CCI, sector regulators may consult each other if jurisdictions overlap

The tussle between the Competition Commission of India (CCI) and sector regulators over jurisdiction on mergers and acquisitions may soon be settled. The Cabinet Committee on Economic Affairs (CCEA) is likely to consider the proposal of empowering the competition watchdog for this, while keeping provisions for consultations between the two.

The proposed amendments in the Competition Act, 2002, are expected to be considered in a CCEA meeting in the coming week. The ministerial panel would evaluate recommendations of a group of ministers (GoM) headed by Finance Minister P Chidambaram, which suggested mergers and acquisitions, including those in the banking, telecom and pharmaceuticals sectors, be under CCI’s purview. “We are expecting more powers for CCI, in line with the GoM’s recommendations. It is eminently possible the Cabinet would take up the proposal at its next meeting,” a senior official in the Ministry of Corporate Affairs told Business Standard.

The GoM, set up for considering amendments in the Competition Act, has suggested more powers for CCI. According to a source, the GoM feels matters of competition must be scrutinised by CCI, which is empowered to check the abuse of dominance and unfair trade practices. Therefore, CCI must have a say in clearing mergers and acquisitions, even in sectors like banking and telecom.

Earlier, various sectors had opposed CCI’s scrutiny of mergers and acquisitions, saying specific regulators in various sectors were already looking into the issue and, therefore, overlapping of jurisdiction was possible if CCI took up the issue. Some sectors also doubted CCI’s ability to monitor mergers and acquisitions.

In the past, the lobby group in the pharmaceuticals sector has also argued CCI did not have the wherewithal to understand public interest in the pricing of drugs and, therefore, foreign investment in the sector should be cleared by the Foreign Investment Promotion Board.

However, ruling out blanket exemptions to any sector from the purview of the Act, the GoM suggested there was no reason to keep CCI away.

Instead, it maintained competition should be overseen by a specialised agency. It, however, suggested CCI and sector regulators must consult each other if their jurisdictions overlapped. “Section 21 and 21 (A) of the Act states the commission, as well as the sector regulator, may make reference to each other if need be. This will now be changed to “shall”, making it mandatory for both to consult each other,” the official said.

However, to leave a provision for exemption, the GoM decided in case there was a need for exemption, the Ministry of Corporate Affairs, under whose ambit CCI functioned, would have the powers to decide. “Such a move by the GoM will reinforce the integrity of economic governance system in the country,” said Pradeep Mehta, secretary general, CUTS International. He added, “Otherwise, such legislative ambiguities would have led to forum shopping and an uncertain legal environment, which would also affect the investment climate adversely.”

The GoM also recommended powers for search and seizure to CCI at the level of Director General of Investigations, the source said.

The GoM had finalised its recommendations last week, the source added.