The Hindu Business Line : Making a success of Competition Commission

If there is one master key to open the doors of the world’s big league of developed nations for India to enter, it is competitiveness. This is to be understood not simply in the sense of warding off threats and challenges and beating targeted rivals in their own game and, if possible, in their own home ground, but in the sense of assuring a level-playing field through legally sanctioned pre-emptive action against practices injurious to the country’s economic pr ogress.

Among them are: Monopolies and any form of contrived and excessive dominance of the market place, formation of cartels, horizontal, vertical and conglomerate combinations (mergers, acquisitions, amalgamations) militating against free and fair competition, and anti-competitive agreements in general.

Prevention of ill-effects arising from the above manipulations of the market is no doubt essential, but equally, if not even more greatly, essential is the need to be on guard against allowing market forces to have such an unbridled sway as to undermine the economic and social well-being of the people at large.

Promoting and sustaining competition is not an end in itself but only a means to achieve the ultimate objective of protecting the interests of consumers and enabling all other economic players to carry on their trade and business with equal freedom, subject to the cardinal principles of legitimacy, justice, equity and good conscience.

The Competition Commission of India (CCI), established in October 2003 under the Competition Act of 2003 is intended to serve precisely this purpose. The substantive sections of the Act laying down the powers and duties of the Commission in respect of commonly prevalent market imperfections which it is meant to address are quite elaborate and adequate.

Giant economy

However, the provisions relating to the selection and appointment of the Chairperson and Members of the Commission show a marked lack of awareness of the sensitive and strategic tasks it is called upon to perform.

The issues the Commission will be handling pertain to a giant economy of more than $1 trillion, with the largest number (10,000) of listed companies having a market cap of a like amount in 2007 and the third largest investor base in the world.

Some of the corporate entities are credited with even having Members of Parliament and the top crust of the political and governing classes in their pockets. No functionary in the Central and State Governments can match a business tycoon in the resources he commands.

Thus, the Commission has to inquire into instances of deviant behaviour of entrenched and vested interests wielding enormous clout over all levels of government in order to set matters right. Here is a rough idea of the ambit of its authority: It can

direct any enterprise or person or their associations to discontinue with anti-competitive practice, by issuing a ‘cease and desist’ order;

impose penalty up to 10 per cent of the turnover, which can go up to the higher of three times of the profit or 10 per cent of the turnover for each year of cartelisation;

modify any agreement or direct an enterprise to abide by its orders;

order division of an enterprise which enjoys dominant position in order to prevent abuse of such position.

One would have thought that the Chairperson and Members (numbering between two and six) of the Commission deserved a sufficiently high status, say, of Supreme Court Justices (on the analogy of the Election Commission) so as to be able to discipline the mighty corporate bigwigs.

Instead, the Act equates them with Group A category officials of the Government of India, and forces them to wait on the minions of the Ministry of Corporate Affairs for sanction and creation of posts, appointment of their own staff and other matters of day-to-day administration.

The Committee of five members, constituted under the Act, for recommending a panel of names for appointment by the Government, also reflects the perfunctory attitude of the Government towards the Commission.

The Committee is required to be chaired by the Chief Justice of India (or his nominee), no doubt, but two of the remaining four members will be the Secretaries in the Ministries of Corporate Affairs and Law and Justice and the other two will be experts of repute “who have special knowledge of, and professional experience in international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs or competition matters including competition law and policy.”

Weak-willed

One sees little purpose in inducting the two Secretaries into the committee, since they are unlikely to add any value to the process of selection other than lending their presence.

This may send wrong signals to the candidates and the persons eventually selected that the Chairperson and the Members of the Commission should feel beholden to the bureaucrats of the two Ministries who are most likely to be green-horn generalists and whose knowledge of what it takes to run the Commission may at best be superficial. And we all know how politicised and weak-willed the current generation of high officials has become!

It is advisable not to vitiate the process of selection by associating bureaucrats from Ministries and letting them throw their weight about.

It will be a distinct service done to the Commission if the composition of the selection committee is changed to include the Chief Justice of India (whose nominee also should be specified to be a Supreme Court Justice, by removing the ambiguity in the language of the Act), two experts and two distinguished academics.

Appointing right persons

Whatever the composition and the process, the selection and appointment of right persons are of paramount importance for the success of the Commission. The tendency has so far been to pack the governing boards of such authorities with retired or serving bureaucrats and judges, many of them too old and rusted to retain any capacity for fresh or innovative thinking, as if all the wisdom and experience are concentrated in them. It is time the Government got rid of this habit.

The basis of selection should be the best person for the job, wherever found. A systematic country-wide search to this end should be undertaken, not merely by advertisements alone (for, persons of eminence may not care to send their applications especially if they are to be scrutinised by officialdom), but by compiling a list of prominent names in the field so that they can be sifted for making a short list.

Also, it is best that the Chairperson is selected first and he is involved in the selection of the other Members.

The Competition Act is needlessly burdened with an Appellate Tribunal meant to hear appeals over any direction or decision of the Commission with powers to confirm, remit, set aside, or vary the Commission’s decision, or make any other decision appropriate to the point at issue.

The Commission’s orders in regard to which the Tribunal’s jurisdiction can be invoked are: Choice of cases for investigation and infructuous investigations; abuse of dominant position; combinations; acts outside India but having impact within India; interim orders of restraint; rectification of orders; execution of orders imposing monetary penalty; imposition of penalties for non-compliance of CCI’s orders and non-furnishing of information on combinations, action against false statement, omission to furnish material information.

It will be seen that the matters which come within the Tribunal’s purview are either of marginal significance or liable to stall the proceedings for long periods.

State of drift

The only forum of appeal from the Commission’s orders should be the Supreme Court and the subject-matter of appeal should involve important questions of law or Constitution. If at all it is deemed necessary to retain the Appellate Tribunal, only cases whose financial stakes exceed a prescribed floor should be taken before it on appeal.

The Competition Commission is in a state of drift for the last five years, with only an acting Chairman, assisted by a Director-General, Secretary, Economic Adviser, Adviser (Law) and three Directors looking after investigation, human resources and services. The Acting Chairman and his team have put in their best efforts within the limitations of their skimpy facilities to frame rules and regulations, take up market studies and acquaint the public through their papers and workshops with the role and functions of the Commission.

According to a projection made at their instance by the IIM, Bangalore, the Commission, for discharging its duties effectively, would require 240 professionals in the first year, going to 480 by the end of the fifth year.

It is learnt that the Ministry of Corporate Affairs has proposed to the Cabinet recruitment of 250 professionals and executives for the CCI. The Ministry should see to it that no further delay occurs in appointing the permanent Chairperson and the six members and in sanctioning the required number of posts of professionals, executives and general staff. The Commission is to play the watchdog to make sure that free market does not become a free-for-all market. The Government, after going to all the trouble in passing the Competition Act and establishing the Competition Commission, should also do everything possible make both potent instruments in successfully weeding out the unwanted outgrowths of liberalisation.

(Concluded)

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