A Bill is likely during the next session of Parliament to empower the Competition Commission of India (CCI) to not only better investigate and enforce rules but also have a significant say in mergers and acquisitions. It is also set to take on existing monopolies in the public sector. CCI Chairman Ashok Chawla talks to Sushmi Dey on the body’s proposed avatar, conflict with sectoral regulators and policy-induced distortions in sectors such as coal and oil. Edited interview:
Do the proposed amendments to the Competition Act empower CCI to do a wider and better job?
These amendments are based on the experience during the past three years and to bring certain clarifications, changes felt to be necessary but not part of the Act. Once these take effect, we will have (more) power. We will be better empowered for both investigation and enforcement. In any case, even as the Act stands today, it is a very robust one, based on good legal principles from various jurisdictions.
What are the new powers proposed and what are the specific changes expected in your working and investigation?
Of the 15-odd amendments, three are crucial. One, the government is putting in a provision empowering it to raise or lower the threshold level for approval of combinations by the Commission. This is in the public interest. Two, the investigation process by the Director General (DG) is sought to be strengthened, by giving powers of search and seizure to the head of CCI. At present, the DG has to get a warrant from a judicial magistrate.
Third-there has been a lot of debate and some misconception on the sectoral regulator vis-a vis the Commission. The Act provides for what is called voluntary consultation between the two. It will now be amended to say ‘shall’ instead of ‘may’, to make it mandatory for us to consult them on matters concerning their sector and for them to consult the CCI where there are market or competition-related issues.
Are there competitive pressures or clashes with regulators like Trai (for telecom) and RBI (banking)?
Not on the law or ambit of jurisdiction. Some regulators in some ministries have said this work can be done by those who oversee those sectors. According to us and what is good international practice, that is misplaced. Sectoral regulators are basically there to look at technical issues of those areas, look at or decide economic issues related to rates, licensing, etc. But issues of market and competition, of actual behavior, are with CCI. So, basically, their role is ex ante; ours is ex post.
In that sense, the jurisdictions are fairly well carved out and I think because these are all new regulatory bodies, there are these initial tensions and misgivings, among the regulators and, more important, among various stake holders. But if the regulatory architecture is looked at holistically in terms of letter and spirit, I don’t think there is much scope for conflicts.
But given the nature of work, there is bound to be overlap in functions. How will CCI handle this and work with sectoral regulators?
The best way is robust communication with the various economic regulators, which we will try to have.
The proposed amendments would also bring absolute powers for the Commission to handle mergers and acquisitions (M&As). In the past, there has been criticism that CCI does not have the wherewithal to handle these. Will you build expertise to monitor acquisitions across sectors?
Capacity and expertise building is an ongoing and a dynamic process. Having said that, I think whether expertise is available is now not an issue. Perhaps it was a year before, when the M&A provisions were getting ready to be enforced. We looked at 80-plus cases across sectors, including companies merging abroad but with a possible impact on the market in India. All those orders are in the public domain. They are all being settled and decided at the preliminary stage, within the self-imposed discipline of 30 days.
Certain sectors have concerns that CCI, while deciding on M&As, might not look into the public interest.
The Act’s preamble says ‘Protect the interest of the consumers’, apart from other things. So, every kind of public interest in a way gets subsumed in the ‘interest of the consumers’. Two, there are specific factors in Section 20, which the Commission has due regard to in considering matters related to M&As, not specific to any sector or particular activity but covering so many areas that any activity gets covered. The preamble plus the application of many of these general principles in this Act will allow us to look at any particular area, including those in which the public interest dimension is or may be larger than other dimensions.
How confident are you that CCI will be able to address properly issues of sectors that cover the public interest?
I do not think there is any particular activity or sector which will not fit into the overall architecture of the Act. Essentially, we will have to see as it goes along and as the provisions of the Act get enforced. Assuming, of course, that the power to monitor M&A is given to CCI.
Some economists feel there is no need for a competition watchdog like CCI for tradable goods because of existing checks in the form of imports, etc.
Good in theory. Tradable doesn’t mean they are an easily available substitute or there are no entry barriers. Other developed economies all have competition laws, the same kind of principles. This is a shade of opinion which comes from those who believe the market will regulate itself and you do not need any other regulator. That conceptual position is one end of the spectrum and not how the real world operates. More than 110 countries have competition rules, many of which have come in the last 10-15 years. Evidence that this is a genuine concern with sovereign countries and policy makers.
There are also public sector monopolies. Is CCI also looking into these or does it lack teeth to take on the government?
There are two kinds. One, clear monopolies under the law. For instance, in coal, and we have at least three or four cases on against the subsidiaries of Coal India. The whole coal sector is state controlled and it’s a monopoly by virtue of an Act. So, we will be looking at those cases where parties have made out a case of abuse of dominance in terms of the fuel supply agreement, which are one sided and they are not getting any relief and they have nowhere else to go to. We will take a call on those cases once the detailed investigation is over.
For the other instance, there’s the oil sector, where legally and on paper we are told by the petroleum ministry that they do not have any say, that the public sector oil companies decide on prices (of petrol). Yet, it is a fact that public sector oil companies all decide prices in tandem; there is very little difference. Of late, they have started keeping a difference of one or two paise to technically make it feel they are not.
Essentially, many of these sectors are transiting from the old economy to the new economy regime and there are sectors with many policy-induced distortions. The Act does not give them any exemption; there is neutrality between all kinds of enterprises. So, we will be pushing in these areas as we go ahead.
