Economic Times, August 10, 2022
By Vijay L Kelkar and Pradeep S Mehta
India follows a system of specialised sector regulators. This is in contrast to the general antitrust legislation, the Competition Act, 2002, which aims to promote competition and consumer welfare in all sectors. There has been a widespread critique of India’s complex and unnavigable regulatory architecture that leads to overlap and conflicts.
A matter of jurisdiction over regulation of ‘debenture trustees’ recently reached the Bombay High Court. The question before the court was the jurisdiction of the Competition Commission of India (CCI) over the Securities and Exchange Board of India (Sebi). Such cases of jurisdictional conflicts need a solution.
India follows a system of specialised sector regulators. This is in contrast to the general antitrust legislation, the Competition Act, 2002, which aims to promote competition and consumer welfare in all sectors. There has been a widespread critique of India’s complex and unnavigable regulatory architecture that leads to overlap and conflicts. The conflict inherently is between the idea of the sector expertise of sectoral regulators like Sebi vis-a-vis the overarching expertise of CCI in maintaining the integrity of the market for businesses and consumers alike.
The powers, functions and jurisdictional aspects of regulators are embedded in their respective statutory frameworks. Conflicts arise due to interpretations of the legislative provisions of the parent statute. These provisions have authorised the sectoral regulators to protect consumer interest and promote competition, but not curb anticompetitive practices. However, CCI is required to do both and ensure a level playing field, in addition to curbing anticompetitive practices in any sector. Sebi is the financial markets regulator, and CCI also functions in that realm. Hence the frequent conflicts.
The electricity sector regulatory regime can also be problematic in this regard, because the Electricity Act, 2003, specifically empowers the Central Electricity Regulatory Commission (CERC) to curb anticompetitive practice. Fortunately, the CERC has not drafted any rules to implement this provision and, thus, there has been no substantive conflict with CCI. Like a standard practice, there is a non-obstante clause in the Electricity Act, which gives the Act an overriding effect over any other legislation in derogation of the Act. It can complicate the situation, if invoked.
Due to the multiplicity of regulators, one transaction through its range of transactions can be spread over several regulators without a single one analysing the full picture. Hence, the overlaps have the potential to transform into a hotbed of disputes. Also, even in the case of appeals of competition cases, each sector in India has a different appellate body, unlike, say, in Britain where the Competition Appellate Tribunal is the common appellate body for competition and all utility sector regulators.
This regulatory conundrum poses a hindrance in ease of doing business. Moreover, the direct harm from these conflicts is that consumer protection is forgotten, which should be the most important consideration. The sectoral regulators in India have the power to penalise the commercial entities, but not award compensation to the investor or consumer.
It is important that the jurisdiction of CCI, as the anti-monopoly watchdog in case of anti-competitive agreements in financial sectors, is not overridden. CCI has fair market and consumer and investor interest at the core of its existence. The penalties levied by CCI are also harsher in comparison.
A change in approach is, thus, needed. In many countries, both the competition authority and some sector regulators are in one body. In a large country like India, replacing multiple regulators with a unified regulator is not an option. Also, these specialised regulators bring in a holistic understanding of particular sectors. So, the approach should rather become more cooperative and collaborative.
The European model follows mandatory consultation between competition authorities and sector regulators. In Mauritius, South Africa and few other countries, the sector regulators and competition authorities have to enter into memoranda of understanding (MoUs) to harmonise their jurisdictional powers. Analysis of competition issues in the market – collusion, predatory pricing, market power, etc – should be left in the hands of CCI. The sectoral regulators do not have the resources and antitrust tools to deal with competition issues in the market.
This model would also ensure non-duplicity of competition enforcement, legal certainty and promote the integrity of CCI. Sector regulators should be rather involved with forecasted technical regulations and structural issues, such as tariffs, third-party access, safety standards and entry-exit conditions. This collaborative model will prevent forum-shopping and deter players from circumventing rules to abuse market dominance. A forum can also be established for regular exchange of ideas between CCI and other regulators.
A close functioning relationship between the competition authority and sector regulators is a reform needed for a better regulatory landscape. This would facilitate ease of doing business, increased investments and economic growth.
Vijay L Kelkar, Former chairman, Finance Commission
Pradeep S Mehta, The writer is secretary general, CUTS (Consumer Unity and Trust Society) International, and former member, think-tank on national policy on ecommerce, ministry of commerce and industry, GoI. Inputs by Ujjwal Kumar
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