Published: The Economic Times, August 23, 2004

By Pradeep S Mehta

The government should make use of the opportunity the Supreme Court verdict has provided to address the systemic problems bedevilling the Competition Act.

The newly adopted Competition Act 2002, is facing a serious challenge even before it has come into operation. The Supreme Court has raised objections to some of the provisions of the Act, going to the extent of calling it a “suspect legislation”. This was observed by the apex court during a hearing on a public interest litigation challenging the constitutional validity of the Act. The court had taken strong exception the “the manner in which the government proposed to appoint a bureaucrat to head -the Competition Commission” whose orders would-be implemented by a high court. By saying this, the Supreme Court has indicated that there would be no problem of constitutional validity if the Competition Commission is headed by a sitting or a retired judge of a high court or the Supreme Court.

The question, however, remains: if the arrangement of a high court implementing an order of the competition commission amounts to the subversion of judicial authority, how tan that be taken care of by having a retired or a sitting judge in place of the bureaucrat? If an Institutional arrangement is constitutionally invalid then that will remain so no matter who heads it. Moreover, if putting a retired or sitting judge makes it equivalent to a high court then how would one accept the fact that the competition commission can receive policy guidelines from the central government? The Supreme Court apparently has no problem with this even as the central government would have the authority to decide what constitutes matters of policy!

Many have viewed it to be a turf battle, between the judiciary and the executive, and the debate so far has missed the crucial point as to what qualifications the head of the competition commission should have. Many have argued that administering competition policy issues is a regulatory function rather than a judicial one. It is expected that a modem competition regime would typically devote more resources and attention to Investigation, advocacy and market monitoring rather than adjudication. It has also been cited that several competition regimes around the world, such as in EU, France, Ireland, Denmark, South Africa, Brazil, UK and US are headed by an economist. Not only that, in many competition authorities now. there are more economists than lawyers among their professional staff. In’ the US’; of course, the competition authorities need to go to courts for adjudication.

The Supreme Court has, however, cautioned that we do not need to look at the experiences of other countries In deciding what is constitutional and what is not. The government of India also seems to be trying to get out of this controversy by just amending the provision which obliges the high courts to implement the orders of the competition commission. It is quite unfortunate that some systemic problems, which have been highlighted in the debate, are being ignored.

The major problem with the Act is that it has mixed up investigative and adjudicative functions, adopting the MRTP Act approach. Incidentally, this has been a worldwide concern as it is widely believed that combining the functions enables a competition authority to act as judge, jury and executioner. This would give it absolute power, while stripping the system of internal checks and balances, thus leaving enough scope for its misuse. Even the MRTP Act had a better arrangement in this regard. It is surprising that the drafters of the Act ignored this aspect, which may jeopardise the basic principles of justice: equity, fairness, consistency, objectivity and certainty.

TO AVOID such problems, in many jurisdictions including the US, the adjudicative powers are vested with the judiciary. However, considering that the Indian judicial system is overloaded and inefficient, such an arrangement will weaken the law. Delays in settling cases as can be seen In Indian courts will, have serious consequences for the Industry.

Thus, for India, it would be best to look at the South African model where the competition commission performs investigative, advocacy and market monitoring functions while the adjudicative functions are vested with the competition tribunal. Despite having only adjudicatory functions, the position of South African competition tribunal chief is not reserved for a judge and, at present, it is headed by an economist, who is now in his second five year term. In India, however, keeping in view the Supreme Court’s observations, the competition tribunal could be headed by a sitting or a retired judge. Such an approach is, of .course, not new to India as can be found in telecom and capital market regulation, for Instance.

Another Interesting aspect of-the South African competition regime is the provision of having part-time members in the tribunal to bring in additional and diverse expertise. We could have both full-time as well as part-time members in the tribunal or even the commission.

On to selection/appointment. Incidentally, in the original Competition Bill it was suggested that a collegium headed by the Chief Justice of India would select the chairman and members of the competition commission. However, the final Act vests all the power in the central government without specifying any procedure. This obviously does not guarantee transparency and fairness in the appointment procedure, which is so important to promote an image of transparency and fairness of the competition authority itself. Thus, it is imperative to have a set procedure for appointments. It can be done by a collegium as was suggested in the original Bill or even by the Union Public Service Commission.

The Supreme Court case has caused delays in implementing the Competition Act, which has been long overdue. Nevertheless, this should be considered as an opportunity to address the systemic problems rather than rushing through with stopgap arrangements. This would help avoid future controversies and problems as well as serious inconvenience and harm to consumers, business and the economy as a whole.