Half a job

While the Competition Commission appears to be busy finalising its draft regulations on issues such as the size of industrial groups whose mergers and acquisitions will get scrutinised, making sure the commission doesn’t go the MRTP way will take a lot of doing.

Readers will recall that the MRTP Commission spent time in deciding whether corporates could run customer contests while issues like whether Reliance Industries could be allowed to buy IPCL and gain even greater market dominance were decided by the ministry of disinvestment!

For one, it’s obvious that care will have to be taken in staffing the commission — if it doesn’t have enough trained lawyers to examine evidence at the investigative stage, for instance, it could well suffer the fate of Sebi which has seen almost all its major orders overturned at the appeals stage.

The commission, similarly, will need specialists to deal with issues of dominance in a nuanced manner. Shifting the emphasis from market share to abuse of market power (during Arun Jaitley’s ministership) may have seemed a good idea, but it is not always easy to prove abuse.

It is also useful to keep in mind that both market share and abuse get mitigated where free trade is allowed. Moreover, dominance in one market can be mitigated as well as exacerbated by dominance in other markets — this is the background behind the US decision to disallow cross-holdings in the media sector, for instance.

The financial sector, an area where Mr Spitzer’s making a big name for himself in the US, is a tricky one as gathering evidence can require months of painstaking investigative work.

Once the controversy over who will head the commission gets over and it becomes clearer as to whether this will just become another preserve for the politico-bureaucratic class, the commission will come up against its biggest challenge.

While big companies may be guilty of predatory pricing and other anti-competitive practices (and it will take courage to go after these companies), the commission will find the largest number of anti-competitive impulses emerge from its creator, the government.

Today, for instance, the government wants to merge big oil firms as well as both the telecom firms it owns. Once merged, BSNL and MTNL will control over 95 per cent of all telephone lines going into the homes of citizens, and yet the government has refused to accept the telecom regulator’s recommendation that these wires (of MTNL, BSNL, everyone) be opened up for use by anyone.

That is, an ISP could, if it wished, use BSNL’s wires to provide Internet access to anyone. In other words, once the merger is through by next year, this firm will control almost all Internet access except that done in a wireless fashion.

Similarly, how is the commission supposed to react to Concor’s government-created monopoloy over container movement, or the government’s propensity to allow the creation of near-monopolies by private players in infrastructure sectors like ports and power?

In a nutshell, the commission will find it is able to deal with only half its job if the government doesn’t begin to reform itself and start judging its policy actions on the touchstone of competition.

And even that half will take a huge beating if some means is not found to ensure the commission’s judgements don’t automatically end up before the country’s courts.