COMPANY LAW
| CCI should not try to be a super-regulator Mon, 27 Sep 2010 21:43:57 GMT |
| The Economic Times CCI should not try to be a super-regulator The Supreme Court could not have done better than this for the Competition Commission of India (CCI). In just a fortnight, the apex court has established and reaffirmed that the commission is within its rights to seek information from companies if it suspects them of distorting fair play. Companies have no choice but to provide all the information that the director general of investigation of the commission may seek. They cannot appeal against such preliminary investigations before the Competition Appellate Authority and seek a stay on such inquiry. The apex court’s pronouncement in the petition filed before it by the commission against an order of the Tribunal staying investigations into exclusive arrangement between SAIL and Indian Railways for supply of rails established that firmly. The court reiterated its position as it refused to admit an appeal filed by Kingfisher Airlines against an inquiry by the director general into a strategic alliance it has with Jet Airways (India) for more than two years. For a regulator whose creation was not welcomed by the industry, the Supreme Court intervention provides the much-needed shot in the arm to go about fulfilling its mandate. But the apex court’s pronouncement need not mean that companies will fall in line. One must not be surprised if defendants use delaying tactics to frustrate the investigation or deny the investigators’ information. It is an old practice and a major reason for huge backlog of cases before various courts and tribunals across the country. The companies too have their concerns. Information sought by the investigators may be sensitive for the company’s business and in an age of corporate espionages and fierce competition, rivals may try to find ways to get their hand on the information. This fear prevents companies from sharing much data that are required by policymakers for forecasting trends. A leakage of information from the commission’s premises or staff would erode its credibility immensely. The commission, therefore, needs to secure industry’s confidence in its ability to keep confidential information safe as envisaged in the Competition Act before it begin investigations into alleged contravention of the principle of fair play. To be an effective competition regulator, the commission should abide by the spirit of the judgement delivered by the Supreme Court. This would require the commission to accelerate the pace at which it forms opinion on alleged anti-competitive agreements and/or abuse of dominant position. The apex court has said such opinion should be formed within 60 days and, wherever possible, much before that deadline. The court has also upheld the powers of the commission to issue orders temporarily restraining companies from carrying on acts that are seen anti-competitive or abuse of dominance till such time its inquiry is completed. The regulator can also prevent companies from forming combination or merging if it needs to investigate that such combinations will reduce competition in the market. Recognising the impact such restraining orders can have on companies’ business, the court has appropriately stated that such powers are to be used ‘sparingly’ and ‘under compelling and exceptional circumstances’. While the court’s judgement is a big positive for the commission, there is a danger that the regulator may interpret this to assume it can act as a super-regulator. That would prove disastrous for not just the commission but also for the regulatory oversight exercised by various sectoral regulators. The consequences of one regulator treading on the toes of another will prove messy for all stakeholders, as the turf war between the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority. The CCI was not envisaged as a super-regulator by the authors of the Competition Act, even though it can investigate practices that distort fair play across all markets and industries. The commission must actively seek views of the sectoral regulators to form a fair opinion of the commercial activities of companies. Its investigation into alleged anti-competitive practices of SAIL and Kingfisher will set a precedent and test its ability to be an impartial regulator. Industry, on its part, will have to accept oversight by the CCI and adopt practices that are defensible and fair. Also, it should approach investigations by the commission with an open mind rather than take a confrontationist stance. |
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