Competition Redefined in India – The Competition Commission Steps In

Competition Redefined in India:

The Competition Commission Steps In


The recent judgments by the Competition Commission of India (CCI) reveal a close scrutiny of the conduct of market players in order to rein in dominance and belligerence by big players. The CCI, in fulfilling its mandate of nurturing entrepreneurial opportunities, seeks to ensure a level playing field. Section 4 of the Competition Act states “No enterprise or group shall abuse its dominant position

This makes it imperative for strategists to understand the scope of competition defined in this act.

Ruling Against Anti-Competitive Behavior by BCCI

The CCI recently gave a landmark judgment in challenging the dominance of BCCI for its monopolistic attitude in barring competitors from hosting cricket events at the national level. In its judgment, the CCI fined the BCCI Rs 52.54 Cr and described its behavior as an abuse of ‘its position of monopoly status as de-facto regulators with vested commercial interest in the game of cricket’.

The strategies used by the BCCI in disallowing potential competition by rival leagues such as the Indian Cricket League (ICL) represented by former cricket captain Kapil Dev, were clearly unfair by this definition. The case highlighted the misuse of market power by the BCCI and includes lessons for other industries as well. After all, as different from one another as industries might appear on the surface, the underlying drivers of profitability are the same.

The CCI found that while BCCI acted as a regulator of the sport of cricket, this was not a status granted it by any statutory provision. The CCI also noted that, BCCI, by virtue of its role as the custodian of cricket, went to great lengths to restrict economic competition in sporting events. It ruled that the sport is best served when the monetary yield from professional league matches is distributed and not concentrated in the hands of a few franchisees. The Commission also opined that the BCCI had abused its dominant position in contravention of Section 4(2)(c) of the Act.

International Verdicts Involving Sporting Entities

Similar verdicts have been doled out in international jurisprudence. For example, in the case of MOTOE (an organizer of motorcycling competitions whose activities are subject to approval by ELPA, the Automobile and Touring Club of Greece), the European Court of Justice expressed concern about regulatory powers as a potential source for abuse of dominance. Organizing such commercial events and also authorizing them is tantamount to de-facto conferring power, which provides an obvious advantage over competitors. Such a right may lead the concerned undertaking to deny other operators access to the relevant market. Similar decisions tied to Abuse of Dominance were also made in the case of FIFA (International Federation of Association Football) and leagues in the EU and Australia.

The implication for BCCI and other sporting bodies or associations would be far reaching while the ramifications would be across the spectrum of dominant industry players. Prima facie, the BCCI’s style of functioning reflects the very Indian ‘family affair’ business mindset that has yet to grasp the nuances of liberalization of the economy for over two decades. It is for this very reason that foreign players have most often dominated and taken over the business with competitive framework. This judgment is a wake up call that clearly defines the parameters for competition.

Indian Market Scenario

For instance, in the market for commercial aircraft, fierce rivalry between dominant producers like Airbus and Boeing and the bargaining power of the airlines that place huge orders for aircraft are strong, while the threat of entry, the threat of substitutes, and the power of suppliers are more benign. The CCI mechanism is a powerful tool that must be factored in planning strategies, especially in emerging sectors like Automotive, Airlines, Oil & Gas.

Recently, CCI found that ‘there was no valid reason why OMCs – Indian Oil, Hindustan Petroleum and Bharat Petroleum – were increasing and decreasing price of petrol in unison, as the product was already decontrolled’. In the case of Coal India, the Director General reported that CIL abuses its monopoly to arm-twist customers acting in an unfair and discriminatory manner.  In first of its kind, forthcoming decisions pertaining to PSUs viz. Oil companies, Coal India by CCI will influence future strategies. Government undertakings like BSNL, Air India would henceforth be held more accountable for losing market share to private entities despite being market incumbents.

The Telecom sector will also see consolidation post the BWA spectrum auction. CCI has asked DoT to take its views on M&A. It also said they may look into the tariff hikes by Telcos. In an interview to a leading financial daily, the CCI chairman quips “..we could look into GSM/CDMA lobbies acting in concert or abusing dominance ..” The Chairperson of the Appellate Tribunal, Justice Sirpurkar, believes that the Success of the Competition regime lies in the benefit reaching the common man.

The efficacy of CCI and its mandate is to investigate, given the powers to see beyond formalized structures, to take holistic view not just customer satisfaction but also the manner and cost at which this is afforded to them

The undertone set through competition regulation is loud and clear – Industry captains could expect to be challenged in the field of core competencies and propriety. While the law upholds the rights to propriety and dominant presence, it also empathizes with entrepreneurs who, through use of breakthrough technology or innovation, could improvise and meet customer satisfaction but has been deprived or denied access by the belligerence of the market leader.

 


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