Finance panel will firm up regulators: Jayant Sinha

Jayant Sinha, the head of parliamentary panel on finance, says if laws and regulations are not clear, it is difficult to invest and grow.
Jayant Sinha, the head of parliamentary panel on finance, says if laws and regulations are not clear, it is difficult to invest and grow.


Parliament’s standing committee on finance may examine issue of state finances, working of market and banking regulators, says Sinha in an interview to Mint.

After recommending sweeping changes to India’s bankruptcy framework and competition regulation, the Parliament’s influential standing committee on finance may examine the issue of state finances, the working of market and banking regulators, and the menace of cybercrimes, the panel’s chairperson, Jayant Sinha, said. The rapid digital transformation of India’s economy—one of the fastest-growing major economies—warrants stronger regulators. In an interview, Sinha said dominant digital market players, to be identified as digital gatekeepers, will have to file annual compliance reports to the regulator under a proposed forward-looking legal framework called Digital Competition Act that will set fair conduct norms for these entities. Sinha said the standing committee expects both the Competition Amendment Bill, 2022, and the proposed Digital Competition Bill to be passed between the forthcoming budget and monsoon sessions of Parliament. Sinha also said that a regulatory framework for news publishers to enter into fair advertisement contracts with digital market gatekeepers, such as dominant online search engines, could be set in the proposed Digital Competition Act. Edited excerpts:

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The parliamentary standing committee has identified 14 subjects to study. Which one will you take up next?

There are two or three areas that we are looking at, which the honourable members want us to examine. One is the entire area of cybercrime. There are these loan apps that are being used right now, once again, to start various kinds of ponzi schemes and to scam people. So, cybercrime, particularly these loan apps, is a very high priority. The second priority is to look at state finances. Obviously, because many states now, post-covid, are dealing with a lot of challenges in terms of their finances, and the switch from the National Pension System (NPS) to Old Pension System (OPS) is going to aggravate some of these public finance issues. Public finance is the second topic we intend to look at. The third topic we have been consistently working on—if you see over the last few years, we have done a lot of work in that area—is strengthening regulatory capacity. There, we have looked at, of course, the Insolvency and Bankruptcy Board. Now we have looked at CCI, and we should absolutely look at Sebi (and) we should look at RBI because what we need to do is ensure that our regulators are ready for a $5 trillion or $10 trillion economy so that we can expand into that comfortably. You have got to build regulatory capacity, skills, and expertise. We have a very sophisticated financial system now, particularly as far as the digital infrastructure is concerned, with direct benefits transfer, UPI, and everything that is happening in fintech, with digital currency coming in, all of these require us to be very vigilant in terms of regulations and innovation. We need enough regulatory capacity to deal with the issues and challenges confronting us because if laws and regulations are not clear, it is difficult to invest, and it is difficult to grow. That is the third area that we are looking at.

What is the spirit of the recommendations on the Competition Amendment Bill in terms of the kind of markets that we want to have?

The recommendations we have given on the Competition Amendment Bill, 2022, are in support of the government’s primary objectives—to bring India’s competition law to a world-class level and to enhance the ease of doing business. Bringing the competition law to world-class standards required two or three major improvements to the existing law. The first one was to bring those transactions that were not previously within the (merger regulation) thresholds because of very high threshold levels for assets and turnover. By bringing in the deal value threshold of 2,000 crore, it was possible to include those deals—that involve very important technologies or market shaping impact—within the purview of CCI. The second aspect, which is very important from the ease of doing business perspective, was the question of settlement and commitments. By introducing much more flexibility in the adjudication process with settlements and commitments now proposed for all parties, it could be possible to get to a negotiated settlement quickly without allowing appeal so that justice could be delivered quickly. The proposals in this regard brought out by the government (in the bill) are extremely important, and our goal was to support that, which is why we made some further suggestions on that. One was that we said it could be done without admission of guilt and that parties could withdraw from that process, giving them more flexibility. We also said that potentially, we could bring cartels into it as well simply because our thinking was that, this way, we could get a quick resolution of a cartel problem. Otherwise, it could also drag on for a very long time, as has happened in certain cases. A very important aspect of the settlement and commitment process is that it is non-appealable.

Besides reviewing the Competition Amendment Bill, the standing committee also proposed a Digital Competition Act in a separate report on the practices of Big Tech. Why should we have two laws on competition, and would these two be administered by different ministries?

No, absolutely not. We have suggested very clearly that the (proposed) Digital Competition Act also be administered by CCI. The reason why we think it is important to have two laws is that one (Competition Act, 2002) deals with ‘ex-post’ cases of anti-competitive practices (where the investigation is initiated after a breach is committed), which is what the traditional competition law is, for which we suggested these amendments I explained earlier, while the Digital Competition Bill deals with ‘ex-ante,’ that is, ‘before the fact’ anti-competitive practices (or forward-looking regulations). So, essentially, by putting in place an ex-post and ex-ante framework, we will have a competition framework in India that is world-leading. The Digital Competition Bill is proposed to function by identifying the small handful of systemically important digital intermediaries that do have a dominant role in certain markets. Then we say specifically that these companies are going to have to play by the rules, these are rules, and you also file a compliance report annually to make sure that these rules are followed. This is the ex-ante regulation.

How soon would you like the Competition Act amendment and the Digital Competition Act to be a reality?

We would like the Competition Amendment Bill to get passed in the Budget session. The committee has unanimously made a certain set of recommendations so the government can take whichever of the recommendations they think are suitable, and I think these Bills will be passed with support from everyone both in the Lok Sabha and Rajya Sabha. We think the Competition Amendment Bill should get passed absolutely in the Budget session. What I have suggested to the honourable finance minister also is that if the Digital Competition Bill can be introduced in the Budget session, then there will be a chance to refine it, hold stakeholder consultations and, hopefully, it can be passed in the monsoon session. If we can get both the bills passed between the budget and monsoon sessions, we will then have established for India the most well-thought-out, fairest and most open set of competition laws in the world.

CCI can have six members but now only has two members while the process of appointing a new chairperson is on. Is that enough for CCI to manage the additional work?

We think CCI’s staffing needs to be significantly expanded. Obviously, we have a much larger economy now. We are headed to become a $5 trillion, $10 trillion economy. In purchasing power parity, we are already the third largest economy, and of course, when we look at the digital economy, we are probably the second most important economy in the world after the US. Therefore, we have to have the expertise to deal with the complex issues associated with the traditional and digital economies because regulatory capacity has to be ahead of our economic growth.

You have also recommended a regulatory framework for news publishers to have fair and transparent contracts with digital gatekeeper firms or dominant internet search engines because of existing information asymmetry and bargaining power imbalance that exists in favour of the digital gatekeeper. What should be the modalities?

This is also something that is happening around the world. What has happened is that because the advertising exchanges are effectively controlled by one or two firms, it becomes very difficult for content providers like news publishers to be able to structure fair and open contracts with people who serve advertisements through these ad exchanges. Therefore, what we have suggested is that in these cases, there should be an opportunity for content providers to be able to establish through collective discussions contracts that are then both available for others to see and understand what is being done and, secondly, to also to be able to get from the digital intermediaries the necessary information about what is happening to the advertisements that are coming to their sites. That will encourage free and fair competition, innovation and growth. If we have a Digital Competition Bill, then this can be part of it.

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