Fair competition vigilance

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As India is now in a position to operationalise its new Competition Act, 2007, it is worthwhile revisiting some of the drivers for it. The need for a competition law becomes vital when a country adopts economic reforms aimed at converting a command economy into a market-oriented one in which the private sector plays the lead role. India adopted economic reforms in the early 1990s by shifting to market economics. We have moved in the right direction, though at a slower pace than required, which has meant that markets are still not as vigorously competitive as they ought to be.

One should not confuse a free market with a free for all. Regulation remains essential, the objective being to ensure competitive markets so that the best possible choice, quality, prices and supplies of goods and services are offered to consumers and businesses.

Accordingly, changes are being made in the economic governance system. These include changing government policies and measures, amending existing legislations or enacting new ones such as the new competition law, and establishing dedicated regulatory bodies in utility sectors such as telecom and electricity. All such measures are designed to ensure that markets function well under the new economic policy regime and yield the desired results. But new policies and laws alone are not going to help much, unless the key stakeholders (consumers and businesses) are familiar with competition and regulatory issues and the nature of prevailing market practices. The lack of understanding of the nature and extent of anti-competitive practices in prevalence poses a major challenge.

In 2006-07, we at Cuts developed an India Competition Perception Index to assess the understanding that informed stakeholders have of competition and related regulatory issues. The findings are that perceptions of competition in the country are neither too good nor too bad. If the “informed” score only moderately well on competition perception, you can picture the awareness of lay people who are also market participants. Even after the one and a half decades of reform, progress on competition and regulatory issues is slow, and anti-competitive practices still prevail in the market at large.

Stakeholders are more familiar with the level of competition prevailing in the market than with the nature of market practices, regulatory bindings and competition rules, effectiveness of competition and regulatory authorities, and the impact of government policies and measures on competition.