For a robust competition law

In the past seven years, the country's youngest regulator- the Competition Commission of India - has seen many of its headline-hogging orders make corporate India take note of fair trade regulations. There have also been challenges to its jurisdiction. Legal experts share their insights on measures to make the competition law more effective

Ashok Chawla, former chairman of the Competition Commission of India (CCI), in a recent interaction with this newspaper before demitting office, said he deemed upgrading of the institutional capacity as the foremost challenge for the fair-trade regulator. "Typically, it takes five to six years for the regulator to mature," he told Business Standard.

India's nascent competition law is currently in its seventh year - the Competition Act, 2002, came into force in May 2009. With a new chairman at the helm - Devender Kumar Sikri, a retired Gujarat-cadre IAS officer - it may be just the right time to look at ways to make the competition law more effective. Since 2009, the commission has handled 688 anti-trust cases, and around 370 combination matters. It has cracked down on cases of cartelisation (in the case of cement and airlines companies), abuse of market power (those involving NSE, DLF, Coal India), and looked at monopolistic mergers and acquisitions. Statistically, while the commission has imposed fines worth around of Rs 14,000 crore over the past seven years, the actual recovery has barely been around one per cent - the balance being stuck in stay orders, etc.

As the proceedings of the commission gather steam, the manpower crunch facing the regulator is likely to become starker. In 2014, according to the Ministry of Corporate Affairs, the nodal ministry for CCI, the regulator and Director General (DG)'s office had the strength of 84 and 19, as against the sanctioned posts of 156 and 41, respectively. This shortage is more acutely felt at DG's office - the investigating arm of the commission. Typically, each officer handles 10-15 cases. "Each case requires working on a different sector altogether," said a former official of the DG office. As a result, there is a huge backlog of cases with it. For example, in 2013-14, the DG office had 91 cases with it, of which only 30 were disposed off. By December 2014, the DG office received another 31 cases to investigate. In the April-December 2014 period, the DG office could dispose of only 24 cases.

Another issue facing the DG office is the absence of institutional memory. The commission has very few permanent staff with most officers investigating a case being on deputation for three years.

Even a parliamentary standing committee had suggested in 2014 that the ministry should comprehensively review the recruitment rules. "Efforts should be made to recruit or engage domain experts/professionals on a contractual basis with a view to professionalising the working of the commission and its offices," the committee said. With a two-and-a half-year term, Sikri clearly has his hands full to build on the gains of country's nascent journey in the competition law jurisdiction.

Need for a strong, effective leniency programme: Naval Satarawala Chopra

  It is easy to criticise a regulator or authority, and the Competition Commission of India (CCI) has had its fair share of criticism, including from the Appellate Tribunal. However, the CCI's work has definitely had an impact on consumers - from home buyers, who now are unafraid of developers, to movie goers, who are no longer held to ransom by distributors. Therefore, a foundation has been set and awareness built, but now the time has come to set the house in order. I have a few concrete suggestions.

Cartels are most damaging to consumers. Unfortunately, the CCI's enforcement activity in this sphere has been wanting, largely as a result of poor evidence being collected. In order to ensure an effective anti-cartel regime, it is essential to have a strong and robust leniency programme. The CCI's existing programme is unpredictable and does not incentivise whistle blowers. In past cases, even the identity of the whistleblower has not been protected. In contrast, in the EU, for example, over the last three years, all cartel decisions have emanated from leniency applications. The advantage of an effective leniency regime is that it provides smoking gun evidence, ensuring a finding of breach. Therefore the CCI must rejig its leniency programme and follow international best practices.

The number of cases in the recent past that had been set aside by the Competition Appellate Tribunal (COMPAT) for a failure by the CCI to adhere to basic natural justice norms is staggering. The CCI must not resort to short cuts disregarding the rights of the defence, after all it has wide ranging powers that have to be exercised lawfully.

The CCI also faces a human resource crunch. To deal with this, the CCI must have a stricter screening process and entertain only those cases where there is a clear competition law violation. On the M&A side, the CCI should introduce additional exemption to help weed out harmless transactions.

If these and other measures are adopted, the day is not far when a consumer will obtain compensation for anti-competitive conduct and the CCI will be considered an effective authority.

The author is a partner at Shardul Amarchand Mangaldas. The views are personal

Strike a balance between regulator and judicial forum: Vinod Dhall

The Competition Commission of India finds itself at a challenging point in its short history. Set up in 2003, the commission could not commence enforcement till several years later due to a combination of constitutional challenges in the higher courts, prolonged process of amendments to the Competition Act, and inexplicable dragging of feet by the government of the day in notifying its powers. Ultimately, anti-trust enforcement commenced only in 2009, and merger regulation in 2011.

It has taken some time for the work of the commission to gather steam, and a sense of purpose. It had passed a number of important judgements recently, which have undoubtedly made businesses to sit up and take note. But at this juncture, the commission too has to step back and review its journey in the face of the challenge to its credibility and effectiveness.

Recently, the COMPACT had set aside several high-profile orders of the commission - largely on procedural grounds - holding that the commission slipped in observing the basic rules of natural justice, namely not following the correct procedure for cross-examination, not giving proper opportunity to a guilty party to defend and lapses in the hearing of arguments, among others.

Following the stiff penalties imposed by the commission, companies were wary of the competition law. But the adverse orders in appeal are leading to cynicism among businesses, and loss of face for the commission. The commission will have to introspect on remedial measures it needs in its procedures. The judiciary, too, could reflect on whether all the minute processes and rules of evidence that apply to courts must equally apply to the commission, which is a regulator, and not a judicial forum. A balance needs to be struck between the interests of the parties, and the broader interests of India's markets and consumers.

(The author is former head of Competition Commission of India, and now executive Chairman, Vinod Dhall-TT&A)

Be in sync with developments in other jurisdictions: Dhanendra Kumar

As a late entrant, the Indian competition law had the advantage of incorporating select features from other jurisdictions. Among the measures frequently adopted in advanced economies to achieve speedier closure of cases are Settlement Decisions (in the case of cartels) and Commitment Decisions (in anti-trust cases). These have over the years become the cornerstone of competition policy of jurisdictions like the US, EU, UK, Canada and Brazil.

In the EU perspective, Settlement Decision is used to speed up the process of adopting the cartel decision where the entities charged with cartelisation accept the commission's objection and, in lieu thereof, receive a reduction in fine. In the US too, there is a long history of settling cases with plea agreements. Settlement is an additional tool in dealing with cartels, and either party is free to choose to go through it depending upon the facts and circumstances of the case, and strength of the evidence. From the entity's perspective, it provides for a shorter procedure, a reduced fine, and 'finality' to move on to normal business. From the commission's perspective, it frees up investigative resources for other cases.

Under the Commitment Decisions route, the entity makes a binding commitment with the competition authority as regards its future behaviour. In case the entity fails to adhere to the undertakings, the commission could re-open the closed file and penalise the entity. As India is a new jurisdiction in the competition law space with limited resources at its disposal, it becomes all the more important to deploy manpower and resources optimally and efficiently. India may have to consider incorporating international developments so as to be in sync with other international jurisdictions.

(The author is former chairman of Competition Commission of India)

Eliminate ad hoc ways, consistently issue well-reasoned orders: Anand Pathak

The Competition Commission of India (CCI) has had a turbulent first seven years.

While it is natural for any new regulator to be chided for procedural irregularities by courts and the appellate tribunal, the CCI must now focus more critically on its procedures and rights of the defence to lay the foundation of a strong and robust competition law regime. Failure to do so will result in significant decisions being reversed, which will not only hurt the international reputation of the CCI as a fair and just regulator, but also give rise to a waste of valuable resources and time.

To achieve greater efficiency in the Director General's (DG) Office, the CCI should adopt a two-fold approach - enhance the capacities of the staff members by imparting adequate training, inter alia, relating to the rules of cross-examination, and lay down well-defined rules and parameters for conducting 'dawn raids' (unannounced or surprise raids). A major case involving abuse of dominance is languishing today simply because of alleged procedural failures in the DG Office's first 'dawn raid'.

In the prohibition of cartels area, the CCI has vigorously enforced the prohibition, but frequently on the basis of dubious circumstantial evidence. To improve credibility in the enforcement, the DG's office and the commission must improve their evaluation of circumstantial evidence, and their assessment of the conduct of alleged violators.

In the abuse of dominance area, there is a need for significant improvement in analysis. The CCI must reject complaints that are in fact consumer matters and breach of contract issues, but are introduced to the CCI under the garb of competition infringement simply to get around the protracted nature of civil litigation. Competition law has no role to play in these cases, which waste the CCI's already limited resources and regulator's time. The cases involving the real estate sector fall in this category.

Another area where the CCI needs to re-think is the role of the competition laws in the overlap between IP laws and competition laws. There is an enormous burden on the CCI to eliminate adhoc-ism and consistently issue well-reasoned orders.

The author is managing partner, P&A Law Offices