Competing fairly

Editorial in Hindu dated June 17, 2009 with reference to CUTS work

The recent entry into force of the key provisions of the 2002 Competition Act — that was mired in controversy over the constitutionality and composition of the Competition Commission of India (CCI), the watchdog — takes India a step closer to integration into the global anti-trust regime, with potentially far-reaching implications for the objective of growth with equity. The decision to defer the application of regulations pertaining to Mergers and Acquisitions (M&As) however underscores the concern that the participation of Indian firms in international consolidations should not be hampered for want of professional expertise and procedural clarity under the new law. The 2002 enactment is premised on the recognition that a monopoly and a dominant position in the market are, per se, not detrimental to competition or the public interest and, to that extent, it constitutes a forward-looking departure from the extant Monopolies and Restrictive Trade Practices (MRTP) Act where the accent was on curbs on monopolies. The focus of the CCI’s latest enforcement is on anti-competitive agreements and any abuse of dominant position, manifest in the denial of market entry, collusive price fixing, and undermining consumer interest. The measures could have an impact on the cable television, steel, transportation, and drug retail sectors which, according to a

Consumer Unity Trust Society

report, came under the dominance of cartels in the wake of the recent wave of consolidation, resulting in such unfair practices as setting prices above market rates and undercutting.

Although following a 2007 amendment, the CCI has been stripped of some of its judicial and punitive powers, it can impose on individual members fines of up to three times the profit, or 10% of the turnover during the period of cartelisation, and even reward whistleblowers. The relatively low financial threshold limits to file transactions involving M&As, in comparison with requirements in the European countries and the United States, and the 210 days-long assessment period have evoked concern about the volume of applications as well as protracted delays in obtaining clearances for new deals. The coming years will determine whether the political commitment to an open and transparent market economy can triumph over strong protectionist pressures in the current global recession. At home, the stakes are far too high to allow anti-competitive forces to thrive for want of a clear consensus and the will to put in place an effective enforcement mechanism.

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