Competition Commission of India

COMPETITION AND REGULATION
by

K.K. Sharma
Advisor (Law)

Seminar on Competition Policy a...
Rationale
Resources are limited/ finite
Economic well being
Better off societies
Worse off societies

Society should maxim...
Benefits of Competition
Promotes efficiency and innovation
Ensures abundant availability of
goods and services of acceptab...
Perfect Competition
Products are homogenous
Perfect information- symmetry
informationLarge number of buyers and sellers
Qu...
Reality
Can these factors and, therefore,
perfect competition exist?
Need
free/complete
competition
exist?
Need there be r...
How much Competition
Should a brain surgery be decided by
auction or bidding process?
Should an accountant be hired by ope...
Natural Monopolies
How many NG gas/ water pipes,
sewage
pipe,
electric/telephone/
internet wire connection?

7
Standards
How many electric plugs you want to
have to charge your mobile or other
electric gadgets?
Should some products b...
Access
Whether the society has all the resources,
in enough quantity, to cater to needs of all?
Or do we need a check on c...
Civil Society
If there are buyers/sellers for some
product/services which are not in
conformity
with
the
collective
consci...
Right or Left
Should Competition, essential in a
free market economy, be allowed a
free run?
Are free markets free enough ...
Natural Progression
Evolution of the Competition law and
regulations
Mind set
History of regulations from prepreindependen...
Present Regulatory Status-I
StatusBIS/Agmark/FDA ; safety,
health
Networking
industries-last
industriesconnectivity

publi...
Present Regulatory Status-II
StatusAreas needing to have minimum standard
guarantor e.g. education (AICTE, CBSE,
ICSE , UG...
Technology Dependence
Can technology provide freedom
from this mind set and duplicity of
services – more so with regards t...
Economic Regulations
Are constraints on market behaviour
or structure by public authorities
Examples:
Examples:
laws, subo...
Need of Sector Regulators
Technical expertise necessary to
determine
access,
maintain
standards, ensure safety, determine
...
Sector Regulator
‘In-market’
‘InUsually ex-ante
exSets ‘rules of the game’
Entry conditions, technical details,
tariff, sa...
Commonly Present
Sectors having natural monopolies
Sectors needing USOs
Network industries
Infrastructure sectors
Utilitie...
Competition Authority
‘Off‘Off-market’ regulator
Usually ex-post
exReferee
Relies on market forces
Independent and objecti...
Competition Oversight
Maximum
impact
with
minimal
intervention
Uniform
competition
outcomes
across sectors
Independent and...
Synergy
Sectoral
regulations
prevent
inefficient use of resources and
protect consumers
Competition law aims at prevention...
Comparison
While sectoral regulation is ex-ante,
excompetition law is, mostly, ex-post
exCompetition law consists of negat...
Overlap / Conflict
Can arise on account of
Conflicts in Laws (legislative ambiguity/overlap/
omission)
Interpretational bi...
Harms of Overlap / Conflicts
Loss of neutrality – “regulatory
capture”
Delay in delivery – “forum shopping”
Adverse effect...
Possible Solutions
‘Sunset’ clauses
Expertise available with either is
unique and cannot be acquired easily
by the other –...
Conflict Resolution
Informal
contacts, meetings and exchange of
information
exchange of officials
setting up of joint work...
Relative Roles
Regulators have strength in technical
areas
Competition authorities have strength in
economic/competition m...
Indian Position
Formal referrals – S 21 & 21A
Any statutory authority
may make a reference to CCI
CCI to give opinion in 6...
The Electricity Act, 2003
S 79 Functions of Central CommissionCommission(1) The Central Commission shall….
(2)The Central ...
The TRAI Act,1997
S 11 Functions of Authority:
Authority:
(1) ….,the functions of the Authority shall be toto(2) Make reco...
The PNGRB Act,2006
S 11 Functions of the Board- The
BoardBoard shallshall(a) Protect the interest of consumers by
fosterin...
Competition Act,2002
S 18
……it shall be the duty of the
……it
Commission to….., promote and
to…..,
sustain competition, pro...
Australia & Japan
In Australia, the competition authority
incorporates industry-specific technical
industryregulators e.g....
EU & Germany
In EU, competition guidelines/directives
issued by EU provide that ex-ante rules
exapply only in absence of c...
UK & France
In UK, the OFT and the sectoral regulators
have concurrent jurisdictions with a
common appellate tribunal (UK ...
Canada & Finland
The Canadian Competition Bureau is
statutorily empowered to intervene before
federal and provincial regul...
Africa
In South Africa, sectoral regulations were
initially exempted from the jurisdiction of
the competition authority bu...
Others
The jurisdictions of the competition
authorities and sectoral regulators
are blurred in Sri Lanka, Botswana,
Kenya ...
Consultation Provisions
Mandatory
France – legislation enabled co-operation – sector
coregulator must consult competition ...
Right to Intervene
Right to intervene - in sector
regulation
UK - competition authority has statutory right to
study exist...
Concurrence & Convergence
Concurrent power
UK – sector regulators in electricity, gas,
telecommunication, water and railwa...
Statutory Powers
Giving statutory powers to the
competition authority for some
aspects of sector regulation
Mexico – compe...
High Status
High status of head of competition
authority
South Korea – given Cabinet rank – useful when
government retains...
Some Questions
Whether regulations is motivated by
increasing welfare and making the scare
resource available to the users...
THANKS
www.cci.gov.in

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  1. 1. Competition Commission of India COMPETITION AND REGULATION by K.K. Sharma Advisor (Law) Seminar on Competition Policy and Law Bengaluru, 30-01-2009 30-011
  2. 2. Rationale Resources are limited/ finite Economic well being Better off societies Worse off societies Society should maximize welfare Allocative efficiency Productive efficiency Dynamic efficiency Welfare maxima limited by resources 2
  3. 3. Benefits of Competition Promotes efficiency and innovation Ensures abundant availability of goods and services of acceptable quality at affordable / lower prices Offers wider choice to consumers 3
  4. 4. Perfect Competition Products are homogenous Perfect information- symmetry informationLarge number of buyers and sellers Quantity of product bought/sold relatively so small as not to affect market price Free entry and exit 4
  5. 5. Reality Can these factors and, therefore, perfect competition exist? Need free/complete competition exist? Need there be really a free entry to the market? Or should there be some check on entry? If entry is not free, how perfect competition would be achieved? 5
  6. 6. How much Competition Should a brain surgery be decided by auction or bidding process? Should an accountant be hired by open tendering process? without any check on the inputs which go into the making of an accountant Should an engineer be hired to build a bridge without any assurance of his competence? Will you be happy to sent your child to a school where the teachers are appointed without regard to their quality through some openly known process 6
  7. 7. Natural Monopolies How many NG gas/ water pipes, sewage pipe, electric/telephone/ internet wire connection? 7
  8. 8. Standards How many electric plugs you want to have to charge your mobile or other electric gadgets? Should some products be allowed into the free market even if they pose health hazards? Would you like to change your mobile hand set every time you choose a SIM card from different competing service providers? 8
  9. 9. Access Whether the society has all the resources, in enough quantity, to cater to needs of all? Or do we need a check on consumption, so that access is not denied to many? Should a villager on a remote island in Lakshadweep not have access to a post card as delivering it to him is uneconomical? Should society ensure that many of those who cannot afford should have basic minimum needs? 9
  10. 10. Civil Society If there are buyers/sellers for some product/services which are not in conformity with the collective conscience of the civil society, should they be allowed into the free market? Indian Penal Code (IPC) S 371 – habitual dealing in slaves S 372/373 – selling/buying minors for … 372/ etc… etc… 10
  11. 11. Right or Left Should Competition, essential in a free market economy, be allowed a free run? Are free markets free enough to escape failures? Is world really divided in capitalist/ socialist blocks? 11
  12. 12. Natural Progression Evolution of the Competition law and regulations Mind set History of regulations from prepreindependence till date Salt movement Essential commodities Is regulation not as old as civilization? 12
  13. 13. Present Regulatory Status-I StatusBIS/Agmark/FDA ; safety, health Networking industries-last industriesconnectivity public mile power, telephone (wire network), Banking/Credit card (is it? One India-One Indiabank), water supply/sewage, natural gas supply, cable operators, internet etc. etc. 13
  14. 14. Present Regulatory Status-II StatusAreas needing to have minimum standard guarantor e.g. education (AICTE, CBSE, ICSE , UGC etc. ), medicine (MCI), Law etc. (BCI), Chartered Accountancy (ICAI), Cost and Works Accountancy (ICWAI), Company Secretaries (ICSI), Other Professional bodies, UGC teachers (NET) Products which are in limited quantities and have to be made available for vast populations 14
  15. 15. Technology Dependence Can technology provide freedom from this mind set and duplicity of services – more so with regards to last mile connectivity Letters- TelegramLetters- Telegram- Telex –Fax- Email FaxFixed line network to CDMA technology / wireless Electricity/ Energy/ Heat etc. may be etc. the next frontiers 15
  16. 16. Economic Regulations Are constraints on market behaviour or structure by public authorities Examples: Examples: laws, subordinate legislation, formal and informal orders, regulations issued by institutions created by the government 16
  17. 17. Need of Sector Regulators Technical expertise necessary to determine access, maintain standards, ensure safety, determine tariffs, ensure Universal Service Obligation (USO) Structural compulsions natural monopolies-economies monopoliesscope network industries of scale/ 17
  18. 18. Sector Regulator ‘In-market’ ‘InUsually ex-ante exSets ‘rules of the game’ Entry conditions, technical details, tariff, safety standards, access, etc Direct control on price/quantity/ quality To prevent inefficient use of resources, meet USO and protect consumers 18
  19. 19. Commonly Present Sectors having natural monopolies Sectors needing USOs Network industries Infrastructure sectors Utilities Examples: Water, Electricity, Telecom etc. 19
  20. 20. Competition Authority ‘Off‘Off-market’ regulator Usually ex-post exReferee Relies on market forces Independent and objective – less prone to influence of market players ‘capture’ Specialized forum for deciding competition issues Applies competition principles uniformly across all sectors 20
  21. 21. Competition Oversight Maximum impact with minimal intervention Uniform competition outcomes across sectors Independent and objective – not prone to influence of incumbents 21
  22. 22. Synergy Sectoral regulations prevent inefficient use of resources and protect consumers Competition law aims at prevention of market power and thus ensures efficiency and enhances consumer welfare 22
  23. 23. Comparison While sectoral regulation is ex-ante, excompetition law is, mostly, ex-post exCompetition law consists of negative commands while industry-specific industryregulations provide positive commands Sectoral regulations are more direct and concerned with structure while competition law is indirect and more concerned with conduct and behaviour 23
  24. 24. Overlap / Conflict Can arise on account of Conflicts in Laws (legislative ambiguity/overlap/ omission) Interpretational bias (bureaucratic bias) Conflicting approaches – market vs. regulation. vs. regulation. Regulatory intervention itself may generate or protect anti-competitive situation antiInevitable in the absence of clear delineation of jurisdiction Spurred by turf ‘warriors’ Market players Enforcers Legal arbitrators 24
  25. 25. Harms of Overlap / Conflicts Loss of neutrality – “regulatory capture” Delay in delivery – “forum shopping” Adverse effects on investments, mergers & acquisitions Lessening of effective competition resulting in decrease in productivity, efficiency, economic growth and consumer welfare 25
  26. 26. Possible Solutions ‘Sunset’ clauses Expertise available with either is unique and cannot be acquired easily by the other – healthy respect Competition law enforcement can overcome insufficiencies in regulations – e.g. predatory pricing A sectoral regulator can do what a competition authority cannot- e.g. cannotsituations might warrant price fixation in public interest, setting standards etc. etc. 26
  27. 27. Conflict Resolution Informal contacts, meetings and exchange of information exchange of officials setting up of joint working groups Formal right to participate in proceedings before the other formal referrals - optional or mandatory appeal to a common authority no interference in the other’s territory delineation of jurisdiction –by statute 27
  28. 28. Relative Roles Regulators have strength in technical areas Competition authorities have strength in economic/competition matters; principles matters; set by them apply across all sectors Regulation should fade away or minimise as competitive markets emerge Appropriate coordination mechanisms at working level are important. Respect and important. consideration for each others’ roles/strengths As far as possible, laws may delineate jurisdictions, and provide for consultation/coordination procedures 28
  29. 29. Indian Position Formal referrals – S 21 & 21A Any statutory authority may make a reference to CCI CCI to give opinion in 60 days Opinion of CCI is not binding CCI may also refer to statutory authorities Reference is not mandatory No provision for CCI to take up suo motu No corresponding provision in sectoral regulatory laws Referrals by Central / State Govt. – S 49 29
  30. 30. The Electricity Act, 2003 S 79 Functions of Central CommissionCommission(1) The Central Commission shall…. (2)The Central Commission shall advise the Central Government on all or any of the following matters, namely:namely:(i).. (ii) Promotion of competition, efficiency and.. [S 86(2) says the same for state Commissions] 30
  31. 31. The TRAI Act,1997 S 11 Functions of Authority: Authority: (1) ….,the functions of the Authority shall be toto(2) Make recommendations, either suo motu or on a request from the licensor, on the following matters, namely:namely: (iv) measures to facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services; services; 31
  32. 32. The PNGRB Act,2006 S 11 Functions of the Board- The BoardBoard shallshall(a) Protect the interest of consumers by fostering fair trade and competition amongst entities; Fair Trade not defined; Unfair trade defined under MRTP Act,1969 in S 36A ; going to be repealed after two years of notification of CA02(S66) 32
  33. 33. Competition Act,2002 S 18 ……it shall be the duty of the ……it Commission to….., promote and to….., sustain competition, protect the interest of consumers and ensure freedom of trade carried on by other participants, in the markets in India; India; 33
  34. 34. Australia & Japan In Australia, the competition authority incorporates industry-specific technical industryregulators e.g. telecom, electricity, gas In Japan, cooperation between JFTC and sectoral regulators is not statutory but is guided by government diktat. JFTC relies diktat. heavily on its advocacy role with regulators to prevent anti-competitive antipolicies 34
  35. 35. EU & Germany In EU, competition guidelines/directives issued by EU provide that ex-ante rules exapply only in absence of competition, and specify how relevant market to be determined In Germany, there is division of labour between the competition authority (FCO) and the Regulatory Authority for Telecommunications and Posts (RegTP). (RegTP). Laws were amended to minimize parallel competencies 35
  36. 36. UK & France In UK, the OFT and the sectoral regulators have concurrent jurisdictions with a common appellate tribunal (UK CAT) – appeals from sectoral regulators lie to the UK Competition Commission in the first instance In France, a new law provides for mandatory consultation between radio & television sector regulator and competition authority. authority. The sectoral regulator provides technical inputs while the competition authority applies competition law on the basis of given technical inputs 36
  37. 37. Canada & Finland The Canadian Competition Bureau is statutorily empowered to intervene before federal and provincial regulatory bodies in policy determination In Finland, the competition authority signed an MoU in 2003 with the telecom regulator defining ways to eliminate overlaps 37
  38. 38. Africa In South Africa, sectoral regulations were initially exempted from the jurisdiction of the competition authority but later the exemption was withdrawn In Zambia, the competition authority is represented on other regulatory boards. boards. In addition, all sectoral regulators are required to consult the competition authority 38
  39. 39. Others The jurisdictions of the competition authorities and sectoral regulators are blurred in Sri Lanka, Botswana, Kenya and Pakistan. Conflicts are left Pakistan. to be resolved by courts As on date, India may be in this league 39
  40. 40. Consultation Provisions Mandatory France – legislation enabled co-operation – sector coregulator must consult competition authority Ireland – formal co-operation agreements in coaccordance with law Germany – formal consultation by law Zambia – statutory requirement on regulators to consult NonNon-mandatory India – sector regulator may refer a matter and then pass an order ‘as it deems fit’ – no reciprocal provision in competition law 40
  41. 41. Right to Intervene Right to intervene - in sector regulation UK - competition authority has statutory right to study existing as well as proposed sector regulations and issue a public statementstatementgovernment responds within 90 days Italy – opportunity to competition authority to air their views to which sector regulator must respond Canada – competition authority can intervene in a case before any federal regulator 41
  42. 42. Concurrence & Convergence Concurrent power UK – sector regulators in electricity, gas, telecommunication, water and railways have concurrent jurisdiction with OFT – Concurrency Working Party (CWP) decides which authority is best suited to deal with the matter – disputes resolved by Secretary of State – regulation guided Appellate Convergence UK – appeals lie to a common body UKCAT – uniformity in approach 42
  43. 43. Statutory Powers Giving statutory powers to the competition authority for some aspects of sector regulation Mexico – competition authority’s determination of market power of an enterprise is the condition precedent for regulation of that enterprise by the sector regulator. regulator. EU – Competition authority plays significant role in identification of the relevant market and then the telecom regulator determines market power using competition benchmark before ex ante obligations can be imposed on identified enterprise 43
  44. 44. High Status High status of head of competition authority South Korea – given Cabinet rank – useful when government retains control over economic decisions – hierarchy helps in pushing proprocompetitive agenda 44
  45. 45. Some Questions Whether regulations is motivated by increasing welfare and making the scare resource available to the users or by protecting those who are to be regulated? Opposition to entry of foreign lawyers in India Opposition to medical practitioners duly qualified in one country to practice medicine in another country without passing requisite regulatory tests Requirement of passing separate exam in the same profession to practice in another countrycountry- CPA/ CA etc. etc. 45
  46. 46. THANKS www.cci.gov.in 46

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