India is, in many respects, a full-fledged open market economy. This is perhaps best underscored in the recent statement of a Union minister of the NDA government -- “When Prime Minister (Narendra Modi) says the government has no business to be in business, it is not a slogan. It is a philosophy”. For the record this was petroleum minister Dharmendra Pradhan’s remark to news agency PTI in early November.
Well, if the government pursues this philosophy in right earnest, we can only expect market forces to become more intense. But text book economics has taught us that inthe real world hardly any market is perfect. In India, as in most other countries, the market structure either shows strong traits of monopolistic competition or oligopoly. Therefore, to ensure fair play in the market, some regulatory oversight is required. And this brings us to the topic of our discussion -- the Competition Commission of India (CCI).
The competition watchdog, or the CCI, which replaced the Monopolies and Restrictive Trade Practices Commission, was conceived to promote competition and private enterprise especially in the light of the economic reforms introduced in the country in the early nineties. Set up as a quasi judicial regulator under the Competition Act, 2002, it became operational in 2009.
Ten years have passed since then and perhaps it will not be inappropriate to take a look at how effective the CCI had been over these years as a fair-play watchdog.
To the CCI’s credit, during its decade-long operation so far, it had been able to bust cartels across sectors, including entertainment, pharmaceuticals, public procurement, transport, and construction. It had conducted raids to crack down on anti-competitive behaviour and held current and former employees of errant companies liable for their conduct. Moreover, the competition watchdog had expeditiously cleared merger notifications and had been proactive in passing leniency orders.
However, when it comes to the enforcement of penalties, the CCI’s record does not look very impressive. According to a recent Economic Times report, till March last year, the CCI had adjudicated upon 135 cases and levied a total penalty of Rs 13,523 crore. However, it has so far collected only Rs 55 crore by way of fine, which is a piffling 0.4 per cent of the total penalty. This low realisation rate is largely because of the companies, involved in such matters, challenging the CCI orders in various judicial forums such as the National Company Law Appellate Tribunal (NCLAT), the Supreme Court etc. and the cases being stuck at various stages of litigation.
According to experts, legal disputes regarding penalties occur because there is often lack of transparency on how the CCI arrives at the fine amount.
On a global perspective, anti-trust bodies in the US and the EU are more nimble in their functioning. For example, the US Department of Justice collected $172 million in criminal penalties in fiscal year 2018 (October-September). The highest it had collected was $3.6 billion in fiscal year 2015. It has also sent several executives to prison.
While collecting penalties is not a goal in itself for the CCI, its ability to impose and enforce fines can foster a culture of competitive compliance in the country. Thankfully, some of the recent recommendations made by the Competition Law Review Committee (CLRC), can make the CCI more proactive in the resolution of cases. Among other things, the CLRC has said the CCI should issue “guidelines on imposition of penalty to ensure more transparency and faster decision making which will encourage compliance by businesses”. It has also suggested the introduction of settlement and commitment procedures to help avoid pendency of cases. The CLRC also wants the formation of a dedicated NCLAT bench for competition cases, given that the NCLAT is overburdened with cases under the Insolvency and Bankruptcy Code (IBC), 2016.
There is no doubt that the effective implementation of the CLRC recommendations can bring the CCI closer to its global peers and help it discharge responsibilities judiciously in this fast-changing world.
Given the evolving ways in which business is done globally, the competition watchdog, going forward, can face several challenges in tackling antitrust issues involving the new-age economy. The growing digital economy and online marketplace model is gaining importance from a competition perspective. The CCI obviously needs to be well equipped to tackle any competition issue arising out of deals in the new-age economy.
It must be kept in mind that if competition issues are not dealt with firmly then the ultimate loser will be the large pool of consumers in the market. The powers vested in the CCI are tools available with the watchdog to ensure this competition compliance.
In the 21st century, it is perhaps anti-trust bodies, such as the CCI, that need to play the role of “the invisible hand” that Adam Smith mentioned in “An Inquiry into the Nature and Causes of the Wealth of Nations” in 1776 to ensure fair play in the market!
Abhijit Kumar Dutta is a freelance writer. Views are personal.
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