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BUSINESS:
COMPETITION BILL
Guard
of Small Things
Industry
is sharply divided over the form and timing of the most significant corporate
law of recent times
By
Rohit
Saran
Unless
you have gone through a rather obscure debate currently on in the edit
pages of the pink papers you may not have noticed that Indian industry
is grappling with potentially the most important corporate law in recent
years—the Competition Bill 2000. Prepared over the past one year,
the bill is to be tabled in the on-going session of Parliament. If cleared,
it will replace the notorious Monopolies and Restrictive Trade Practices
(MRTP) Act with a more contemporary Competition Act. Says Arun Jaitley,
Union minister for law, justice and company affairs: "As market economy
takes root, a competition law is required to prevent anti-competition
practices and to protect consumer interests."
 There
is no doubting the intentions of the law. As the Government eliminates
its controls, some rules and institutions will be required to ensure that
the free market also remains a fair market. Explains Pallavi Shroff, a
leading corporate lawyer, partner with the Delhi-based law firm Amarchand
& Mangaldas and one of the experts who drafted the bill: "The
purpose of a competition policy is to maintain a level-playing field between
big and small companies in India as well as between foreign and domestic
companies."
There are
three practices a competition law monitors to ensure fair play in the
market economy: agreements among companies, abuse of market dominance
by a big market player, and mergers that can subdue competition. The bill
defines four agreements as anti-competitive per se-pacts for price fixing,
for limited supplies, for dividing markets to create virtual monopolies
and for rigging of bids or collusive tendering. Such agreements not only
harm consumers by resulting in higher prices or limited choices, but could
also set entry barriers for new companies.
A company
is dominant when it can set prices or change products without bothering
about the response of its competitors. The bill lists out a dozen criteria-including
market share-which could be used to gauge the dominance of a company.
But crucially, dominance itself can't be considered anti-competitive.
It's the abuse of dominance that's anti-competitive. The US Justice Department's
case against Microsoft is based on the software giant's alleged abuse
of market dominance. Then there is a merger provision which states that
all Indian companies with an asset base of Rs 1,000 crore or a turnover
of Rs 3,000 crore must undergo a scrutiny before they go in for any merger.
Logical
and desirable as the bill may sound, not every section of Indian industry
wants it-at least not any time soon. All three industry chambers-FICCI,
CII and ASSOCHAM-have expressed dissatisfaction over one or the other
provision of the bill. The divide within the industry spilt out in the
open on December 2 at a meeting of the prime minister's Council for Trade
and Industry. While some industrialists wanted the Government to enact
the bill without further delay, others were dead opposed to any bid to
rush it through.
The staunchest
opponents of the bill aren't really against the idea of a competition
law-they only feel it has come too soon. Reason: Indian industry isn't
free enough to be subjected to the kind of regulations companies in the
market economies have to face. Even the committee appointed to prepare
a detailed report on the competition policy (on which the Competition
Bill is actually based) had laid out that a competition law must be preceded
by the dismantling of government monopolies, dereservation for the small-scale
sector and modifications in labour and bankruptcy laws.
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Ayodhya
is an issue that is pre-determined. And it matters little in the present
fuss that the foremost casualty is the truth, writes INDIA TODAY Deputy
Editor Swapan Dasgupta in 