The competition law needs to be effective

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News reports suggest that the government is planning to amend India’s competition law to speed up the resolution of anti-trust cases that various companies are embroiled in. Given the long delays and consequent business losses that adjudication processes often cause, any revision that saves time should be welcomed, prima facie. Specifically, the Centre is said to be mulling a “commitment and settlement” clause in the Competition Act. If it goes through, companies facing penal action by the Competition Commission of India (CCI) for anti-competitive actions or practices will be allowed to reach a settlement by committing themselves to taking corrective action. This option will reportedly be available even in cases where a probe has already been done against a company accused of a violation. Settling such cases would enable companies to lower the uncertainty of prolonged trials and the risk of adverse CCI rulings, and get on with their jobs. The idea seems to be aimed at improving the ease of doing business in India.

The rules of competition are always hard to implement. This is mainly because it is difficult to judge what amounts to a practice that constrains rivalry and hurts consumers, rivals and other participants in a market. In India, with its long legacy of monopolistic enterprises, there are very few open-and-shut cases. Most are highly complex and evidence is tough to gather. This also means that the CCI remains burdened with a rising pile of pending cases. Since this pile-up acts against business efficiency, pragmatism demands that new ways are sought to clear the backlog. The contours of the proposed amendment, however, are still unclear. For instance, settling a case may call for some form of negotiation, but within what framework could this be done? In a dispute involving two rivals, an out-of-court deal may be possible, but what if several companies are involved? Also, the classic idea of anti-trust is for an organ of the state to take suo motu notice of a corporate move, such as a business takeover, that could hurt competition. Would the CCI appoint its own negotiators? Clarity is also needed on the mechanism to monitor the amends promised by errant companies. Importantly, the government must ensure that the new options available do not weaken the authority of the CCI, whose job it is to see that markets in India stay competitive. The watchdog’s very existence, together with the penalties it imposes, is meant to deter companies from violating the competition law.

The government is also reported to be considering changes that would prevent acquisitions by large digital companies from escaping scrutiny. Until now, the CCI has been reviewing deals where the target company’s turnover and assets exceed specified thresholds. This is thought to have let Big Tech firms snap up low-asset startups without coming under the scanner for the impact of such buyouts. Now, the CCI would also take into account the size of deals to determine if an acquisition deserves a closer look. India’s approach to anti-trust behaviour has been lax by advanced economy standards. The existence of legal provisions is not enough. They need to be effective. If the proposed amendments help turn Indian markets more competitive, the changes will count as reform measures. But, for that, these will have to be evaluated by their outcome, not just by the speedy clearance of cases.



via LiveMint

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