The recent controversy regarding the conflict of jurisdiction between Competition Commission of India (CCI) and other sectoral regulators like Reserve Bank of India (RBI) and Telecom Regulatory Authority of India (TRAI) has generated a lot of interest in public. It has been reported that Government is considering ‘clipping the wings’ of CCI. If the government goes ahead with any such plans, it would be a serious setback to an institution which has the power to bring the true benefits of market economy to consumers in India. Moreover, there is no reason why the sectoral regulators cannot have concurrent jurisdiction with CCI if the specifics of their jurisdiction is clearly defined and are mutually respected by the regulators. The much hyped turf war is non-existent because the turfs on which the CCI and sectoral regulators play are broadly different with only slight overlaps. Regulation of an industry has three primary dimensions; technical, economic and competition. These three elements have to be distributed between the sectoral regulators and competition authority. Different countries have used different kinds of permutations and combinations vis-à-vis these elements in order to achieve coherence in the regulatory environment. For instance Australian Competition and Consumer Commission covers access regulation, regulations of prices of public utilities and a variety of other regulatory tasks while the state regulators undertake technical and economic regulatory responsibilities. In India, Competition Act (governing law for CCI) itself, restricts the role of CCI to competition issues. The preamble of the Act states the purpose of CCI; “…to prevent practices having adverse effect on competition, to promote and sustain competition in the markets, to protect the interest of the consumers and to ensure freedom of trade…”. Hence, Sectoral Regulators still have a free hand in the technical and economic regulation of their respective industries. They can rest assured that CCI is not going to invade their jurisdiction. The only development is that previously, competition in these industries was not being regulated and now CCI has been established to do the needful in this regard. A clear example of the requirement to regulate competition is the recent CCI notices to banks asking them to explain the imposition of penalty on borrowers for pre-payment of home loans. CCI’s notice is based on the premise that pre-payment penalty acts as a barrier by preventing customers to shift their loans from one bank to another bank which offer better interest rates. Pre-payment penalties have been in existence for a long time. However, its impact on the Banking sector was never detected or analysed by RBI, primarily because RBI officials have not been trained to do so. In fact just after CCI’s intervention a senior RBI official gave the following statement to media – “We will direct banks to do away with the prepayment penalty in case of loans disbursed in future”. It is clear that a regulatory loophole existed which needed to be filled by CCI. Similar loopholes vis-à-vis competition exists is other sectors and they need to be addressed by CCI. As far as overlapping of jurisdictions is concerned, the requirement is to create systems to ensure cooperation between CCI and other Sectoral Regulators. Both CCI and the Sectoral Regulators have their areas of expertise and both cannot replace each other. It may also be noted that the objectives of CCI and sectoral regulators are complementary. While sectoral regulators have socio-economic benefits as their objective, CCI’s objective is to promote and sustain competition in the market in order to protect the interest of the consumer. Cooperation will make sure that the activities of the regulators is well coordinated, thereby ensuring best use of their respective resources. It may also happen that conflicts may arise due to different prioritisation of their respective goals by the CCI and Sectoral Regulators. Even the different method used for resolution of same problem may cause conflict. However such conflicts can be sorted out through consultation. It is for this reason that Competition Act provides for consultation between CCI and other statutory authorities i.e. sectoral regulators here, by way of reference. Government may also consider creating ‘regulator’s forum’ (as has been done in some other countries) which would allow CCI and Sectoral Authorities to work in close cooperation and coordinate their action. This would also allow the regulators to achieve policy coherence while simultaneously getting sensitised to competition law. It cannot be denied that there is a requirement of competition in all the industries in order to improve on their efficiencies and benefit the consumer. Temporary exceptions for certain sectors may be acceptable because certain sectors in India may not be ready to face open competition. But a complete exclusion of any sector from CCI’s jurisdiction would be a tragedy and amount the defrauding Indian consumers of the benefit of an efficient industry.
Clash of Regulators
Posted by editor | Tags: antitrust, Competition Act 2002, Competition Commission of India, Competition Law, Conflict of regulators, Regulators | Categories: Uncategorized | 200 CommentsSec 32 – An albatross around CCI’s neck?
Posted by editor | Tags: Competition Commission of India, Competition Law, Extra-territorial jurisdiction | Categories: Uncategorized | 185 CommentsWith the young Competition Commission of India (CCI) slowly spreading its wings to soar up in the sky, some very interesting questions regarding its extra-territorial jurisdiction arise. Section 32 of the Competition Act, 2002 (CA02) gives CCI, the power to enforce Indian Competition law against foreign entities whose actions have ‘appreciable adverse effect’ on competition in the relevant Indian market. The question is, will CCI be able to use its powers to control International mergers or export cartels, which are being promoted and protected by their own governments, if such International mergers or export cartels are having an adverse effect on competition in Indian market?
Sec 32 is primarily a statutory embodiment of ‘effects doctrine’, which is the antithesis of the ‘principle of territoriality’, dealing with jurisdiction. It is the brain child of US jurisprudence. It was in the case of US v. Aluminium Company of America et al, famously known as the ‘Alcoa case’ that Court of Appeal for the Second Circuit held ‘that any State may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders’. This doctrine was given statutory recognition in US in 1994 by the International Antitrust Enforcement Assistance Act. Similarly European Union (EU) also recognises this concept, though with minor theoretical differences.
Hon’ble Supreme Court of India recognised this doctrine in the famous ANSAC case but held that under the MRTP Act, 1969, MRTP Commission could take action only against the Indian leg of the restrictive trade practice. This restriction has been done away with under the new Competition Act, 2002. Therefore, CCI would have complete power to take action against a foreign entity in a similar situation.
However, Cross-border enforcement of competition law is not about simple implementation of domestic laws. It’s a complex interplay of delicate diplomacy and brute economic strength. For instance most of countries, including India, have so drafted their laws that they cannot be enforced against ‘export cartels’. The US Foreign Trade Antitrust Improvements Act ensures that its ‘export cartels’ are not affected by the US competition law unless it has a direct, substantial and reasonably foreseeable effect on the US markets or on the US exports. As a matter of fact, US government takes active interests in protecting its ‘export cartels’. For instance, in 2000, when the ANSAC case was still pending in the Supreme Court, it is alleged that the then US Trade Representative, Charlene Barshefsky and the US Secretary of Commerce, William A. Daley, sent a joint letter to the then Indian Minister of Commerce and Industry, Murasoli Maran and reportedly threatened that up to USD 1 billion of India’s duty free imports of a variety of goods under the Generalised System of Preferences into the US could be jeopardised over the embargo on US soda ash. Possibly, it was a result of this letter, that in the 2001-02 budget Government of India reduced the import tariff on soda ash from 35% to 20%.
Similarly, in cases of certain mergers with multinational aspect, the interest of different countries may come into conflict. For instance, the merger proposal of Boeing and McDonnell Douglas, both US based companies, was enquired into by both US Department of Justice (USDOJ) and European Commission. While USDOJ approved it, European Commission rejected the proposal as being anti-competitive. It was only after intense political pressure and threats of a trade war, emanating from Washington that a compromise was reached between Boeing and the EU Authorities, and the merger was approved by the European Commission.
It would be interesting to see how CCI would deal with such situations which are bound to arise in future. Would CCI flex India’s newly found, recession threatened, economic muscles and take action against such ‘export cartels’ or merger or will it succumb to the pressure of bigger economic powers and give way?
One possible solution for CCI and India would be to goad other countries in South Asia to form a regional framework for competition. Such regional framework can resist or build diplomatic pressure on a foreign government which may try and support its export cartels or domestic firms, indulging in anti-competitive practices. However, considering the volatility of this region and mutual animosity of the member nations, it would be a herculean task to build consensus over any such issue.
The future, it seems, is pregnant with opportunities. CCI can be instrumental in bringing vast benefits to Indian Consumers. But it is to be seen, whether CCI becomes a superhero of consumer interest or Section 32 proves to be an albatross around its neck.
Should certain weak sectors be excluded from the jurisdiction of CCI?
Posted by editor | Tags: CCI, Commission, Competition, India, liberalisation, National, Policy, Protection | Categories: Uncategorized | 1 CommentCompetition Commission of India: A game changer?
Posted by editor | | Categories: Uncategorized | 65 CommentsIn his recent article in Economic Times, Mr. Arvind Panagariya, (Professor at Columbia University and Non-resident Senior Fellow at Brookings Institution) called CCI a ‘game changer’. Citing the matter of pre-payment fine imposed by banks, which is currently under investigation by CCI, Mr. Panagariya argues that CCI is probably the most important reform under the UPA government.
Support for this argument can be drawn from a catena of cases presently under investigation by CCI; the sectors under investigation vary from films to Stock Exchanges to Shipping to DTH manufacturers.
However the other opinion says that CCI is just another regulator which would increase the regulatory hurdles for the businesses in India. This aspect gets highlighted vis-a-vis the review of combinations (i.e. mergers, acquisitions etc) by CCI.
So the question is; Is CCI really a game changer or just another regulatory hurdle? What does corporate India make of it?
