After being viewed as largely dormant since its inception in 2009, the Competition Commission of India (CCI) has had an eventful year-and-a-half under its present chairman, Ashok Chawla. The imposition of a hefty Rs 6,300-crore penalty on cement companies grabbed the headlines last year, but the CCI—whose job is to safeguard consumer interest by targeting companies who abuse their market dominance or set up cartels—is still fighting that out in the courts. In an interview with Lola Nayar, Chawla talks about the challenges ahead. Excerpts:
From cement to tyres to film distribution, the CCI has filed numerous cases. How effective have you been in tackling cartels?
As you know, we have passed an order regarding cement. We looked at the tyre sector quite intensively too but couldn’t find substantive evidence. We are looking at the steel sector, particularly the hot-rolled coils, where some user industries allege a cartelisation. We looked at the airline fares not once but twice and found that airline prices move somewhat in a volatile manner when the demand is higher, but we found no evidence of a cartel. In the case of hospitals, we noticed patients being forced to use services of alliance partners such as laboratories.
There was one case of a hospital insisting that patients use the facility of a certain stem cell bank, excluding others. We are at an advanced stage on the issue and will be able to take a decision in the next two months. However, we have not been referred any cases where hospitals charge high prices from private patients as compared to other patients. We may look at it because the commission is trying to focus on issues affecting a vast majority of people and healthcare is important in a country like ours.
What about education, where colleges charge high capitation fees?
Education is now very commercial in nature and there is a lot of competition. From the commission’s point of view, prima facie, there is no issue. If the quality is not good, there are other regulators to look into that.
Overall, has CCI become more effective of late? Do you feel its role is being recognised?
The kind of issues related to fair play in the market which are coming up are not in adequate numbers—not all of them are cases which fall squarely within the parameters of competition laws. That is why we end up not pursuing not more than 60 per cent of the cases. The others are either contractual disputes or pure consumer issues.
Industry associations the CCI has confronted certainly seem aware of your role....
We ask them for compliance in terms of the change in practices, systems or processes that they follow—very often, they comply, unless they go in for appeal. We’re also told that now there is much greater awareness and anxiety among associations not to violate the Competition Act. In fact, one of the associations told me that now when they meet, they bring a lawyer along to see they don’t do anything that violates the act. This practice is spreading fast.
The Competition Act is fairly robust. India had the advantage of learning from legislations in other jurisdictions. The decisions of the commission cannot be final. The act provides for two appeals—to the Appellate Tribunal and thereafter, to the Supreme Court. Whatever decisions we are taking, there is quick action from these two. In the cement cartel case, we imposed penalty on 11 cement companies. They appealed to Compact, which agreed to hear their case but asked them to first deposit 10 per cent of the penalty amount. Since the cement companies were not quite happy even with that order, they went to the Supreme Court, which upheld the decision of Compact. All this happened within a period of three or four months.
There have been allegations of cartelisation in the telecom sector. Is CCI looking into it?
In the telecom sector, the general perception is that there is robust competition. That is why tariffs are low. In fact, the industry has been complaining that there is dire need for consolidation. So, we have not looked at it. Recently, a matter came to our knowledge, where telecom companies got together and did not bid for 2G spectrum auctions. We are not sure what the contours of the matter are. We have asked for information from the department of telecommunications and from the CAG’s office, which put out a report on this recently. We will see what the facts are and whether there is any violation of our act.
You have expressed concerns about Coal India’s monopoly and the procurement system followed by the government which is leading to unfair trade practices....
It’s not about unfair trade practices. It’s either abuse of trade dominance or bid rigging in government procurement, or acting in concert like a cartel. For instance, in the coal matter, it was alleged that because Coal India and its subsidiaries are in a dominant position, they impose one-sided agreements on the power utilities and the utilities have no place to redress those grievances.
Are you referring to the NTPC case, where they got poor quality coal?
I don’t know if the NTPC case has come to us but there are other utilities which have approached us making similar charges and complaints against different subsidiaries of Coal India. The grievances were basically all the same: the agreement is one-sided and quality is poor, and that they say they’ll give a certain percentage but give much lesser. They are virtually at the mercy of Coal India, which is dominant and there is no competition. There are also cases of bid rigging in the supply of medicines for preserving foodgrains to the Food Corporation of India and in the case of LPG cylinders supply to oil marketing companies. Then there are cases of so-called cartels, which are seen working in concert with each other, like fixing of petrol prices by oil marketing companies, which is presently under investigation. Remember, the Act is ownership-neutral so it applies to all entities.
How many cases have you taken up against government entities?
We get cases regarding services, hiring of rigs and procurement of medicines by the health ministry’s store department. The position we take is that setting benchmarks or thresholds or criteria for procurement is the job of the procuring agency. But where they devise criteria under which most people are not able to compete and which allows only one agency, then we look into it.
