In an exclusive interview with Firstpost, Ashok Chawla, chairman, Competition Commission of India speaks about pressure from other regulatory bodies, state monopolies and how corporate India perceives the CCI.
Role of the Competition Commission of India and how it ensures that businesses adhere to the fairest terms of competition
The role of the CCI is like that of most other market regulators and competition authorities around the world. It’s supposed to be a regulator to ensure fair play in the market and that cmpanies don’t abuse dominance. That they don’t combine with each other to form cartels and in the process harm the interest of the consumers and the economy. The Act also provides for mandatory prior approval for mergers and acquisitions above a specified threshold. That’s the broad framework and architecture of the law in India.
The CCI has already fined businesses Rs 7,500 crore in its 3 years of existence. What’s the success rate of cases that have been taken up by the CCI?
The commission has in the last 3 years and more specifically in the last year or so imposed a fine which is close to Rs 7,500 crore. The imposition of the fine is a culmination of the legal process , which starts with a complaint or information to us. Investigation by the director general who is the investigative arm and then the quasi judicial hearings in the commission where the parties are given an opportunity to defend themselves. The penalties have covered a fairly wide range of sectors and activities — both in the manufacturing and the services sector. Lots of matter that came to us were maters that were transferred from the original legislation called the Monopolies and Restrictive Trade Practices Commission which were at various stages. Some new proposals came up within the last three years. Overall we have about 275 cases of which 210 have been decided and penalties have been imposed on about 30— most others have been closed so far.
What is the process of investigation undertaken by the CCI? How long does a typical case take to get resolved?
Time taken varies from case to case, depending on how serious it is. There are many which we close at the initial stage itself because the method is the admission of a complaint and there is a filter which the commission applies. Cases we think are not necessary and don’t really fall within the four corners of the Act are closed immediately. Some cases need to be looked into in detail, so we send it to the director general who investigates. That can take anything between three to six months to do a thorough job. It then comes back to the committee at the Competition Commission – which is a multi membered body, with a chairperson and six members. This body then looks at the investigation done by the director general, calls in the parties if they have found to be in violation, hears them and then decides. The total time taken can be between one year to one and a half year.
Did you – as chairman – imagine that the CCI would be so effective and successful, in such a short a time?
Both, yes and no. The Act which Parliament has given us is fairly robust, so in that sense there’s really nothing that is not provided for. But, that we would ht the ground running and would be in the position to make an impact in the market place and in the minds of the stakeholders is something which the commission has achieved in a short period of time – which is also a combination not just of the legal provisions, but also of the advocacy work which went on even before the provision of the Act were enforced.
Where does the CCI come into play vis a vis the consumer redressal systems — which are already in place?
The preamble to the Competition Act says that it will be for the benefit of the consumers. There is already a Consumer Protection Act in the country for matters which directly relate to business vs consumers – which are supposed to go to that body. Some of them do come to us but we are not ready to take cognisance of those matters. Where the Competition Commission comes in and works ultimately to the benefit of its consumers is where there are issues between business and business which impact the consumers and harm their interest and work in a manner where the markets are not working efficiently – then there could be poor quality, there could be higher prices, and if we try and redress those grievances, then at the end of the day the consumer benefits because he gets that the markets function better than they were functioning earlier, he gets maybe lower prices, he gets better quality.
What has been the mindset of Indian corporates towards the CCI – do they take it seriously or think they can get away by appealing to the higher appellate body?
The Act is only three years old and it’s also something new as far as this country is concerned. So many corporates and people who have to ensure that the act is followed are not entirely aware of the Act. We have been talking to various chambers of commerce and we have taken up cases and imposed penalties which ring a bell out there in the market place that fairplay is the order of the day. So there is awareness which is coming in — so i won’t say the corporates are entirely aware of all the Dos and Dont’s — but they are certainly not ignoring it, they are trying to take it seriously. The trade associations and bodies are taking it up in that regard and we are also doing our bit in terms of communication.
In light of the Rs 630 crore fine on DLF tell us a little about the real estate sector complaints that come to you. How will the decision benefit consumers?
In so far as the real estate sector is, we are not the regulator for the real estate sector or for that matter any particular sector. We came in and we will come in with respect to corporate entities which are dominant in the area and the product they are putting into the market. Based on that dominance, it was felt that the company was abusing its dominance, hence a penalty was imposed. It was also provided for that many of the conditions of those agreements would be modified to make them more symmetrical and not unfair in far as the consumer or the user is concerned. Now, that will obviously apply to a specific case, but once that is put out, it is very likely that others who are not dominant in that particular area or market will also be well advised and find it appropriate to follow the same agreements and guidelines, so that they do not trip up either in consumer forums or in any other forum where litigation is possible.
Is it imperative for someone to complain for the CCI to take up an issue? Or is it enough for you to be informed to take charge?
The law can work both ways. We don’t really need a complainant in the sense the person need not be an aggrieved party. All we need is some kind of information — whoever has it. He may not be concerned with the matter but he can bring it to our notice and after that his job in the sense is over. We (then) take over. There could be matters of grave importance where we don’t receive information from anywhere. So the Act also allows the Competition Commission to look at matters suo moto. We have taken up in the past, some matters on our own and we hope to do this in a more active manner, now that our machinery is getting better organised.
Do competitive pressures from other regulatory bodies – like the TRAI, RBI, etc. – bother you? How do you deal with it?
This is an issue which has now become active – the sectoral regulator vis a vis the competition regulator. The Act as it stands today gives full mandate to the Competition Commission in matters relating to fair play in the marketplace – there is no ambiguity on that. The government will have to address this issue in case they wish to make carve outs for any particular activity or sector. The matter has been referred by the cabinet to a group of ministers – which is under the process of deciding this in the very near future. And our expectation is that based on what goes on in more mature and developed economies — it’s very unlikely that a sector will be allowed to be kept out of the Competition Comission’s mandate on wishful requests from those bodies or those regulators. I think this will get settled – and because this is a new regime which is starting to operate, there will always be issues where people will feel “well this is an act which is worth pursuing and worth doing, but please leave me out of it”.
On public sector monopolies and whether a regulator has enough teeth to rein them in…
Monopolies of government per say may not be bad. But its very likely that if an entity is a single supplier of a good or service or it’s dominant — then it’s likely that there will be an abuse of dominance and therefore that’s not a good thing. So far as coal is specifically concerned the issue is, that by law there is a framework which gives the right to mine coal and put it in the marketplace through a single entity, which is state owned. But, per say, monopolies and firms which are dominant are not the best way of handling the marketplace. And that’s why there is need for bodies like the competition commission and the competition act to look into possible misuse.
In many sectors, the monopoly is that of the state – in coal and power distribution for example. What is the CCI doing about this?
In coal, there have been one or two cases where people have given us information that they are being denied access to the material and that the entity which is supplying the coal — i.e. a subsidiary of Coal India – is dominant and so it’s abusing it position. So we are looking at that matter. So far as electricity is concerned, most of the technical issues and tarrif issues are with the sectoral regulator. Where we could come in and we may come in is the issue of last mile connectivity — where the consumer should have the choice under the Electricity Act and open access is provided for, but is not really functioning and is not really available in the manner in which it should be. So we might look at that case.
On Air India, Indian Oil and BPCL being subsidised by the government, driving the rest of the industry into losses…
Some aspects (of providing subsidies to Air India, Indian Oil and BPCL which drives out competitors) impinge on competition — not every aspect. If the government of India supports Air India in financial aspects, I don’t think that’s a competition issue. But where it gives it some special privileges, which are not available to other competitors — that could become a competition issue. So there is that dividing line between what is legitimate financial involvement of the state as the owner and issues which go beyond that and may impact competition.
What is the larger role for the CCI in the coming year?
Our plan is to continue with the kind of work we are doing. We hope to strengthen ourselves, both in terms of capacity and in terms of our investigative abilities. We need to — and we will — put out to all stakeholders the fact that most other activities that are going to cause problems will be put under the scanner and that this is an act which cannot be treated lightly and cannot be ignored in the years to come.