Jun 06, 2013, 11.01 AM | Source: CNBC-TV18

CCI probes CAG report on telcos' role in spectrum auction

The CCI is examining a Comptroller and Auditor General (CAG) report that alleges that telcos formed a cartel to cause the failure of the spectrum auction in November.

The Competition Commission of India (CCI) is probing if telcos were responsible for the failure of the spectrum auction in November reports CNBC-TV18's Malvika Jain. In an interview to CNBC-TV18, CCI chairman Ashok Chawla said the committee is examining a Comptroller and Auditor General (CAG) report that alleges that telcos formed a cartel to cause the failure of the spectrum auction in November. 

When asked, just like the tax authorities have a system of advanced rulings, if it was possible to provide and create such a system for competition related issues as well, he said, " There is no scope for advanced rulings on competition issues. I don’t think we can have any system because it is not an executive decision. It is a quasi-judicial process based on investigation and evidence."

But, about the issue of approvals for mergers and acquisitions (M&A), he said CCI has started the process of informally allowing companies or lawyers to come to the them and discuss what they propose to do.

CCI plans a revamp of the organisation’s structure to handle an increasing workload. It also hopes to reduce M&A compliance burden on companies.

Here is the edited transcript of his interview with CNBC-TV18

Q: The finance minister recently said that the role of the commission has to be enhanced. It has to maybe partner with other sectoral regulators and ensure that competition regulation becomes more effective in India. So going forward, what do you think would be the role of CCI? Do you think that all the regulators should refer all matters related to competition to CCI or maybe we can have an arrangement wherein just like the law ministry has officials deputed to various departments, can't there can be some kind of a set up for the CCI as well?

A: The general principle is that the sectoral regulators look after matters relating to their sector, while issues of competition and fair play in the market are the cocenrn of the CCI. This is an universally accepted paradigm and has been built into the Competition Act. We refer matters to sectoral regulators for their advice.

Q: But how do the sectoral regulators refer matters to you? How does TRAI for instance partner with CCI because in the TRAI Act there is no specific provision that mandaates that it has to refer the matter to the CCI?

A: No, it may not. But it can always come to us for advice and opinion. However, that doesn’t prohibit the CCI from intervening if there is sufficient evidence of carterlisation or an absence of fair play.

Q: Does that not in a sense make CCI a super regulator because on every decision the CCI can intervene? Where do you draw the line?

A: I wouldn't say it is a super regulator. But if you look at the overarching issues of the market and competition, the Competition Commission does have an across-the-sector-perspective.

Q: The finance minister mentioned that the CCI should not turn into another bureaucracy and stifle growth. How will you ensure that CCI actually becomes a partner in growth in India? Some lawyers and various experts have opined that the hefty penalty imposed by CCI will not solve the problem of carterlisation? How will you ensure that CCI actually partners growth in India?
A: I don’t know what is going to solve the problem then. We don’t come in and impose penalties on the basis of whim and fancy. There is a very detailed process of investigation and the commission hears the companies which are alleged to have made violations before the penalty is imposed. There has to be adequate evidence, either direct or circumstantial, for us to conduct a probe and initiate punitive action.

Q: There are certain companies who feel that while deciding the quantum of penalty, the CCI does not accord them an adequate hearing, do you agree with this view?

A: All companies are given sufficient opportunities to present their case. The Act, as it stands today, doesn’t provide for specific hearing.

Q: Do you think that needs to be changed?

A: I believe that this is part of the Competition Act Amendment Bill, which has been tabled in Parliament. So, if that goes through and becomes law, then it will binding on us to follow that principle.

Q: Just like the tax authorities have a system of advanced ruling, is it possible to create such a system for competition-related issues as well to provide clarity to industry but also lighten some of the commission's workload?

A: There are two different aspects of the Competition Act — One, judging behaviour based on evidence. It is a quasi-judicial process based on investigation and evidence. So, I don’t think there is any scope whatsoever for engaging with industry or giving any advanced ruling.

Two, the CCI grants approvals for mergers and acquisitions (M&A). We have already made the process transparent by informally allowing companies or lawyers to come to the CCI and submit their proposals and seek clarifications.

Q: Is it possible to have a formal setup wherein industry and CCI can engage with each other?

A: No amount of professional engagement will substitute the decision taken by the commission which is a body of seven members.

Q: Eventually isn't it the file that is put up by the professionals on the basis of which decisions are taken?

A: That is not binding or final. Eventually, it will depend on what the commission, as a judicial body, decides. In executive matters and decisions such as taxation there is a scope for advanced ruling or telling people what the decision is going to or likely to be. In cases which are based on evidence, on decisions within the corners of the law, it may not work.

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