Speech of

Mr Vinod Dhall,
Member,
Competition Commission of India

CUTS International Conference on

The process of economic reform in India started in earnest in 1991, when the regime of
license and control began to be dismantled. Some time after this process began, but rather
lately, the Government turned its attention to having a genuine competition law. In a free
economy, there could be market failures, and enterprises could form cartels or abuse their
dominance. Adam Smith ( to quote his words) wrote of the ‘wretched spirit of
monopoly’ in which ‘the oppression of the poor must establish the monopoly of the rich’.
Thus liberalization is incomplete unless it is complemented by a competition watch dog
that can discipline players that seek to undermine the market for individual advantage.
This wisdom has in fact compelled almost 100 countries to rewrite or freshly enact a
competition law, and set up a modern competition authority.

The Indian Government set up of a high level committee to study the matter; after
considering its report and the suggestions from trade, industry and others, a new
Competition Act was enacted in January, 2003. This Act is a modern piece of
competition legislation moulded on the pattern of similar laws in the world. It covers the
usual three fields of: anti-competitive agreements, abuse of dominance, and regulation
of mergers and acquisitions. In addition, it mandates undertaking competition advocacy.

The Competition Act marks a conscious departure from the previous Monopolies and
Restrictive Trade Practices Act ( commonly referred to as the MRTPAct). The MRTP
Commission represented the regime of license and control, and it became an
anachronism in the new economic order. According to the Preamble, the Competition Act
is for establishing a Commission which is to prevent anti-competitive practices, promote
competition, protect the interests of consumers and ensure freedom of trade; the Act
specifically makes these the duties of the Commission. This is very different from the

2
purpose of the MRTP Act which was to control monopolies, defined in terms of size; the
Competition Act punishes behaviour, not mere size. There are other critical differences
between the new Act and the MRTP Act; for example the Competition Act clearly
defines and penalizes cartels, regarded as the most pernicious form of competition
violation; the Commission can impose heavy penalties; it has extra-territorial jurisdiction
and can additionally enter into arrangements with overseas competition authorities; it
incorporates a leniency programme, and so on. Overall, the two bodies and the two laws
are poles apart in their philosophy, tenor and thrust.

The Competition Commission was established in October, 2003. But, the new Act has
faced legal challenges in the hon’ble Supreme Court of the land. Thus so far the
Commission has not undertaken regulatory or adjudicatory work. However, the
Commission has during this time being doing intensive professional work despite severe
constraints faced by it. This work is in addition to the normal administrative and
establishment work involved in setting up any new organization, which is quite enormous
in a governmental system. The objective of this work has been to prepare the
Commission professionally for starting its onerous duties once the writ petitions have
been disposed off by the Hon’ble Supreme Court, and the legal clouds have cleared.

The Commission has some of the best professionals networking with it to develop the
economic and legal concepts and practices included in the Act. We have separate expert
groups working with the Commission on its Regulations, on Economic Information, on
Market Studies and Research Projects, on Predatory Pricing, on Competition Advocacy,
and on Academic Course Curriculum. These expert groups comprise of economists, legal
experts, trade and industry representatives, consumer organizations, and other such
professionals. In this way, the Commission, even with a small team of officials on its roll,
has been able to avail of the knowledge and skills of highly regarded experts in the field
of competition economics and law.

We have initiated a number of market studies and research projects. Some of these
projects are proposed in specific sectors of the market eg pharmaceuticals,

3
telecommunications, transport, and food retailing, while some projects relate to broad
horizontal concentration in the manufacturing industry. Some other projects are aimed at
studying the laws, policies and practices of the state governments or of the central
government in particular sectors that might be impeding competition and thereby
injuring the economy or the consumers, for example in public transport and liquor trade.
The aim of such studies is to give the Commission a better insight into the structure of a
sector, market behaviour of major players, and the potential for, or prevalence of, anti-
competitive practices. This will help the Commission apply professional analysis to its
regulatory and adjudicatory work when deciding about violations of the law. It will also
aid the Commission in its public awareness work. Such studies will also underpin the
Commission’s advocacy work with the Central and state governments, and hopefully
facilitate legislative and policy changes that will promote competition, not stifle it. These
studies are to be carried out through highly reputed academic and research institutions in
the country. Also, we have an expert group of eminent economists, industry
representatives and others to steer these studies while assessing their rationale and
usefulness.

The Commission has finalized its future organizational structure, that is heavily
professionals loaded. It will have a strong Economics Wing that will enable expert
application of theoretical principles and econometric techniques to the available empirical
data of specific markets; it will facilitate the organization of economic data and will
coordinate the undertaking of economic and market studies. Presently, networking is
being developed with organizations for sourcing economic data required for the analysis,
such as determination of the relevant market, dominance of a firm and existence of entry
and exit barriers. In this work again the Commission is being assisted by a group of
experts.

We have set up a Competition Forum where, every Friday, we invite an eminent expert to
talk and discuss with us on some subject related to Competition. We have had
economists, international competition experts, legal experts, government departments,
consumer representatives and organizational experts. In recent weeks we have been

4
concentrating on trade and industry associations. Until now we have had about 23
sessions of the Competition Forum; and it has turned out to be an invaluable platform for
capacity building of the institution and its staff. It has helped to develop and refine many
of the economic concepts embedded in the Act, which have to be applied in the
enforcement of the Act and in deciding individual cases. So far, the Forum has been
confined to the staff of the Commission; now we are planning to broaden the
constituency to others like policy makers and government ministries, economic research
institutions, law and management institutes, law firms, business representatives and so
on. This will be a powerful tool for spreading the culture of competition and building a
competition fraternity. This is in fact integral to the advocacy function of the
Commission.

The Commission has carefully studied the regulations and practices of established
competition authorities in other countries, and the economic analysis undertaken by them
in deciding violations of the law. The effort has been to understand the best practices
world-wide and to incorporate these in our work. It is after such study and after
consultation with the expert group on Regulations that the Commission drew up its draft
Regulations which will determine the procedures of the Commission. The Regulations
contain some innovative provisions such as consent order, pre-conference hearing, time
limit for passing orders, cap on the number of adjournments, allocation of equal time to
parties, etc The objective is to cut delays, even through imposing discipline on the
Commission members, minimize litigation, have professional grounds for decisions, etc.
The Commission is also in the process of drawing up separate Predatory Pricing
Regulations.

In addition, the Commission has been undertaking Competition Advocacy and Public
Awareness. It has been networking with trade and industry associations, and professional
institutes for holding seminars and conferences; several such conferences have been held.
The Commission has also been interacting with academic bodies for inclusion of
competition law and policy in their curriculum. Many such bodies have already done so.
We have also developed a web-site, and are now upgrading it.

5
The Commission has maintained a very low profile in its work, in deference to the on-
going proceedings in the Hon’ble Supreme Court. Therefore much of this work has gone
unnoticed. However, this work has grown a store-house of competition knowledge in the
Commission, and has laid a solid foundation for future regulatory and adjudicatory work.

Competition Policy has two main aspects: one is a state policy framework that defends
and promotes competition, and the other is a competition law coupled with an authority
that enforces the law. The Competition Act has given the Commission a role in both
areas. It is to enforce the Competition Act and it has the Advocacy responsibility in
respect of the policy framework. It is the nodal point within the Government structure on
competition issues. It is therefore important that it be consulted when a legislative or
policy issue arises that is likely to impact competition in any area. For example, we are
told that in government, an exercise is underway to design an appropriate regulatory
structure for the infrastructure sector. Competition issues do arise in any such exercise,
such as, is regulation the preferable framework? if so regulation to what extent? and
what should be left to the forces of competition? These are questions on which the
Competition Commission can bring an expert view. We have seen press statements about
proposals for setting up new regulatory authorities, for some sectors where there is little
justification for doing so. In matters of disinvestment or restructuring the public sector
too, competition concerns can arise. Section 49 of the Act makes consultation with the
Commission optional; perhaps such consultation should be made mandatory, even though
the opinion of the Commission is not binding on the Commission.

India is the only major economy in the world without a fully functional competition
authority, which is an unfortunate fact. Meanwhile, the Indian economy and its
consumers are losing out, and the gainers are those who may be happily profiting at
public and national expense, poignantly proving Adam Smith’s famous words. The
Hon’ble Supreme Court has pronounced its verdict; the Government is now
contemplating further action in the light of the judgement. It must be the common hope
of all who are concerned about the health of the Indian economy that this exercise will

6
end the legal uncertainty and will enable the Competition Commission to start its
regulatory and adjudicatory work in full measure, sooner rather than later.