Competition Commission through the eyes of the media: Doing well!

Money life, September 19, 2012

This article by CUTS International attempts to present a holistic picture about the performance of the Competition Commission of India or CCI, on the basis of reports in the print media, since it became fully functional in 2009

The years 2009-12 seemed lucky for the CCI but unlucky for some others at the same time. The CCI became fully operational for the first time in 2009. CCI is the enforcement agency for India’s Competition Act, 2002 which has replaced the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969. It has more teeth and powers in addition to giving out cease and desist orders such as the power to impose penalties and issue injunctions.

In a little over three years, CCI has been coming down heavily on companies across all sectors. The mission of the CCI is to eliminate anti-competitive practices, such as cartels and abuse of dominance, as well as check anti-competitive mergers and takeovers to protect the interest of consumers and achieve economic efficiency. Apart from this, competition advocacy is another mandate on the CCI agenda. CCI has been actively probing sectors like real estate, entertainment, cement, petroleum, steel, travel industry, healthcare and education. At present, it is reportedly looking into 39 cases of violation of anti-competitive norms under the Competition Act, 2002. Though seminars and workshops are also advocacy in the understanding of CCI and it has done major work in this regard, they can create awareness mainly, but promoting the competition culture needs much more including challenging policies and practices which harm the competition culture. During the time 2003-08 when it had just one Member without any enforcement powers, it was quite active in its policy advocacy in many cases, such as shipping, banking, post office issues etc.

In any event, the CCI has been trying to act as a deterrent by instilling fear of hefty penalties amongst large companies that flout the competition provisions in order to create monopoly and dictate market prices that earn them huge rents. CCI has also impacted the way regulatory agencies behave. For example, for years, customers had complained about pre-payment penalties to the RBI. However not much had been done to address the matter. When customers took the matter before the CCI, RBI fearing CCI’s entry as a competing regulatory agency pre-empted it by announcing its intention to end prepayment penalties. Similar impact has been seen amongst other regulatory agencies. However here there is always the downside of resulting turf wars between the CCI and the sectoral regulators that gives rise to problems of forum shopping and difficulties in arriving at a solution which is agreeable to both. Recently, CUTS International undertook a study to address conflicts arising from jurisdictional overlaps between Competition and Sector Regulatory Authorities, which is available at:

In 2011, CCI imposed a penalty of Rs55.5 crore on the National Stock Exchange for abusing its dominant position in the currency derivatives market. Similarly, it imposed a penalty of Rs630 crore on DLF for abusing its dominant position by drafting one sided agreements with buyers. This case is pending before the Competition Appellate Tribunal. Just recently in 2012, CCI fined 11 cement firms Rs6,300 crore for cartelisation. Further, CCI has recently taken up an investigation against Google based on a preliminary information report by NGO, CUTS International. Businesses have complained that Google has internal mechanisms that favour large websites which do paid marketing with them.

Google gives them higher ranking for certain keywords even though relevancy may be low, based on their ad spend. Matchmaking portal Bharat Matrimony has sued Google along with its rivals and in connection with the Google advertising programme.

These investigations have given hope for the future and have acted as some sort of a deterrent for companies across sectors. Nonetheless, CCI orders have often been criticised for being lacking in economic reasoning which was the case found with NSE as well as DLF. The reasoning employed to define the relevant market, the preliminary step of any competition analysis has been a subject of much debate in these cases.

Furthermore, the penalties imposed by the CCI have been found to be excessive in the absence of proper guidelines for arriving at the appropriate amounts. In an interview with Mint, a business daily, Pallavi Shroff, Partner, Amarchand and Mangaldas, points out couple of glitches in the CCI’s policy of imposing penalties. She emphasised on the use of sophisticated tools and economic tools of investigation and a set guidelines for fining which is the case with many other countries. Globally countries have a formula of calculating the appropriate fine amount which CCI needs to put in the system.

Similarly Pradeep Mehta, Secretary General, CUTS International, has suggested ways to empower the CCI which includes re-examination of procedure for selecting members, amendments enabling CCI to work in an autonomous manner and to resolve overlapping issues between the CCI and sector regulators permanently.

Some lacunae in the Competition Act itself need to be rectified as they impair the effective functioning of the CCI. Section 26 of the Act does not have any provision for the CCI to close a case if the Director-General’s report recognises a contravention of the Act. On receiving a case, the CCI directs the Director-General to initiate an investigation into the allegations on which the DG needs to submit a report within a specified period of time. Based on the report, the CCI starts hearing the affected parties. Only after completing its own proceedings does the CCI pass a final order as it deems fit. However, nowhere does the Act facilitate the CCI to close a case if the DG has found a contravention in its report. The whole situation has been widely criticised as against audi alteram partem (the right to be heard). However, an official in CCI said that the quality of the investigation reports is not very good and hence have not been taken up for further processing. That means that the investigative wing needs capacity building.

CCI was constituted in 2003 and became fully operational in 2009, due to court challenges on the appointments of the commissioners. The regulation of combinations was notified only in June, 2011. Hence the CCI is still at a nascent stage. For five years, it did not have a chair and in 2011, it had 58 pending cases which were reduced to 20 by July 2012 under the Chairmanship of Ashok Chawla. It would be wrong to say therefore in light of this and all the recent orders that have made headlines that CCI has been inactive. Nonetheless, as mentioned earlier, guidelines need to be formulated for computation of penalties to be imposed in cases; training is needed for CCI officials such that the orders reflect a logical approach. Furthermore, CCI staff also needs better skills for sound economic reasoning. A critique on this is available in a newsletter of Nathan India at No: 107 of the annexed table of reporting. The jury is still out on how many of its orders will stand in the appellate process. This would involve appeals to the Competition Appellate Tribunal and then to the Supreme Court. Over time learning and on the job training from officials of other evolved competition regimes such as the EU, UK, South Africa and the US could be of great help.

As mentioned earlier, a challenge before the CCI is the constant turf wars with regulatory agencies it is faced with. However the Group of Ministers headed by Finance Minister P Chidambaram in a recent meeting has decided to address the issue and end the deadlock by allowing no blanket exemptions from CCI’s purview. Section 21 and 21 (A) of the Act states that the CCI as well as the other authority “may” make reference to each other if need be. This will now be changed to “shall”, and making it mandatory for both to consult each other. In light of this, it is important that CCI be strengthened to incorporate multi-disciplinary expertise that will enable it to undertake better investigations.

It is hoped that the CCI will embrace these recommendations and benefits from the amendments while it continues to work actively to prevent anti-competitive practices, to promote and sustain competition in the market, to protect the interest of consumers and to ensure freedom of trade amongst participants in markets in India as envisaged under the Competition Act of India.

[Click on the link below to see details…..News sources follow in a table. On a rough estimation the news showed CCI in a good light with 68 happy smileys, while 22 were indifferent and the score of frowning smileys was 17. This is not a rigorous analysis though, and even the scoring can be disputed. A proper analysis would take some time and resources).

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