OPINION | Competition Law: Govt must shed piecemeal approach, arm CCI with powers

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Updated: October 24, 2019 11:58:52 AM

Instead of introducing individual clauses to deal with situations, the government should equip CCI with ample powers to deal with the changing business environment.

Competition Commission of India, Supreme Court,  Competition Act 2002, public sector undertakings, CCI, competitionThe calls for breaking large technology firms are getting louder by the day.

The government will amend the Competition Act to add a ”commitment and settlement clause” in the Competition Act, a newspaper report said citing Competition Commission of India (CCI) chairperson Ashok Kumar Gupta. This will allow companies charged with violation of competition law to correct themselves to avoid punishment at any stage of the investigation. This was part of the recommendations made by the Competition Law Review Committee chaired by corporate affairs secretary Injeti Srinivas that submitted its report in July this year. The move follows the global trend of introducing leniency programmes in competition laws to reduce unnecessary litigation.

As the government intends to amend the Competition Act, it has the opportunity to have a relook at the law that has been found to be inadequate to address the concentration of power in the hands of corporations. The regulators and lawmakers in the US and Europe are zealously working on ways to tackle market concentration and address the limitations of existing laws. The calls for breaking large technology firms are getting louder by the day.

This sudden spurt of regulatory/legislative action on competition laws is caused by a change in the character of monopolies in the era of big tech. In the industrial age, the monopoly was defined as “the exclusive possession or control of the supply of or trade in a commodity or service”. The economic impact of monopolies was high prices and control of the output. The technology and telecommunications industries are currently witnessing a situation where two or three dominant players drive down prices.

Amazon and Flipkart are shaking up the retail market through aggressive pricing. In the telecom sector, Reliance Jio, Airtel and Vodafone Idea have brought down tariffs to ridiculously low levels. So there is a need to redraft certain provisions of the law to address the new market reality.

Another area where the competition law needs a relook is the positioning of the CCI among a multitude of regulators. There is a likelihood of regulators stepping on each other’s toes. The CCI had a huge setback last year when the Supreme Court dismissed its appeal against a Bombay High Court order that rejected its prima facie order seeking an investigation into alleged cartelisation by Airtel, Vodafone Idea and COAI. The redrafting of the competition law presents the government with an opportunity to clearly define the powers of CCI.

In July, the OECD Council adopted the “Recommendation concerning Effective Action against Hard Core Cartels”. One of the objectives of the recommendations was to ensure that competition watchdogs have enough teeth to deal with cartels. These recommendations include arming regulatory bodies with powers to conduct ‘dawn raids’ and access documents and information, to access remotely stored electronic information and to seek information from third parties including other governments. These powers will be key to create a regulatory environment for technology and e-commerce industries.

Instead of introducing clauses one by one in a piecemeal approach, the government should rework the entire competition law to equip it for the changing business environment. The new competition law must meet the twin objectives of free and fair competition and consumer welfare by arming the regulator with ample powers to tackle both private and government monopolies.

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