

The information was sought by the Lok Sabha Secretariat's PAC branch. Congress party leader K.C. Venugopal heads the PAC, which has members from different political parties.

“A general decision was taken by the PAC for performance review of regulatory bodies established by Acts of Parliament. CCI will definitely be part of this," a second person said. Both people declined to be identified.

Covering effectiveness

The review is expected to cover the effectiveness of competition regulation in the country in ensuring consumer choices and best market outcomes without stifling innovation. CCI’s manpower and track record in enforcement will be part of the review, said the first person.

Data available from CCI showed that of the 1,224 anti-trust cases registered up to end of March 2023, CCI had ordered investigation in 403 cases, leading to detection of violations and adjudicatory orders in 185 cases. Over 100 cases were pending at various stages at the end of March 2023. Till then, CCI had also decided on over a thousand merger filings.

PAC helps to hold the executive accountable to the parliament. Besides the funds sanctioned by the parliament and the government’s annual finance account, it examines any other matter which it considers fit. The recommendations of the committee are followed up by the government, which gives its replies about the action taken or to be taken, which forms the basis for the committee’s ‘action taken report’ to the parliament.

Also read |  What the overhaul of India’s merger control regime means

One area that may receive attention from the parliamentary panel is the way businesses contest CCI’s penalty orders, which come in the way of recovering those amounts. In FY22 and FY23, CCI imposed penalties of ₹1,336 crore and ₹2,672 crore, but could recover only about 13% and less than 1% of those, respectively, CCI’s annual report for 2022-23 available on its website showed.

Eye on CCI's mandate

The panel is also expected to look into how CCI is equipped to handle its mandate. The authority now has the additional mandate of handling profiteering cases related to Goods and Services Tax (GST) after the National Anti-Profiteering Authority’s (NAA) term expired in 2022. Besides, the growing digital economy and a proposed digital competition law are expected to add to the watchdog’s regulatory ambit. However, the regulator has only about 30 professionals across the disciplines of financial analysts, economists and lawyers, said the first person quoted above.

“CCI’s effectiveness in ensuring level playing field in the market will receive the PAC’s attention," said the person.

Experts said the regulations governing competition in India have evolved over the last decade and have been fairly effective. “Over the years, with various initiatives like the introduction of the de minimis exemptions for combinations (exemption for small targets), the green channel and most recently, reducing the timelines for approving M&A combinations from 210 to 150 days, the CCI is seen as a progressive regulator keeping up with changing times and global best practices," said Natasha Treasurywala, a partner at law firm Desai & Diwanji.

“However, now, with significant attention on the digital sector and a spate of proposals from a competition law perspective, the CCI has to tread a fine line between regulating big tech players while allowing growth and innovation in the digital sector, and all this while ensuring that the end consumer isn’t negatively impacted," said Treasurywala.

Also read |  Anti-trust case: CCI asks Amazon, Flipkart to share financials to decide penalty

Mohit Chaudhary, managing partner at law firm Kings & Alliance LLP, said India’s competition regulation has made significant strides in promoting fair market practices and in curbing anti-competitive behaviour, and that CCI has been instrumental in shaping India's competition landscape. “Though India's competition regulation has made significant progress, there are areas where industry's regulatory experience can be improved. CCI needs to strengthen its capabilities to tackle complex digital market issues, such as data-driven anti-competitive practices," said Chaudhary.

Regulating competition

A proposal to introduce ex-ante rules to more closely regulate competition in digital markets is under way, he said. Also, effective coordination between the CCI and sectoral regulators is crucial to avoid regulatory overlaps and ensure seamless enforcement, he said. CCI must balance public interest with competition concerns while dealing with public sector units, which are exempt from certain provisions of the Competition Act, said Chaudhary.

“Ongoing regulatory reforms aim to streamline the merger review process, introduce settlement and commitment procedures, and expand leniency provisions. These areas highlight the need for continued refinement in India's competition regulation to ensure a level playing field for businesses," said Chaudhary.

The parliamentary panel’s review also has the potential to become politically sensitive. On 21 August, Opposition leader Jairam Ramesh said in a social media post on X that the CCI has not hesitated to impose penalties on both domestic and global firms for alleged abuse of dominance.

Also read |  Hostile takeovers of faltering firms are integral to a competitive economy

“Yet, a five-fold increase in user development fees (UDF) paid by passengers at Lucknow and Mangalore airports has been allowed by the Union government," said Ramesh, who is not part of the PAC.

The two airports are run by the Adani group. Queries emailed on 6 September to CCI, ministry of corporate affairs, the PAC and to the Adani group seeking comments for the story remained unanswered at the time of publishing.

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