A K Bhattacharya: More turf battles surface

RAISINA HILL

Even before the Competition Commission of India could start functioning and have a chairman in place, a fresh debate over its jurisdiction has started within the government.

The question being raised sounds fairly simple: should the Competition Commission decide on cases pertaining to anti-competitive practices in sectors which are already being governed by independent regulators?

In other words, whose responsibility should it be to determine if a merger between two telecom companies leads to dominance or a near-monopoly situation, adversely affecting consumers as a consequence?

Should it be the Competition Commission of India or the Telecom Regulatory Authority of India? Similar questions could arise in sectors such as insurance, power (which already have independent regulators in the form of the Insurance Regulatory and Development Authority and the Central Electricity Regulatory Commission) or civil aviation, which may soon acquire an independent regulator.

The answer, too, seems to be as simple, particularly if you raise this question with some of the independent regulators. The telecom regulator or the power regulator, for instance, has acquired an expertise in its respective sector.

That expertise has been accumulated over time while it has framed the rules and regulations according to which the industry must function.

There are technology issues that are peculiar to these sectors. It would, therefore, be more easy and apt if an independent regulator in a sector was also entrusted with the responsibility to determine whether a certain practice adopted by an industry player violates the competitive spirit.

The argument is somewhat similar to the one that the government used while insisting on setting up quasi-judicial appellate bodies for each of these areas.

The civil courts may not have the expertise to determine the aptness or the correctness of a regulatory order pertaining to technology or licensing conditions in a sector.

They may not also have the time, overburdened as they are with a huge number of pending civil and criminal cases. Thus, special appellate bodies to hear cases against a regulatory decision were justified and created.

The Competition Commission will have the time to adjudicate anti-competitive practices. But the argument is that it may not have the expertise to do so.

Consider another scenario. Assume for a moment that the recent decision of the Bangalore-headquartered United Breweries to acquire the liquor business of Shaw Wallace is taken up by the Competition Commission suo motu as a case where the takeover has created a dominant position for the acquirer company in the market, undermined competition and posed a threat to consumers.

Will anybody in the government or anyone among the current independent regulators say that the Competition Commission may not have the expertise to determine the case? That would be unlikely.

Similarly, if banks enter into an understanding among each other on a certain service-related issue that affects consumers by undermining competition and the Competition Commission takes that up as a case, will the Reserve Bank of India (RBI) raise a banner of protest? Once again, that is extremely unlikely to happen.

So, it seems that the debate over Competition Commission's jurisdiction is a turf battle being fought among the newly set up regulators.

The liquor sector has no regulator and, therefore, no question over jurisdiction is likely to be raised. The RBI, which is one of the oldest regulators in the system, has far too much on its plate to worry about its turf.

The real issue, it seems, is neither a question over anybody's turf or competence. The debate in the government over the jurisdiction of the Competition Commission has completely ignored the basic principle of regulatory adjudication.

Should the telecom or power regulator be permitted to decide on whether the regulations they have laid down in their respective sectors have led to anti-competitive practices? It makes sense to have another body, committed to preserving the spirit of competition in industry, to adjudicate all such matters.

Allowing the rule maker to decide whether the rules have undermined competition or not will itself be an uncompetitive practice.

The argument that the Competition Commission's functioning may overlap with those performed by some newly set up independent regulators is nothing but a red herring.

In fact, the Competition Commission will act as the nodal agency to determine if the rules of the game put in place by the regulators have resulted in anti-competitive practices.

Instead of an overlap, the Competition Commission will play a useful complementary role.

It is also naïve to believe that the Competition Commission will not have the expertise to understand the technology and other intricacies of a sector.

Neither the telecom regulator nor its counterpart in the power sector had any special expertise in these areas, except what they may have picked up during their long stints as civil servants in charge of different ministries.

There is no reason to believe that the Competition Commission members will not have the same skills as those of their counterparts in the newly set up independent regulators and fail to acquire the required expertise to adjudicate competition matters.

There is no denying that the regulatory system in our country needs fundamental reforms. But vesting the powers to decide on competition issues with regulators themselves is surely not one of them.

For the present, it is better if such powers remain with the newly created Competition Commission of India.