'Rightsizing' Competition Commission of India: Costs may outweigh benefits

The Cabinet decision on ‘rightsizing’ the Competition Commission of India (CCI) to four members from its current strength of seven is likely to lead to a swifter disposal of cases. But it may also lead to a complicated situation in case of a tie and dearth of experts in the Commission.

Legal experts, including former CCI members, that Business Standard spoke to said that the government decision is not likely to change the daily functioning of the Commission. What is likely to change is the time taken by the Commission to arrive at a decision.

“The present number of members of the CCI was creating problems in quick decision-making. Under the CCI Act, all members in office have to sign on an order. Large numbers make this difficult to implement. This has been flagged for several years. The reduced strength makes the CCI a potentially faster decision-making body,” said Ashok Chawla, former chairperson, CCI.

By restricting the number to three plus one, the government has limited its options, Chawla said. He added there could be a demand for members to be now experts in new disciplines in the future. Echoing Chawla’s views, Augustine Peter, current member of the CCI, said, “Rightsizing would not have any adverse impact on the power of the Commission per se, though more members could have made possible the induction of experts from more disciplines.” Peter also added that the CCI was not consulted by the government before taking its decision. 

A former member of the Commission said that reducing the number of members is not likely to make any significant difference. The number of cases filed was falling after the recent relaxation of the merger control regime.

The impact though will be on the contentious issue of breaking potential monopoly or abuse of market dominance. The CCI data from its annual reports shows the number of orders against “anti-competitive conduct” has hovered at above 90 since 2013-14. There was a spike in 2015-16 at 127, but has come down to 78 by 2016-17.

Initially envisioned as a 10-member Commission, the body was put in place through the CCI Act enacted in 2003. The CCI was originally supposed to have had benches in different cities.

Some legal experts that Business Standard spoke to actually fear that the government’s decision to downsize the CCI is more contentious than is appreciated. A problem could arise in case of a tie in a four-member body because experts said the chairperson cannot go for a casting vote as well as normal vote.

“The change of composition of the CCI from seven to four seems to be ending the era of ‘dissent’ decisions.  The second or casting vote, according to Section 22(3), may cause more problems than solutions since Section 2(j) defines ‘member’ to include the ‘chairperson’ as well. Casting two votes by chairperson in adversarial proceedings may not stand the judicial scrutiny of a writ court,” said Manas K Chaudhuri, partner, Khaitan & Co LLP.

Experts also said reducing the strength will weaken the efficiency of the CCI. “It is a surprising decision, considering that the Commission needs to be strengthened and bolstered rather than be cut down. There are many pressing issues that are required to be addressed,” said Vaibhav Gaggar, managing partner with Gaggar & Partners.

Data from the CCI’s annual report also does not paint a pretty picture about its performance to date. While the Commission imposes monetary penalties, it has only collected a fraction of its imposed amount. As opposed to total penalties of Rs 130 billion imposed between 2011-12 and 2016-17, it has realised only Rs 1.09 billion. A part of this could be because appeals against the CCI orders have soared to 39.2 per cent of the total orders at the end of 2016-17, up from 26.1 per cent the year before. A closer look at the appeals shows that the number of appeals allowed by the Competition Appellate Tribunal (Compat) has also soared over the last two years. In 2015-16, while 49 appeals were disallowed, 87 were allowed. Similarly, in 2016-17, 47 appeals were disallowed, while 69 were allowed.

Big-ticket penalties stayed by the appellate tribunal or the courts pertain to cement and automobile giants like Jai Prakash Associates (Rs 13.2 billion), Ambuja Cement (Rs 11.6 billion), ACC (Rs 11.5 billion), Tata Motors (Rs 13.5 billion), and Maruti Suzuki (Rs 4.7 billion), among others.

Compat has now been subsumed into the National Company Law Appellate Tribunal. The number of pending investigations by the director-general has also soared to 129 at the end of March 2017, up from 52 at the end of the previous financial year.