Published: Financial Express, 28 January 2005

By Pradeep S Mehta

We can breathe a sigh of relief, now that the Supreme Court has disposed of the writ petitions challenging the validity of the appointments to the new Competition Commission. Earlier, the court was so angered that it even expressed a disdain for the law. The government will now need to amend the Competition Act, 2002 to provide substance to its pleadings before the apex court. It may take another year or so, but it will be worthwhile to see what should be done, so that the law doesn’t face another challenge, and we do get a modern and first class competition authority in the country.

First, the government has offered to split the competition authority into two: a commission and an appellate authority, somewhat like Trai and Sebi. It is welcome. However, the commission will need to have adjudicatory powers, otherwise it will lack teeth. It is not a recommendatory body like Trai but a regulator like Sebi. Besides, the appointments to the new commission and the appellate body also have to undergo a transparent selection procedure, as the government has averred.

It will need to establish two selection committees, while the hunt for the personnel should not be restricted to sinecures: retired bureaucrats and/or judges. Such bodies need to be headed by persons, who have a good understanding of ‘law and economics’, and particularly their nexus. These can be specialist economists or lawyers, as the trend all over the world is. The job will require great vigour and rigour, and that should be the attributes one will have to look for.

A CUTS research report, Towards a Functional Competition Policy for India (to be released on January 31) has shown how a huge amount of anti-competitive practices which exist in our market place is sapping the economy, thus harming both consumer and business welfare. The UPA government is very serious about both promoting competition and ensuring that we have the best international practices in regulation. Therefore, both the government and the new competition authority have a huge agenda. The authority cannot handle such problems if it is not given the comfort and wherewithal of being able to function without fear or favour.

The existing law contains a Damocles sword, in terms of the ability of the government to remove any member, including superceding the entire body. Such medieval provisions will have to go. Other than that, the government’s power to issue policy directives will also have to be defined, rather than kept in such a manner, that even a section officer can create problems. The staff of the two bodies also need to be experts and professionals, rather than only deputationists from civil services. Services also offer good talent, but such appointments should be done through a proper selection procedure.

Another issue which requires serious consideration is the weak coverage of the competition law on intellectual property rights. The new Act has to provide for active coverage of abuse of IPRs (patents, copyright, trade marks etc), which we can do as per the provisions of the WTO-TRIPs agreement. The patent amendment Bill provides for an enabling provision for compulsory licencing for medicines etc., which engage in an exploitative pricing strategy. However, the role of the competition authority to examine such matters, needs better coordination between it and the patent office.

Coordination with other agencies and the competition authority is another grey area that needs to be re-examined. After all, it is the competition authority’s mandate to ensure that competition prevails in the market, while most of other agencies are mandated to protect competitors. For example, if a telecom operator is engaged in predatory pricing, Trai may not act on it, but the competition agency will. Similarly, it is the Reserve Bank of India, which regulates mergers between two banks, but it may not examine the competition angle. It is, therefore, necessary that the competition authority has the prime or at least the concurrent responsibility of acting on sectors, even if there is a sectoral regulator.

In conclusion, awareness about competition in India is very low. Many anti-competitive practices are taken for granted. The Competition Commission’s predecessor, MRTP Commission, did little on this due to its own legal and resource limitations. The new authority has thus a mandate and a big agenda for research and advocacy, which it can carry out methodically and effectively. That could be a good exercise for it until such time the law is amended and operationalised.