Competition panel not consumer forum or sectoral regulator

Written by Ronojoy Banerjee | Ronojoy Banerjee | Updated: Oct 28 2011, 10:42am hrs
New chairman of the Competition (CCI) Commission of India Ashok Chawla has his job clearly cut out. Observers feel that he would need to bring his close-to-four-decades-long experience in bureaucracy to strike the right balance between the requisite freedom of market players in a fast-growing economy and the regulator's mandate to ensure fail play of market forces. In his first interview since taking charge, the former finance secretary speaks to FE's Ronojoy Banerjee on how issues of regulatory overlap can be handled deftly and how he would address these issues head on.

There has been the long debate on whether CCI is encroaching into other regulator's territory. RBI has excluded banks from the ambit M&A regulations as well. Do you think there is any inherent conflict between CCI and sectoral regulations

Well, legally speaking, the commission is not supposed to enter into areas that are already looked into by the respective sectoral regulatory bodies. The decision to exclude banks from the ambit of M&As was a conscious decision taken by the government. However, in other sectors while everyday issues would certainly be under the respective sectoral bodies, it is the CCI that is empowered to look into issues concerning competition. We have a very clear focus. It is a very subtle issue as to what impinges upon competition law and what does not. There is, however, no confusion as far as that is concerned.

Will you as the chairman hold discussions with heads of other sectoral regulators to ensure that misunderstandings with respect to regulatory oversight do not arise

As I said, there is no area of dispute or misunderstanding. Sectoral regulations would address issues that pertain directly to that sector. We would come in only when issues of competition arises. And yes, we may look at meeting (other sectoral heads) regularly on such matters if the need arises.

Prime Minister Manmohan Singh has reportedly said that merger and acquisition (M&A) deals involving brownfield investments in the Indian pharmaceutical sector would be cleared by the CCI, even if the deal sizes are below the thresholds specified under the Competition Act. Is the commission ready for a challenge like this

So far, we have not received any official communication on the matter. We will follow whatever directions we get from the government and in that sense there would not be any problem. That prices of generic drugs would increase owing to MNC takeover of Indian firms is a perception. Now, how true that is would only be clear once these issues are closely looked into.

An internal committee set up by the CCI has proposed certain changes to Competition Act to strengthen the commission. One of the proposals also say that CCI should be allowed to conduct searches and seizures. Isn't it too early for that as it has been only two years since the commission was formally notified

The proposed changes you are referring to has flown from a set of earlier recommendations made by a committee which was formed to look into the framing of the National Competition Policy. It was headed by former chairman Dhanendra Kumar. It is there that the observations were made as to what are the changes, if any, the commission would need in the future. It is only after that the CCI formed an internal committee to propose changes. I have not applied my mind on the specific proposals as yet.

The commission recently imposed Rs 630 crore fine on real estate company DLF. Following this, the commission has received several complaints from consumers regarding other realty players as well. Do you feel that certain sectors like real estate and cement need more regulatory oversight than the rest when it comes to matters of competition

This is a dynamic process. At different points of time, different sectors will experience overcapacity/issues of dominance. Some dominant players might engage in anti-competitive practices. The regulatory process to address this is not static and changes with time. Today, we see one or two sectors indulging in such practices. But this would change over time. Also we would look into complaints that have a direct bearing on competition. However, we are neither a consumer forum nor a sectoral regulator.

There are also cases of trade associations knowingly or unknowingly engaging in anti-competitive practices.

I am not too sure whether they do it entirely unknowingly or not. However advocacy is something we undertake and it is provided for in the Competition Act as well.

What is the biggest challenge for the commission which is still at its nascent stage

The big challenge would be to strike the right balance in handling cases concerning issues of dominance on one hand and that of mergers and acquisitions on the other. The economy is growing and hence it is only natural that mergers and consolidations would be undertaken in a big way. Institutionally we need to strike the right balance. That is critical.