Defanging The CCI

With the Supreme Court reducing its powers, violators will get away easily.

- Abraham C. Mathews

If Indian economic regulators were birds of prey, then the Competition Commission of India (CCI) was the eagle, the king of the skies. If you were in its grasp, you paid for it dearly.

Last month, the Supreme Court of India clipped the CCI's claws.

The appeal in the Supreme Court was brought by the manufacturers of Aluminium Phosphide Tablets, an oral pesticide. For eight years, four manufacturers of APTs (one of them dropped out in between) had quoted identical prices in response to tenders floated by the Food Corporation of India, or collectively abstained from bidding.

The Commission found them guilty of collusion, an offence under Section 3 of the Competition Act 2002, and fined the three remaining players a total of over Rs 315 crore. Now, neither the Competition Appellate Tribunal (COMPAT) nor the Supreme Court found them not guilty of the offence. However, in penalising them, it adopted a novel approach with specious reasoning, bringing down the penalty to around Rs 10 crore for all the three companies cumulatively.

The Most-feared Regulator

But some background first. The CCI compared to its peers, had an unenviable job. Unlike the Securities and Exchange Board of India, it does not have a monitoring mechanism to survey potential violators. Nor, like the Reserve Bank of India, does it have a regulatory stranglehold over its hemisphere that compels acquiescence with its diktats.

What it had, instead, was the power to punish. And punish it did. Be it the Rs 630 crore fine on real estate major DLF for saddling some of its flat-buyers with unilateral and unfair changes to their flat-purchase agreements, the cumulative penalty of Rs 6,714 crore on 10 cement majors for colluding to keep prices artificially high, or the Rs 2,545-crore penalty on 14 automobile manufacturers for making spare-parts prohibitively expensive while prohibiting buyers from purchasing them from the open market at lower prices.