Striking a competitive balance

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The state of Competition Law in India is still at a relatively nascent stage. However, the Competition Commission of India (CCI) in just five years has undertaken a slew of steps to curb organizations from violating competition laws but at the same time stimulate business growth. To quote Arun Jaitley, Minister of Corporate Affairs, “Mergers and acquisitions have to be encouraged to promote the size of domestic companies but there is also a need to understand when to draw the red line while implementing the competition law”.

At the height of popularity of board games as a form of entertainment, ‘Monopoly’ was perhaps one of the most enjoyable among the lot. The basic premise of the game can be taken as an extension of the business sentiment in the post liberalization era – market domination by a single entity. But board games became somewhat obsolete as did the model of market supremacy. With the Indian economy opening up and growing at a rapid pace, it proved necessary to take adequate measures to promote competition and curb monopolistic tendencies. With this thought in place, the Competition Commission of India (CCI), an autonomous body with a Chairperson and six members was institutionalized in 2002. This was followed by an appellate body, Competition Appellate Tribunal (COMPAT), which was set up in 2009.

Competition Law advocates the concept of free trade while at the same time negating the hostile effects of aggressive, predatory competitive practices. To simplify, it essentially prohibits companies from abusing their dominant positions, bans anti-competitive agreements and looks at regulating combinations (acquisitions, and acquisition of control and mergers) that have or are likely to have an adverse effect on competition in India.

The last few years saw a steady increase in large corporations allegedly exploiting their dominant position in the market and being accused of cartelization. Investigations were conducted and many companies were penalised for these unlawful practices. It has also been observed that many of these companies do not necessarily understand the complex dynamics of Competition Law. An inference can be drawn to corroborate this is the fact there have been just two leniency applications filed before the CCI. One reason could be the need to avoid making headlines in the industry; another is that companies are still adopting the wait and watch approach, in contrast with what happens in some mature jurisdictions.

Elaborating the current state and awareness levels in the country, EY India recently released a report “Calibrating the pulse of Competition Law in India”. It summarises the views and opinions of senior legal professionals & advocates, leading lawyers and former members of the CCI; while also highlighting emerging trends such as Dawn Raids, use of eDiscovery, sensitization among corporates and penalty guidelines. The report states that more than 80% of Indian enterprises are unaware of Competition Law, what it seeks what it seeks to achieve and likely consequences of their contravening it. In addition, almost 70% of the respondents believed that Indian enterprises do not have in place control mechanisms and their documents such as vendor contracts, supply and distribution agreements, etc.

The gravity of non-compliance and apathy is immense and should be a definite cause of concern for the industry. While the CCI will continue in its crusade, corporates should strive to build strong compliance programs and practices so any possible violations can be identified and addressed early.


One thought on “Striking a competitive balance

  1. A timely note, also in the context of the new Companies Act which increases self-regulation. Though MRTP was around for a long time, to ensure that competitiveness and innovation do not get stifled by new laws, industry must address internally the issues highlighted of awareness, compliance and planning, and also externally engage to frame and shape these regulations in a manner that will promote both competitiveness and customer benefit, and Make in India.

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