Competition Act silent on penalising trade bodies

Financial Chronicle, New Delhi, November 27, 2009

The Competition Commission of India (CCI) does not know what penalty it can impose on industry and trade associations which are found guilty of indulging in anti-competitive practices.

Last month, CCI began probe into a number of travel agencies and their associations including Tr­avel Agents Federation of India (Tafi) and Travel Ag­ents Association of India (Taai) over their ticket-boo­king dispute with Singapore Airlines. In the pro­cess, it has now discovered that while the Competition Act, 2002, clearly states the quantum of penalty to be imposed on individual companies if they are fo­und breaching the law, it is silent in the case of trade associations, a CCI official said. In case of individual companies, the penalty can be as high as 10 per cent of the turnover.

Financial Chronicle had reported on July 27 that the commission was empowered to take action against trade bodies and associations for any anti-competitive behaviour in the same way as it would apply the law to individual companies. The commission can take action against industry chambers in the case of cartel like behaviour, its chairman Dhanendra Kumar had said.

“There is nothing in the law for trade bodies…in the West most of the cartel cases arise from trade associations but since in India the law does not state anything we are in a fix,” the official said, asking not be named.

The official said that the commission is evaluating two options. It could write to the ministry of corporate affairs to move an amendment to the Competition Act, 2002, providing for specific penalty that can be imposed on erring trade associations. Alternatively, it could take legal opinion and explore the possibility of notifying a set of rules to clarify the provisions on penalty.

Under the Act, CCI is empowered to notify its rules and procedures, the official said.

Secretary general of CUTS International Pr­adeep S Mehta said the competition law in India is still at its nascent stage and it would take time before these loopholes are pl­ugged. “With time, these gaps would be addressed. As of now the commission would have to take a call on this…its juts an interpretation of the prevalent laws,” Mehta said.

Since the commission got notified in May 2009, it has had to fight issues ranging from loopholes in competition law to questions on its jurisdiction. Financial Chronicle reported in September that Kingfisher Airlines had moved the Bombay High Court challenging the jurisdiction of the commission over a case pertaining to its str­ategic alliance with Jet Airways.

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