Competition policy and governance

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: The possible link between competition policy and good governance is often a matter of debate in different forums. However, in the Indian context, the debate seems to be irrelevant. Not because the link is non-existent or irrelevant, but implementation of a Competition Policy is an essential component of governance in India. According to the Indian Constitution, the freedom to trade or practice any occupation is a fundamental right. As per Articles 301-305 of the Constitution, only the Parliament or the State has the power to impose restrictions on this right. Hence, when barriers to entry are created by private parties, or a business entity is thrown out of business by predatory practices, or a business entity is forced to close down due to a buyers cartel, a fundamental right guaranteed by the Constitution

is violated.

The state does maintain regulations on when it cannot allow a business to operate, such as on environmental or social grounds. But that too is in public interest, so that the larger good of the community over rides a personss fundamental right to trade or practice any occupation. A Competition Policy does reconcile to such exceptions.

Reverting to the linkage of competition with the Constitution, the latter also provides for curbing concentration of economic power, so that the common good is not adversely affected. Since, the core function of the government is to protect the constitutional rights, an appropriate mechanism to check such anti-competitive practices becomes an essential component of governance. Interestingly, it is not only the present Indian Constitution, that the country adopted after Independence, recognises this right, but this was recognised even in the Arthashastra, the first known treatise on government and economy written by Chanakya in the 3rd century BC. It emphasised fair trade as one of the cornerstones of good governance.

There are of course several other ways through which competition or competition policy can promote good governance. If there are few powerful companies rather than many non-powerful companies, the ability of the business to influence government policies and decisions will be greater. The government in such a situation is more likely to develop a close nexus with the business leading to corruption.