We need a competition law regime that fosters rivalry
As a bill for a new competition regime is deliberated upon, our revised law should reduce regulatory discretion and help coordinate sectoral regulation to boost the intensity of rivalry
A law is a by-product of—and responds to—the challenges of the times it is enacted in. As the Standing Committee on Finance chaired by Jayant Sinha examines the Competition (Amendment) Bill, 2022, I recall deliberations from almost 20 years ago during the adoption of the Competition Act of 2002, helmed by his father, the then finance minister Yashwant Sinha.
One of the key questions was on the purpose of that legislation. As India had opened its economy a decade earlier, it was felt that the erstwhile Monopolies and Restrictive Trade Practices Act, which supposed big as bad, was not in sync with the times. Thus, like most regimes in the world, we decided to shift the focus from curbing monopolies to prohibiting anti-competitive practices.
The natural question to ask is what key problems the current bill aims to solve and how. Given the irrelevance of assets and revenue in a digital economy, the bill seeks to empower the Competition Commission of India (CCI) to review combination transactions of more than a specified deal value if either party has substantial business operations in India, but with an undefined term.
It also proposes to expand the scope of what “control” means by including concepts like “material influence”, which has again been left to the CCI’s imagination. The competition regulator is also empowered to consider commitments and settlements proposed by alleged wrongdoers without litigation, which in Western terms is called plea bargaining. This is welcome, as it would reduce the CCI’s burden. It would also have a say in the appointment of its director general, its investigation chief, as against the central government taking that call.
In effect, the bill intends to increase the discretion and powers of the CCI. One may argue that this is necessary to deal with increasing market uncertainty and the need for effective and efficient decision-making. However, this discretion is being sought at a time when concerns of a decline in the quality of regulation and performance of such unelected regulatory agencies are at an all-time high. It is thus important that such powers are accompanied by adequate checks and balances in the form of effective transparency, accountability to Parliament, and grievance redressal mechanisms.
However, unlike the principal law, this bill fails to reflect the state of the current Indian economy, the role of competition in it and key concerns it should address. It is not that there is none. Twenty years is a long time to evaluate the performance of a law. Even if the Competition Act was fully implemented only in 2007, a lot of time has elapsed.
While fairly successful in addressing anti-competitive actions, the competition regime has failed to percolate and instil a culture of competition across sectors and industries.
Despite three decades of liberalization, there are many instances of sectors in which specific types of firms get unfair preference over others. Those who want to compete fairly have to deal with prohibitive costs of land, capital, inputs, logistics, compliance, power and what not, thereby becoming uncompetitive.
Many industries still demand protection and concessions, instead of competing with global firms, and would any day vote for import barriers over getting export opportunities in lieu of enhanced domestic competition. These demands are music to the ears of unelected bureaucrats who get a high from discretionary power. The competition authority must not go down this path.
To the contrary, every regulator, other than for competition and consumer interests, must have an obligation to promote competitiveness. They must work to tear down constraints faced by firms. Regulators must not be able to use discretionary powers without proper explanation, and must always follow the principles of natural justice.
A leaf could be taken from the UK competition regime, under which regulators in the sectors of energy, communications, financial services, payments, health, railways and aviation go by the competition law. Appeals from the UK Competition and Markets Authority (CMA) and all sectoral regulators are heard by the Competition Appeal Tribunal in the UK, an independent judicial body that acts as an oversight body to promote rivalry across sectors. A similar model can serve India to promote a culture of competition.
Fortunately, while our bill does away with the proposal of an overarching governing board, which would have added another bureaucratic layer and slowed the regulator down, it still does not discuss important concepts like the abuse of collective dominance. It has not warmed up to the idea of mandating consultation among competition and sectoral regulators even after more than 10 years of its proposal (made during discussions to amend the law in 2011). The UK Competition Network is an established forum for cooperation between the CMA and sectoral regulators to encourage stronger competition across the economy. Something similar has been proposed in the National Competition Policy (NCP) that has been pending with India’s ministry of corporate affairs since 2011.
A competition law regime of our times must impose obligations to promote competitiveness across sectors. Incorporation of this objective in the preamble of the law can be a good start. Reinstating the Competition Appellate Tribunal and adopting the NCP would help pursue this objective.
Amol Kulkarni contributed to this article.
Pradeep S. Mehta is secretary general, CUTS International
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First Published:25 Aug 2022, 11:38 PM IST
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