Suo motu CCI probe into banking, finance cos

Written by Ronojoy Banerjee | Ronojoy Banerjee | Rishi Raj | New Delhi | Updated: Feb 4 2012, 10:57am hrs
The competition regulator is all set to initiate suo motu inquires into a host of sectors that it feels are adopting unfair and anti-competitive practices. Sectors like banking, finance, and mobile handset industries have been reporting growing incidence of anti-competitive practices, said sources in the Competition Commission of India (CCI).

The CCI will probe the commonly used practices employed by companies, which are against the competition laws.

The exercise by CCI may soon follow clear guidelines as part of the efforts to strengthen its advisory practices. Though these guidelines are unlikely to have statutory powers, the commission hopes it would create peer pressure on companies restraining them from employing such tactics.

The development comes months after the commission initiated a suo moto probe into the common practices of every major real estate company in the country after imposing a fine of R630 crore on DLF. We have identified a few sectors in which the tendency to employ unfair and anti-competitive practices are very high. We want to look into these areas, a senior CCI official told FE on conditions of anonymity. He said that the move is a part of the commissions efforts to strengthen its role as an advisory body in competition-related issues. Advisories are critical to the commission. The field of competition law is still evolving hence there need to be a clear understanding on such matters, the official said.

The development is significant since the commission had given a clean chit to banking and finance companies over the issue of pre-payment penalty last year. It came as a big disappointment to the existing borrowers who were hoping that CCIs intervention would bring some reprieve. However, soon after the commission absolved the banks of any wrongdoing, the Reserve Bank of India governor D Subbarao came out against such levies on foreclosure of loans and given banks a months time to discontinue the practice. These are practices that banks blindly follow which needs to be curbed. We hope that an inquiry into the most common practices would benefit the end consumers, the CCI official added.

As per the Competition Act, 2002, the commission is empowered to not only issue advisories on competition related matters but also suo moto investigate anti-competitive practices. the Commission shall be an expert body which would function as a market regulator for preventing and regulating anti-competitive practices in the country in accordance with the Act and it would also have advisory and advocacy functions in its role as a regulator; the objects and reasons of the Act states.

A Delhi-based competition lawyer who has represented several high-profile cases in the commission said, It is important that the CCI strengthens its advisory practices. Most of the powerful competition regulators in the world, including those in EU and South Africa, have strong advisory practices. Since CCI has proved that it would not shy away from passing strong orders the advisories would be useful.