Published: The Hindu Business Line, November 20, 2003
By Pradeep S Mehta
Nitya Nanda

As the Competition Commission’s chief task is to decide whether a particular trade practice is harmful for the market, the economy or consumers, the top slot would require the expertise of an economist. If the right persons are not appointed at its formative stage, a useful opportunity will be lost.

THE recent observation by the Supreme Court on the issue of the appointment of the chairman for the soon-to-be-established Competition Commission of India has triggered a debate of a strange, and probably unique, kind. On the face of it, it appears to be a turf war between the Judiciary and the Executive rather than what the qualifications for the head should be.

What is clear is that in India, where market distortions are galore, the Competition Commission’s head will need to be a professional who can meet the challenges of helping the economy grow by following a rigorous and vigorous agenda.

Competition policy is a regulatory function and not a judicial one. If one looks at competition panels worldwide, most are headed by people with either legal or economic/academic background. Putting a retired bureaucrat or a judge in charge may be the norm. One, of course, would find exception in countries such as Italy, where the competition authority has been headed by a former Prime Minister, thus raising the profile of the agency.

If one looks at the most successful and highly-rated competition regulators around the globe, they are, and have been, led by young and dynamic persons.

For example, Mr Allan Fels, who just retired as chairman of the Australian Competition and Consumer Commission, is an economist who blazed a trail of market reforms for the last decade or so. His former colleague and vice-chairman, Prof Allan Asher, was a lawyer with 10 years as a consumer activist. Prof Asher’s successor, Prof Louise Sylvan, again an economist, has headed the Australian Consumers Association.

In Brazil, the competition authority ā€” CADE ā€” was headed by an economist in his mid-forties ā€” Prof Gesner Oliviera who reverted to academia, after completing two terms as the CADE Chairman. Prof Olivierahas been succeeded by another mid-career economist.

In South Africa, the Competition Commissioner, Mr Menzi Similane, is a lawyer in his early forties. The Competition Tribunal chief, Mr David Lewis, is, however, a mid-career economist. It is interesting to note that in South Africa, the Competition Commission, which investigates cases and does not have adjudicative power, is headed by a lawyer, while the Competition Tribunal that actually adjudicates the cases is headed by an economist.

The South African law is, perhaps, the best model that India could have followed. As in India, the final arbiter is the South African apex court though it has a specialised Bench.

In Peru, the INDECOPI, that regulates intellectual property, competition policy, consumer protection, market access, anti-dumping, bankruptcy and technical standards and is a model of a integrated regulatory body in a developing country context, has been headed by a dynamic and young Ms Beatriz Boza, an accomplished economist.

Prof Mario Monti, the powerful Competition Commissioner of the European Union, is also an economist. One can find several such examples elsewhere too, including Canada and the US which have the longest experience in competition law and policy.

Not only going by the experience worldwide, even common sense suggests that to be successful, such authorities need to be dynamic and proactive and free from government interference. If one goes by the experience of Monopolies and Restrictive Trade Practices Commission (MRTPC), the present avatar of the proposed Competition Commission, it has always been headed by a retired judge.

The MRTPC became another court. dogged by procedural delays where a case could take several years to be decided. Just as an example, if one looks at the annual report of the MRTP Commission, one can see the real position.

Rarely can one find that a retired person has been able to provide leadership to such an organisation. If at all such a person has been proactive, more often he has become super-zealous rather than providing balanced leadership. Naturally, many consumer groups are worried that even the new avatar of the MRTPC will also be ineffective if manned by retired bureaucrats/judges.

Similarly, the fear has also been expressed by the corporate world that retired bureaucrats and judges might bring with them the hangover of a command-and-control regime.

An inefficient Competition Commission will cost consumers, as it will not be able to check anti-competitive practices. Delayed decisions of the Commission will also cost business dearly as it will bring uncertainty and firms will not be able to take important strategic decisions.

Despite its legal status as a quasi-judicial body, the Commission is not going to be another court but an important institution for economic governance. Thus, like a retired bureaucrat, putting a retired judge at the head of the Commission can send wrong signals. It might also bring in the so-called court culture to the Commission.

The real issue, however, is not whether we need a bureaucrat or a judge but the kind of persons to man the 10-member Commission who understand the issues and can deliver.

Imagine a situation where it has to be decided whether some food or drinks manufactured by a company is safe enough and whether it should be allowed to be sold in the market. It involves a judicial function which means a decision has to be made whether something should be allowed or not.

Obviously, only a food scientist can take the right decision. Similarly, the job of the Competition Commission would be to decide whether a particular trade practice adopted by a company or a group is harmful for the market/economy or consumers. Admittedly, one would require the expertise of an economist.

In developed countries, as mentioned before, such bodies are headed either by an economist or a lawyer. But these countries have a long tradition of competition law enforcement and, hence, many lawyers have adequate expertise in economic issues as well. In developing countries, however, such inter-disciplinary training is not yet available. Hence, it would be better to have an economist head such bodies.

A selection procedure for the head of the Competition Commission that is not transparent would undermine the credibility of the new organisation which will be difficult to regain.

On the other hand, if the right kind of persons are not appointed at its formative stage, a useful opportunity will be lost.

After all, forming and running an efficient organisation is much easier, but turning around an inefficient organisation is very difficult, if not impossible!

That was precisely why a new law was adopted, rather than tinkering with the old MRTP Act. But a new law will need a new approach.