Cross checking

For the first time in liberalised India, economic statutes of both the federal and the State governments will be systematically subjected to a common, market-driven ‘competition assessment’ if the proposed plan of the Competition Commission of India (CCI) sees the light of the day.

Last week, CCI member MS Sahoo revealed the fair trade regulator’s plan to proactively conduct competition assessments of all economic laws before the federal and State legislatures.

Given that India has not adopted a formal ‘regulatory impact assessment’ framework for identifying the costs of regulation on various sectors of the economy, CCI’s assessments could well set in place a much-needed institutional framework to manage the flow and content of the country’s existing and proposed economic laws.

Economic laws typically aim at balancing competing interests of various stakeholders as well as interests of government ministers/departments charged with implementing such laws. The balancing of competing interests often allows the imposition of business costs that exceeds the benefits expected from a legislation.

Consequently, Indian entrepreneurs are subjected to a legal regime which at the macro level attempts to ease investments or facilitate growth but allows at the micro level the existence of an ecosystem of compliance rules that hinders competitive growth.

For example, the Real Estate (Regulation and Development) Bill, 2013, seeks to regulate contracts between developers and buyers to ensure consumer protection, requires mandatory registration of projects, imposes spending restrictions upon developers and introduces penalties for violating provisions of the proposed law.

Will such a law, while ensuring a more consumer-friendly real-estate sector, maintain the sector’s competitiveness? If the Bill’s provisions impose further business costs, are the benefits economically justified? Will they impinge upon the effectiveness of macro-level economic reforms initiated for the sector? At present, India does not have a ‘regulatory management system’ to examine these questions.

The CCI’s competitive assessments would allow for economic laws to be examined against the goals set for such legislation — allowing the government to identify and eliminate the hidden ‘business costs’, check if the long-term benefits of a proposed law outweigh short term costs and avoid the possibility of overlap of regulatory reach.

Further, in conducting competition assessments, CCI should check if the implementation of a proposed economic law would restrict the ability of market players to effectively compete or limit the choices or information available to customers.

The CCI should also look at global best practices — those followed by UK’s Better Regulation Executive, South Korea’s Regulatory Reform Committee or the US’ Office of Information and Regulatory Affairs. These agencies are tasked to maintain the overall competitiveness of their respective economies at a constant level, recommending the removal of existing business regulations before the addition of new ones.

The CCI may have been inspired, among other things, from the lead set by the Australian government, which in the mid-1990s launched ‘competition impact assessments’ of its economic policies, and found about 1,800 instances of competitive distortions. Removal of such distortions eventually allowed the economy to grow by 5.5 per cent, and consumers benefited annually by A$9 billion.

The writer is an assistant professor at Jindal Global Law School

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