CCI cometh, CCI Faceth Problems

 

According to a news report in Business Standard on 21^st May, (http://www.business-standard.com/india/news/cci-to-notify-regulations-soon/358754/ ) Competition Commission of India (CCI), will notify the regulations to govern its functions in a day or two. Following is the list of regulations which have already been drafted and which may be notified in the coming days:

• draft Competition Commission of India (calling upon Experts to assist in conduct of                   Inquiry) Regulations;
• draft Competition Commission of India (Engagement of Experts and Professionals)                  Regulations;
• draft Competition Commission of India (General) Regulation;
• draft Competition Commission of India (Meetings for Transaction of Business) Regulation;
• draft Competition Commission of India (Determination of Cost of Production) Regulations;
• draft Competition Commission of India (Lesser Penalty) Regulations;
• draft Competition Commission of India (Combinations) Regulations.

Though these draft regulations cover most of the basic regulatory issues, I doubt if they are sufficient to ensure a smooth functioning of CCI. Some of the issues which might face CCI in near future:

• Conflict with Intellectual Property Rights – Competition law frowns at monopolies. On the other hand IPR laws gives the Intellectual Property Owners a monopoly over his right. Section 3(5) of Competition Act does recognised the rights of the Intellectual Property Owner under IPR laws but it only allows the owner “to impose reasonable conditions, as may be necessary for protecting any of his rights”.  There is no clarity on what can or cannot constitute ‘reasonable conditions’? The advocacy booklet of CCI on the subject also fails to give a clear idea on the issue. CCI would be required to come up with specific regulations or guidelines in this regard to make matters more clear.

 

• Conflict with the Anti-dumping laws – Even though both Competition law and Anti-dumping laws seek to ensure competition in the market and have common origin in US, they have evolved into two extremely divergent concepts. Governments use anti-dumping to protect the domestic producers against cheaper imports. On the other hand, through competition law, Governments seek to protect the interest of the consumers by encouraging competition in the domestic market. And it may be relevant to note here that encouraging more efficiently produced and hence cheaper imports plays an important role in this. Competitive pricing under Competition law can, in certain circumstances, be considered dumping under Anti-dumping laws.  

 

• Conflict with other regulators – Under Section 21 and 21A of the Competition Act, 2002, CCI and other Statutory Authorities can reference to each other for matters related to Competition. However, would CCI have a complete freedom to take action against enterprises operating within the jurisdiction of the some other regulator? Or would it be required to coordinate its actions with other regulators? Competition Authorities in other countries have also faced similar problems. For instance in some countries, like in Australia, they have created a single entity to deal with matter related to Competition and Consumer issues.  

 

• Extra-territorial jurisdiction under Section 32 - Section 32 of the Competition Act, 2002 gives CCI, the power to enforce Indian Competition law against foreign entities whose actions have ‘appreciable adverse effect’ on competition in the relevant Indian market. The question is, will CCI be able to use its powers to control International mergers or export cartels, which are being promoted and protected by their own governments, if such International mergers or export cartels are having an adverse effect on competition in Indian market? It reminds us of the merger of Boeing and McDonnell Douglas which received the approval of European Commission only because of intense political pressure and threats of a trade war, emanating from Washington.

 

• Regulations regarding Joint Ventures – How would CCI treat a joint venture if it has an appreciable adverse effect on the market? Would it be considered an anti-competitive agreement and treated as such or would it be treated as a merger proposal which will have to take the approval of CCI before going ahead with the venture.

  

As of now, I can think of only aforementioned issues. But am sure, there will be many more such issues which would rise in due course and CCI would have to address them, either with regulations or guidelines or both.

 Another interesting thing that I noticed was that there is nothing on the website to indicate that CCI has become operational. Even the notification of 20^th may, notifying Section 3 and 4 and appointment of Dr. Justice Arijit Pasayat, as the head of Competition Appellate Tribunal, has not been updated on the website. I wonder if this sluggishness would continue when CCI actually starts handling cases. As a lawyer I know that law expects me to read the official gazette of India regularly (Ignorantia legis neminem excusat). But please would somebody tell where on net can I find it or which newspaper wallah in Malvianagar keeps a copy of this Gazette???!!! I would really appreciate that.

 

 

 

CCI Cometh

With its operationalisation, Competition Commission of India (CCI) is ready to usher in a new era of Competition in the markets of India. Empowered with a wider jurisdiction and powers to impose severe penalties, it can and hopefully it will change the way business is done by Corporate India.

Competition law, also known as Anti-trust law in United States is that branch of law which regulates ‘competition in market’. Competition has been defined beautifully by the Black's Law Dictionary as 'an effort or action of two or more commercial interests to obtain the same business from third parties'. It is considered desirable because it forces the enterprises to become more efficient and provide better quality and wider range of products and services at the lowest price. It ensures consumer welfare and induces economic growth.

Competition Act, 2002 by establishing CCI seeks to protect competition in the market by prohibiting anti-competitive agreements and abuse of dominance. CCI would also regulate combinations, through mergers, acquisitions or amalgamations.   Any combination above a certain threshold limit, specified in Competition Act, 2002, would require the approval of CCI. However as of now only Section 3 and 4 of the Competition Act, which deal with Anti-competitive agreements and abuse of dominance have been notified. Section 5 and 6 which deal with Combinations and their regulation is yet to be notified. Hence, as of now, enterprises do not require the approval of CCI before getting into a combination.

CCI would be replacing the existing MRTP Commission which was functioning under MRTP Act. MRTP Commission was tasked to ensure that the operation of economic system does not result in the concentration of economic power to the common detriment and to prohibit monopolistic and restrictive trade practices which are prejudicial to public interest. The reasons for the failure of MRTP Commission are manifold. Suffice to say that the law makers preferred to bring in a new law instead of simply amending the MRTP Act.

Needless to say that next couple of years are going to be exciting for the students of Competition law. It will take at least two years for this law to stabilize.   Every case would develop new concepts and principles and lay down the foundations of the competition regime in India. Possible conflicts with other sectoral regulators caused by overlap of jurisdiction would raise and answer some very interesting legal issues.

A note of warning for managers and entrepreneur in India. CCI is not MRTP Commission. It has much wider jurisdiction and it can levy very very serious penalties. Hence, unless you want to become a precedent in the yet to be written history of Competition law in India, it may be advisable for the managers and entrepreneurs to reassess their strategies and practices to ensure compliance with the new law. It’s a new world friends and the Corporate India will have to adjust to the new realties.