 "Indian firms more reluctant to comply with competition laws: Ashok Chawla")
The Competition Commission of India (CCI) has been in the spotlight, ever since it gave a spate of orders penalising companies across real estate, cement, automobiles, etc, for anti-competitive practices. CCI Chairman Ashok Chawla tells Sudipto Dey and Deepak Patel why Indian companies need to do more to comply with competition laws. Edited excerpts:
We are yet to have a national competition policy, though we have a competition law and a regulator. Do you think the absence of a clear policy in this regard is the reason why CCI appears to be misunderstood by industry?
A national competition policy is something of a precursor to the legislation (competition law); it isn’t something that is required or an absolute necessity. Globally, 120 countries have competition laws, and only a handful of them have competition policies.
Do you think the CCI should come out with some sort of guidance on how one defines market dominance or other related issues?
As required in the Act, we are involved in many advocacy events, through which we talk to various constituencies and fora, including businesses. If they are asking for specific instances of what constitutes dominance and what doesn’t, and above what percentage market share it is regarded as a dominant enterprise, these aren’t in the scheme of things at all. There are a number of factors on which dominance is based, but there is no quantitative or arithmetic safe harbour as far as dominance is concerned. Basically, the law hinges on behaviour, and behaviour isn’t quantitative.
I think the issue is a lot of businesses aren’t fully geared to be compliant with the competition law. While everybody pays lip service to it, they might not be following it down the line. It (the competition law) is not something limited to the chief executive or the board, but to every aspect of business---buying, selling, marketing or procuring material from others. If they are not following it, and it catches our attention or is brought to our attention by customers, other businesses or informants, according to law, we are obliged to examine it.
Precise numbers or quantification will never be possible. The various orders or judgments we pass, or those passed by appellate tribunals or the Supreme Court, will give them a sense of what is the jurisprudence, and how a thing is evaluated or examined. Beyond that, specific guidelines on dominance, etc, aren’t possible.
Despite the spate of CCI orders, consumers on the ground are yet to see benefits. For instance, there has been no change in agreements between builders and buyers, despite the CCI order in the DLF case.
That is because those things are still in appeal; they haven’t yet accepted those. The process of enforcement hasn’t been fully settled. We pass an order and they appeal against it in COMPAT (Competition Appellate Tribunal), which confirms or partly confirms it. Then, they appeal in the Supreme Court. They are contesting the fact that they are dominant, that there has been an abuse of dominance.
Our passing an order does not make it, ipso facto, the law of the land, unless it is upheld by the fora where appeal is possible.
One common grudge of industry is at times, it isn’t able to follow the economic logic of CCI orders. Many feel decisions aren’t backed by enough evidence and market realities aren’t considered.
If they are to write the order, we are not required. The only thing they can do is appeal. Anybody against whom an order is passed is always unhappy.
Issues such as clubbing of two companies under the same parent group or levying a penalty on the total turnover have been bothering industry.
The spotlight of the Act is on the enterprise. We cannot disaggregate the balance sheet of that company. There is an appeal that the turnover should be the relevant turnover; if it is a multi-product company, the turnover of that product alone should be considered. But that liberty is not available to us under the Act Parliament has passed. Till it is reversed or is challenged and the Supreme Court lays down the principle that only be the relevant turnover should be considered, not the entire turnover, we will keep following the same rule.
For the time being, even if they (companies) are hurt, or if they feel it is illogical, the main point is that is not the way the Act is written.
Earlier this year, you spoke about the three-six-three month timeframe---three months for a preliminary inquiry, six months for investigation and three months for issue of the final order. How has the progress been?
We have certainly progressed to some extent. But still, it takes longer than it should. We should be able to improve on that.
Currently, what is the average time taken from the beginning to the passing of a final order?
It is very difficult to give an average time. Also, that will be misleading. But you could say it takes a year and six months, instead of a year, as envisaged.
Did you expect this kind of reaction from industry? Do you think it is somewhat misunderstood?
No, it isn’t. Nobody likes to be penalised. Everybody says ‘this is good legislation, a good activity and CCI is doing a good job’, but add ‘don’t do it on me, do it on the next person’. There is no question of misunderstanding.
Why does it seem there’s a perception gap between industry and the commission?
I do not think there is any gap. They know what the law is; all they have to do is comply. Multinational companies have no problem in complying because they are used to doing it in their jurisdiction. Indian companies are shy or reluctant to comply.
So, are Indian companies more reluctant?
Yes, because for them, it is new. The multinationals have lived with it in their jurisdiction for years, wherever they come from---the US, the UK, etc. They know the laws and the relevance of market regulations. For enterprises in our country, it is relatively new. So, they are learning to cope with it. It is not as if there is some gap or misunderstanding; they only have to operationalise the procedures and systems to ensure compliance.
We are yet to have a national competition policy, though we have a competition law and a regulator. Do you think the absence of a clear policy in this regard is the reason why CCI appears to be misunderstood by industry?
A national competition policy is something of a precursor to the legislation (competition law); it isn’t something that is required or an absolute necessity. Globally, 120 countries have competition laws, and only a handful of them have competition policies.
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The law is what Parliament has enacted. In a sense, the law encompasses the philosophy of the policy. So, there might or might not be a national competition policy. That does not, in any way, dilute or take away from the provisions of the law.
Do you think the CCI should come out with some sort of guidance on how one defines market dominance or other related issues?
As required in the Act, we are involved in many advocacy events, through which we talk to various constituencies and fora, including businesses. If they are asking for specific instances of what constitutes dominance and what doesn’t, and above what percentage market share it is regarded as a dominant enterprise, these aren’t in the scheme of things at all. There are a number of factors on which dominance is based, but there is no quantitative or arithmetic safe harbour as far as dominance is concerned. Basically, the law hinges on behaviour, and behaviour isn’t quantitative.
I think the issue is a lot of businesses aren’t fully geared to be compliant with the competition law. While everybody pays lip service to it, they might not be following it down the line. It (the competition law) is not something limited to the chief executive or the board, but to every aspect of business---buying, selling, marketing or procuring material from others. If they are not following it, and it catches our attention or is brought to our attention by customers, other businesses or informants, according to law, we are obliged to examine it.
Precise numbers or quantification will never be possible. The various orders or judgments we pass, or those passed by appellate tribunals or the Supreme Court, will give them a sense of what is the jurisprudence, and how a thing is evaluated or examined. Beyond that, specific guidelines on dominance, etc, aren’t possible.
Despite the spate of CCI orders, consumers on the ground are yet to see benefits. For instance, there has been no change in agreements between builders and buyers, despite the CCI order in the DLF case.
That is because those things are still in appeal; they haven’t yet accepted those. The process of enforcement hasn’t been fully settled. We pass an order and they appeal against it in COMPAT (Competition Appellate Tribunal), which confirms or partly confirms it. Then, they appeal in the Supreme Court. They are contesting the fact that they are dominant, that there has been an abuse of dominance.
Our passing an order does not make it, ipso facto, the law of the land, unless it is upheld by the fora where appeal is possible.
One common grudge of industry is at times, it isn’t able to follow the economic logic of CCI orders. Many feel decisions aren’t backed by enough evidence and market realities aren’t considered.
If they are to write the order, we are not required. The only thing they can do is appeal. Anybody against whom an order is passed is always unhappy.
Issues such as clubbing of two companies under the same parent group or levying a penalty on the total turnover have been bothering industry.
The spotlight of the Act is on the enterprise. We cannot disaggregate the balance sheet of that company. There is an appeal that the turnover should be the relevant turnover; if it is a multi-product company, the turnover of that product alone should be considered. But that liberty is not available to us under the Act Parliament has passed. Till it is reversed or is challenged and the Supreme Court lays down the principle that only be the relevant turnover should be considered, not the entire turnover, we will keep following the same rule.
For the time being, even if they (companies) are hurt, or if they feel it is illogical, the main point is that is not the way the Act is written.
Earlier this year, you spoke about the three-six-three month timeframe---three months for a preliminary inquiry, six months for investigation and three months for issue of the final order. How has the progress been?
We have certainly progressed to some extent. But still, it takes longer than it should. We should be able to improve on that.
Currently, what is the average time taken from the beginning to the passing of a final order?
It is very difficult to give an average time. Also, that will be misleading. But you could say it takes a year and six months, instead of a year, as envisaged.
Did you expect this kind of reaction from industry? Do you think it is somewhat misunderstood?
No, it isn’t. Nobody likes to be penalised. Everybody says ‘this is good legislation, a good activity and CCI is doing a good job’, but add ‘don’t do it on me, do it on the next person’. There is no question of misunderstanding.
Why does it seem there’s a perception gap between industry and the commission?
I do not think there is any gap. They know what the law is; all they have to do is comply. Multinational companies have no problem in complying because they are used to doing it in their jurisdiction. Indian companies are shy or reluctant to comply.
So, are Indian companies more reluctant?
Yes, because for them, it is new. The multinationals have lived with it in their jurisdiction for years, wherever they come from---the US, the UK, etc. They know the laws and the relevance of market regulations. For enterprises in our country, it is relatively new. So, they are learning to cope with it. It is not as if there is some gap or misunderstanding; they only have to operationalise the procedures and systems to ensure compliance.