Ready for action, soon

With the Lok Sabha passing the Competition (Amendment) Bill, there is finally some hope for the country's Competition Commission, which was set up way back in 2003. The original enactment should have given the country a modern competition law to replace the antiquated Monopolies and Restrictive Trade Practices Act, but matters got held up due to a petition in the courts against the Bill. There was also a dispute over whether the powers of the courts were being taken away by the bureaucrats. Fortunately, all this is now water under the bridge, and once the Rajya Sabha passes the new Bill, the ground will have been cleared for some real action. Immediately, this will mean several changes in the way competition and monopoly are defined. The existing law, for instance, sets certain threshold limits, and firms with market shares and sizes beyond this are deemed to have monopoly power. Under the new Bill, this definition has been junked in favour of one that defines monopoly power in terms of its abuse.

The new law has been long overdue. It is common knowledge that price fixing and cartelisation are routine in many industries. Anti-competitive behaviour abounds and goes unchecked. Many mergers and acquisitions, like Coca-Cola buying Parle brands and Reliance Industries swallowing up Indian Petrochemicals Corporation Ltd, should certainly have been subjected to a competition test. But when Reliance Infocomm (as it was then called) began its mobile operations some years ago, at prices lower than those prevailing, though competitors termed it predatory pricing, it may have passed muster since the definitions under the new law require significant market power, which as a newcomer to the telecom market Reliance Infocomm did not have. How effectively the Competition Commission will be able to deal with such issues will depend in part on the staffing of the Commission; competent economists and lawyers will be critical components of the team.

There is also the question of which forum is supreme, now that the country has several regulators in the infrastructure sphere as well. While the telecom regulator has deemed that mergers and acquisitions are not to take place if this results in the number of players falling below a certain level, this is quite different from the "abuse matters, not size" approach adopted in the competition law. Similarly, the telecom regulator is willing to live with a lot of anti-competitive practices by the government-owned Bharat Sanchar Nigam Ltd, much of which would be frowned upon by the Competition Commission "" so should telecom firms hurt by this approach go to the telecom appellate tribunal or the Competition Commission? The government has said in the past that the sectoral regulators will lay down the policy for each sector while the Competition Commission will create an overall framework for policy, but this may not be a tenable position and the contradictions will surface as events unfold. But instead of anticipating all eventualities now, it is better at this stage to wait and see how things pan out, and make course corrections as the issues get etched more sharply. In this context, the Competition Commission's proposal to have a Competition Policy Oversight Council, with a mandate to review various competition laws in the country, is a good idea. Over time, as the country's regulators and courts understand the contemporary competition lexicon, and case law gets developed, matters will (hopefully) get resolved on their own.