Competition Commission of India 2.0

In today’s newsletter, we’ll talk about the Competition Commission of India, and how it's likely to receive a major overhaul.

The Story

There is another bill in town and this time it’s targeted at the Competition Commission of India. But before we dive into this bit, a brief on the regulator.

India has a relatively open economy. Meaning we don’t intervene a lot and we allow trade to flourish as is. However, when it comes to competition between various players in a market this huge and diverse, not everyone plays fair.

That’s why we have the Competition Commission of India (CCI). The CCI believes in a very simple mantra — customers are kings and its the commission's job to make sure everyone in the market abides by this little maxim. It also ensures no one has any undue advantage when it comes to controlling the supply of goods and services, manipulating prices or restricting the growth of other players in any way.

So if you’re an e-commerce marketplace that’s forcing suppliers to sell below cost on your platform, the CCI is coming for you. If you’re a cement giant who’s colluding with other manufacturers in the industry to restrict supply and hike prices, you’ll be hearing from them. If you’re looking to acquire another company of substantial stature and size, you can’t do it unless the CCI signs off on the deal. In summary, the CCI squashes unfair practices and monopolistic tendencies to make sure customers don’t have to suffer by way of unreasonably high prices, lack of options or inferior quality products.

And for the most part, the commission is good at what it does. In the 10 years since it has been established, it has busted cartels across sectors, cracked down on anti-competitive tendencies and held offending companies liable. In fact, until March 2018, the CCI had adjudicated 135 cases and levied Rs. 13,523 Cr. in fines. Although it must be noted that they only collected about 0.4% of this amount in total

Now while you could argue that making money isn’t the CCI’s primary objective it’s still very important to set a strong precedent so that companies take the regulator seriously. The problem is that the CCI isn’t very transparent in disclosing how it arrives at penalty amounts, which in turn sets the ground for appeals and lengthy legal battles. And since we’re on the subject, there are a bunch of other things they could be doing better. Which finally brings us to the bill that’s supposed to give CCI new wings.

Now, it’s not possible for us to talk about everything that’s in the bill. But here are some key details.

First and foremost, the bill proposes that the CCI be more clear and transparent about how it calculates penalties. While this might not seem like a gamechanger, remember that companies often challenge the penalties primarily because of the vague and arbitrary nature of these fines. Hopefully, once they have a little system in place to calculate this stuff, they’ll be able to defend their case better.

Another recommendation has to do with the timely and effective resolution of cases. The suggestion is to use settlements and commitments to resolve disputes before they turn into legal battles. Essentially, that means companies being investigated can choose to admit their guilt and stop doing whatever they are doing in exchange for a reduction in the penalty amount. The case never goes to court, and both parties are happy.

Another proposition is that the CCI look at the past, instead of treating every case as a new one. Meaning if the regulator has already ruled on a matter, then they may not be able to take on fresh complaints if the facts of the case are similar. Alongside this, we also have a whole host of other changes that include changing the corporate structure of the commission itself, redefining certain terms and concepts (like cartels) to make them more precise, and protecting certain intellectual property rights.

Bottom line — it’s a comprehensive list. And if this bill turns into law, we are sure it will go some way towards facilitating the ease of doing business in India, whilst safeguarding the rights of consumers.

Until next time…

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