The virtues of a free market are now accepted the world over, including by former communist countries such as Russia and China. The open competition it allows between business rivals obliges them to work at highest levels of efficiency and offer the best products and services at the lowest prices. This in turn maximises consumer welfare, indeed total welfare. Historically, India had not been a competitive market; efficiencies were low, consumer interest remained undermined, and as we know economic growth was minimal.
When India began to liberalise its economy there was immense resistance from domestic businesses who argued that this would kill domestic industry in favour of foreign competitors. In truth they were trying to perpetuate protectionism and continue their free run over domestic markets at the expense of Indian consumers. Cartelisation and abuse of monopoly power, even by government enterprises, was rampant. These features of the Indian markets made it imperative to set up a modern competition authority, which came in the shape of the Competition Commission of India (CCI), and the abolition of the MRTPC.
The nature of markets vary and businesses deploy all sorts of innovative or clever methods to enhance their competitiveness vis a vis their rivals—no harm in that. It is necessary therefore for the CCI to first understand the characteristics of a particular market, which vary from case to case, and then understand an enterprise's competitive strategies before it begins to assess the latter's practices to identify a breach of the competition law.
All this exercise reflects the economic nature of competition law, and led Fali Nariman to observe (in his Introduction to my book 'Competition Law Today'): "Since competition law is about economic behaviour, it is essential that the regulator, the civil servant, the judge, and lawyer be acquainted with and become proficient in the application of economic concepts to the needs of society." He even quoted Justice Brandeis, highly respected for his Brandeis brief, who had remarked "[A] lawyer who has not studied economics ... is very apt to become a public enemy".
However, unlike sector regulators, the CCI is not an in-market regulator; it functions off the market. It does not set the rules of behaviour ex ante in the same way assay as SEBI or CERC does. Its role is more like an alert referee who has to allow the teams to compete with their "animal spirits" and is not permitted to interfere in the game; the better team wins and the lesser one loses. Only when the rules of the game are broken by any player, the CCI can step in. When it does intervene however it must carry out a detailed inquiry basis the specific facts of a case and giving opportunity for defence; the CCI order is therefore ex post, not ex ante and is arrived at after due process. In this lies the beauty of competition law. It leaves markets to bring out the best in rivals resulting in the maximisation of social welfare till such time as the rules of competition law are broken by any party resulting in enforcement proceedings by the CCI.
Only in the case of mergers, the CCI has ex ante powers to scrutinise large mergers before these are consummated. This is because if a merger with potentially anticompetitive fall out goes through without antitrust scrutiny, it is virtually impossible to undo the merger that is to "unscramble the egg". Such unscrambling could cause immense economic harm and uncertainty in the markets. But here too the CCI is to function as only a gatekeeper, preventing or modifying the merger only when it has potential to harm the markets – no more. Hence the vast majority of mergers are not stopped by a competition authority.
The CCI has been carrying out its functions commendably, occasional hiccups apart. This inter alia is because all orders are passed ex post after due inquiry, which additionally are subject to judicial scrutiny by the appellate tribunal and the Supreme Court. CCI orders have covered a variety of sectors ranging from manufacturing, to services, to financial, to high tech, to infrastructure, the traditional as well as the emerging ones. Its orders have largely withstood judicial scrutiny. This also demonstrates the versatility and flexibility of competition law; it lays out basic principles of effective competition which can be adapted to different kinds of sectors or businesses. Newer tools are being evolved by experts and authorities to apply to offending conduct in various kinds of industries including the high tech.
Some competition authorities have been deeply concerned about the high tech digital sector comprising giants such as Amazon, Tiktok, Meta, Apple, Google and Microsoft. These mega companies have acquired the positions of gatekeepers in the sense that they can control entry of, or competition from, rivals. Hence authorities in the EU have enacted new laws that will prevent these 'gatekeepers' from certain kinds of 'abusive' practices. These restrictions are based largely on the size of the enterprises; once this threshold is crossed, the blanket ban applies. Other countries have also given thought to this big tech problem but none has ventured so far as the EU. UK and Australia have diverged in their approach from that of the EU. In the US, there has been a lot of noise, and congressional committees have given various recommendations for the enactment of laws to enforce new restrictions on big tech. But in the end the inquiries undertaken against the Apples or the Googles are under the competition law only.
Several experts view the EU's digital law as an overreach, that is likely to chill innovation and dilute consumer benefits; the fallout is being keenly watched.
In India, following the report of the Standing Parliamentary Committee a draft bill has been suggested by an expert committee for extensive ex ante restrictions on big tech. Such an approach will upend the basic principles of competition enforcement alluded to above—first convict then inquire.
Government has rightly called for comments within a month. This is an occasion to step back and think—are we hurtling headlong into unknown territory merely because the EU has gone that way? The Indian economy is unlike the European and the benefits from digital developments (including those from government) are still unfolding for the vast majority of our consumers including for the start-up community. Many digital start-ups of yesterday are now today's domestic leaders bringing immense benefits in terms of user experiences. These companies too will be caught in the net of the new law along with global majors.
A moot point is whether the desired results can be better achieved through the strengthening of India's competition law with its tried and tested ex post approach than enacting a new blanket law that is at odds with the economic principles of competition law. It is prudent to exercise caution before upsetting the apple cart. Time should be spent on in-depth interaction with stakeholders, including experts, affected individual businesses and consumer bodies.
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