May 23, 2005, The Financial Express

The Competition Commission of India (CCI) needs to swing into action undertaking substantial capacity building to implement the extra-territorial jurisdiction that is embodied in the Competition Act 2002, according to a recent CUTS study.

As India integrates at a fast pace with the global economy, there is a need to ensure international co-operation to tackle cross-border competition challenges. Even though the Competition Act 2002 embodies the ‘effects’ doctrine, its implementation has been more or less ineffective, says the report.

Since 1990s, various sectoral regulators like those in power and telecommunications have been appointed to attract investment in various areas as well as ensure healthy competition. However, this augurs a conflict due to an overlap in competition policy. The fact that there have been hardly any problems so far is because the competition authority has been ineffective, the study says.

For instance, a plethora of other agencies apart from the CCI regulate mergers and acquisitions in India. These include the Telecom Regulatory Authority of India (Trai), electricity regulatory commissions, Reserve Bank of India (RBI), Securities and Exchange Board of India (Sebi), company benches of high courts etc. The CCI needs to build a proper co-ordination mechanism in order to make regulation effective. The government also needs to resolve the complexities that exist due to the inter-relationship between various government policies like the trade policy, industrial policy and regulatory reforms with the competition policy as a whole.

At the state level, there are five major policies that are responsible for nurturing anti-competitive practices, as per the study. These are the procurement policy, excise policy, truck operations, bid rigging in construction and retail services. This means that state level competition agencies backed by appropriate laws need to be constituted.

Apart from demolishing anti-competitive cartels, it is essential that the CCI takes up systemic consumer abuses which are rampant at the local level. This can also be done in collaboration with redressal agencies under COPRA which covers retail level competition issues, the study recommends.

Competition issues need to be addressed not only in the manufacturing sector but also in agriculture and services. It is common knowledge that there is a huge gap between the prices consumers pay and what the farmers actually receive because of the chain intermediaries. In order to provide more competition at the retail level, innovative marketing mechanisms like apni mandi and producer’s sales counters in consumer centres need to be promoted by the government and agriculture co-operatives.

As far as services are concerned, there are certain authorities that outrightly hamper healthy competition. For instance, in a case where the private sector comes forward to invest in ports, it is completely up to the port authority to allow or disallow competition. Likewise, even though the government has allowed private airlines to fly abroad the entry barriers are still high, the study points out.