Competition law in perspective

THE Government of India constituted a High Level Committee on Competition Policy and Competition Law under the chairmanship of Mr. S. V. S. Raghavan at the end of last year. This committee has submitted Volume I of its report recently. The central conclusion of the Committee is that ``there is the need for a Competition Law Tribunal (Competition Commission of India) that will act as a watchdog for the introduction and maintenance of competition policy and once this is done, it will perform a proactive advocacy function for competition.

Competition law should deal with anti-competitive practices, particularly cartelisation, price-fixing and other abuses of market power and should regulate mergers. It is important to ensure that such legislation does not itself become

anti-competitive and this is a real danger. For this, it is necessary to ensure that the law is precise and discretion is kept at a minimum.

The plea for a new competition policy must be set against the backdrop of decades of protectionist policies followed in this country all in the name of ``public interest'' whether it was the Monopolies and Restrictive Trade Practices Act 1969, the earlier landmark law on Industrial Development and Regulation of 1951 or the much later Sick Industrial Companies Act 1985. The paradigm shift in economic policy in 1991 which brought into bold relief the opportunities which India had missed during the first four decades of Independence to mould its economy into a recognisable competitive entity in the global market place.

In the above backdrop, one has to look at the committee report and has to agree in its conclusion that we need a precise law which does not pose a danger, which ensures that discretion is kept at the minimum and this law can replace a few existing laws which have not served their purpose. Further, a number of foreign companies and agencies have earlier complained of Indian laws being tricky and complicated. They would now welcome a precise law which would allow market competition and promote the welfare of producers and consumers alike.

The committee sets down the pre-requisites of a competition policy as follows: 1. The IDRA may no longer be necessary except for location, environmental protection and for monuments and national heritage protection considerations.

2. There should be no reservation for the small-scale sector of products which are already on OGL for imports. There should be a progressive reduction and ultimate elimination of reservation of products for the small scale industrial and handloom sectors.

3. All trade policies should be open, non-discriminatory and rule-bound. They should fall within the contours of the competition principles. All physical and fiscal controls on the movement of goods throughout the country should be abolished.

4. Government should divest its shares and assets in State monopolies and public enterprises and privatise them in all sectors other than those subserving defence and security needs and sovereign functions.

5. The Industrial Disputes Act, 1947, and the connected statutes need to be amended to provide for an easy exist for non-viable, ill-managed and inefficient units subjects to their legal obligations in respect of their liabilities.

6. Structures such as the Board of Industrial and Financial Reconstruction (BIFR) need to be eliminated.

7. Concerns relating to trade dimensions vis-a-vis WTO agreements and principles need to be addressed.

8. The economic reforms of liberalisation, deregulation and privatisation need to be further progressed and should be so designed that they strengthen the Competition Policy and vice- versa.

9. The essence and spirit of competition should be preserved while positioning the competition policy and seeking to harmonise the conflicts between competition policy and government policy.

In the light of the Indian constitution and its working, its current review undertaken by the National Commission, the presence of numerous national political parties and innumerable regional political parties and outfits, and trade unions, and above all, the politicians-industrialists nexus, harmonising the conflicts between competition policy and government policy will pose the greatest challenge to the draftsmen of the law on the subject. We are already in coalition politics and have seen parliamentary opposition to reforms and street protests.

As there is an environment law and green benches in various High Courts, there is no need to continue the IDR Act for this purpose. National monuments are also protected under a separate statute. The need for competition law cannot be over emphasised in the present context and circumstances. There are certain international obligations, which we have undertaken to fulfil and these cannot be done under the existing laws most of which have not achieved their objectives and are out-dated.On the contours of competition policy the following summary of the Committee report would serve to explain the broad rationale:

1. State monopolies, Government procurement and foreign companies should be subject to the competition law. The law should cover all consumers who purchase goods or services, regardless of the purpose for which the purchase is made.

2. Bodies administering the various professions should use their autonomy and privileges for regulating the standard and quality of the profession and not to limit competition.

3. If quality and safety standards for goods and services are designed to prevent market access, such practices will constitute abuse of dominance/exclusionary practices.

4. Certain anti-competitive practices should be presumed to be illegal. Blatant price, quantity, bid and territory sharing agreements and cartels should be presumed to be illegal. (One is reminded of similar provisions of the MRTP Act, 1969).

5. Abuse of dominance rather than dominance needs to be frowned upon for which relevant market will be an important factor.

6. Predatory pricing will be treated as an abuse, only if it is indulged in by a dominant undertaking.

7. Exclusionary practices which create a barrier to new entrants or force existing competitors out of the market will attract the Competition Law.

8. Mergers beyond a threshold limit in terms of assets will require prenotification. If no reasoned order, prohibiting the merger is received within 90 days it should be deemed to have been approved. In adjudicating a merger, potential efficiency losses from the merger should be weighed against potential gains.

9. the Competition Law should be designed and implemented in terms of these principles.

A pertinent question here is whether the existing provisions in the MRTP Act would not serve the purposes with some amendments wherever they are required. One view is that if an old law is completely repealed and a new law enacted in its place, the comfort level it provides to those affected by the law will increase provided the new law is simple, pragmatic, not bureaucratic, and not too legalistic. It should more be a business or commercial law easy to understand by people who are expected to comply with it. The present MRTP Act seems to have been deliberately designed to provide a lawyers' paradise for improving their practice and equally so for management consultants and experts.

Compliance with law in order to be voluntary has to be in the language and style that an average businessman understands without the need for lawyers or experts to interpret the law for him. In that consideration, MRTP Act must be scrapped. The language of competition law should be commercial and not legalistic. The department of legal affairs of the Government of India is used to complicate the drafting even of simple provisions and the new law should not also be a similar casualty. If the language were to be cumbersome like some of the provisions of MRTP law, then the new law would suffer the same fate as the previous law in that it would never achieve its objective.

The Committee has stressed the need for dealing with anti- competitive practices in the economy in the eight of India's obligation vis-a-vis the WTO regime. Seen in the background of world-wide protests against the WTO serious reservations among political parties in India on the prudence of the country going overboard with regard to the WTO agreements the question arises whether a competition law on western lines cannot be held in abeyance till all our trading partners converge on issues such TRIMS and TRIPS.

The most important reconsideration of the Report is on setting up a Competition Commission of India. The proposals are as follows:

1. A competition Law Authority christened Competition Commission of India (CCI) may be established to implement the Indian Competition Act. It will hear competition cases and also play the role of competition advocacy.

2. CCI should be a multi-member body comprised of eminent and erudite persons of integrity and objectivity from the fields of judiciary, economics, law, international trade, commerce, industry, accountancy, public affairs and administration. The investigative, prosecutorial and adjudicative functions will be separate.

3. The CCI will be the sole recipient of all complaints against infringement of the Indian Competition Act from any source whatsoever be it.

4. There will be a collegium for choosing the Chairperson and Members of the CCI. The Chairperson can be from any of the fields/disciplines listed above and should be an eminent person who has considerable exposure and knowledge in international trade, commerce and complicated issued relating to trade. A code of ethics needs to be stipulated for observance by them.

5. The committee suggests that the Headquarters of the CCI may be located in a city outside Delhi with permanent Benches at Delhi, Calcutta, Mumbai and Chennai with further Benches to be decided by the Government from time to time.

The members of the CCI will constitute the Mergers Commission. The CCI will have not less than 10 members including the Chairperson. The headquarters will have one Bench of two members as Mergers Commission. It will also have another Bench of two members to deal with the competition matters. All the other three metropolitan cities will have one Bench of two members each to deal with the competition matters, in addition to the Headquarters Bench.

7. Each Bench must have a judicial member.

8. The CCI will have the power to formulate its own rules and regulations to govern the procedure and conduct of its business and also its administration. It will have powers to impose fines and sentences of imprisonment, to award compensation and to review it's own orders.

9. The trial before the CCI should be summary in nature. It will have limited powers of contempt. It will also have powers to review the orders of other regulatory authorities on the touchstone of competition. There will be provision for advance ruling. The investigative and prosecutorial wings will be separate but headed jointly by the Director-General (Investigation & Prosecution).

10. The Competition Commission will be the sole authority to receive complaints against the infringement of Competition Law from individuals, business firms, entities, Central or State Governments.

11. The Director-General will not have su motu powers of investigation. He will examine only such complaints received from the Competition Commission.

The above recommendations would, if implemented, create a huge set up and would cost the exchequer enormous expenditure. CCI should not become bureaucratic and also not be punitive. It should run on business lines except for adjudicating functions where, of course, it should be subject to judicial discipline applicable to High Courts. It may come out with original side rules and Appellate side rules as far as its power to review the orders of other regulatory authorities on the touchstone of competition. Here we run into some trouble in that we are unable to understand as to whether the committee recommends by implication any other regulatory authority to decide competition matters. In that case, there will be multiplicity of proceedings and delays and the law will be yet another one of yesteryears on the subject or on allied subjects.

It should be made clear that CCI shall be the only authority in the matter of implementation of the law as it will have all the three functions necessary, namely, investigative, prosecutorial and adjudicative functions. A case should start with CCI and end with CCI with only a right of appeal to the Supreme Court on points of law may be provided in the law. Otherwise, CCI may go the MRTPC way or the BIFR way. (The Committee elsewhere has recommended abolition of MRTPC and BIFR obviously for non- performance.) A complaint should be lodged with the CCI and if there is a prima facie case, it will refer it for investigation and report. After perusal of the report, if it deems necessary, it may initiate a prosecution and the Bench shall adjudicate on the matters with a right of appeal to the parties to approach the Supreme Court on point of law.

The CCI should operate as a single window remedy/relief on any complaint it receives and should not act suo motu. The Mergers Commission will, of course, not replace High Court jurisdictions under Sections 391 to 394 of the Companies Act, 1956, but will examine and file or cause to be filed representations to the High Court concerned on cases involving a particular size of assets, turnover, market and the like as a result of the merger. Ultimately, the merger requires the approval of the High Court. The Companies Act also requires an amendment in this regard. This has to be studied in the light of the fact that there are demands to shift these powers to the Company Law Board.

Provision for advance ruling is a new thing in a business law and what specific legal provisions the committee or the draftsmen have in this regard has to be watched before analysing its implications. We have to study the draft bill or the bill as the case may be when it becomes available before offering further views in the matter.

One of the recommendations of the Committee is that the competition commission proposed should advocate competition. The structure of CCI has to be carefully made and full autonomy must be given to it. Once the Parliament enacts a law on competition, the Government should get out of its implementation and leave it to the CCI to implement, administer, adjudicate and do whatever else will become necessary within the framework of the law. The Supreme Court in India at any time may intervene even suo motu to prevent injustice or steps that go against the Constitution of the country.

Once Parliament enacts a law, it is for the judiciary to see that violations brought to its notice are dealt with properly. We should learn lessons from our own past experience and enact a law in line with our global commitments and the trends in world markets so that we give to our people equal opportunities for growth and development. We should not deny to our people the rising standards of living that are visible in developed countries. Towards this, a new awareness has to be created and competition policy may take the initiative.

Perfect competition is the economists' dream and imperfect competition has come to be accepted as an economic theory because of varying parameters governing the market. Being a poor and developing country that India is, it becomes necessary that the leaders in politics, be they in government or outside, the media and the voluntary agencies and above all economists should educate the illiterate public in a way that what is being done has to be done in the interest of the people and the country. Short term inconveniences and aberrations have to be borne with patience for obtaining long term benefits. We have to build a new India in this century so that our progeny does not blame us for missing opportunities for growth and development.

T.V.Padmanabhan

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