Times, July 03, 2012
When he took
over the competition regulator, Ashok Chawla sent out a message
within: focus on quick decision-making and big cases. In his
eight-month tenure, both have happened.
It took India's competition regulator 23 months to decide on a
complaint that cement companies were colluding to fix product
Of this, the Competition Commission of India's (CCI) investigation
wing took about eight months to submit its report. The remaining
15 months were taken by the commission to analyse if there was a
case, study the investigation report, hear arguments from all
parties and reach a decision
If the innate associations of the old CCI were acceptance and
length, the new CCI is positioning itself to be about selectivity
and speed, says Ashok Chawla, who took charge as CCI chairman
eight months ago and has signed orders that make a statement.
Last month, it gave its most important verdict yet: pronouncing 11
cement companies guilty of operating like a cartel and fining them
about Rs 6,300 crore. Chawla asserts CCI will not accept weak
cases. And the cases it admits, it will pursue them with vigour.
"We have made a conscious decision to take cases and start
investigation only when there is a very high degree of prima facie
evidence," he says. "No point in focusing on something in a casual
manner. What needs to be closed should be closed, and what needs
to be investigated should start immediately."
Closure has been a hallmark of Chawla's brief tenure, partly
because of his own construct and partly because of the timing of
According to the
annual report of the ministry of corporate affairs (MCA), CCI had
58 cases pending in December 2011.
This has dropped to around 20 today, says a senior CCI official,
speaking on the condition of anonymity.
At least five senior CCI officials we spoke to pointed to Chawla's
appointment for the change in speed and approach.
"The new chairman has made a difference. Efforts are being made to
dispose off cases at the earliest," says SN Dhingra, member
(legal) of CCI.
Dhingra is a former Delhi High Court judge who was appointed along
with Chawla in October 2011.
When a complaint is filed with CCI, its six members and chairman
take a call if it is worth looking into. If they think so, the
case is sent to CCI's investigation wing, which usually files its
report within six months.
Based on this report and representations from the parties to the
case, the members and chairman take a decision.
"Previously, CCI used to take a lot of time to decide once we
submitted the (investigation) report, but now it's faster," says
an investigation official, not wanting to be identified.
"That should be and has to be," says Chawla, when asked about the
push to clear cases.
"There is an urgent need to move towards clearing the backlog in a
reasonable period of time and give a verdict, one way or the
other. Otherwise, the relevance of the order, howsoever
meritorious it maybe, will be lost in the socio-economic
Fewer pending cases is
not all Chawla's doing. The unidentified CCI official quoted
earlier adds that Chawla inherited a robust pipeline of cases
where the investigation and hearings were complete, and only
needed a verdict from the seven-member CCI panel
"So, we were able to give the orders in the last eight months," he
says. Dhanendra Kumar, the first CCI chairman, between February
2009 to June 2011, adds the initial years were spent building the
institution's capabilities. "In its teething years, CCI had its
role cut out," he says.
"It is because of the efficient system it could put in place that
we today see a faster rollout of cases." Still, having Chawla at
the helm has helped, say current CCI officials, who see his calm
style of functioning as a positive influence.
Four of the six members are career-bureaucrats, with two even
being senior to Chawla in terms of joining civil services. There
were reports of few members opposing Chawla's appointment as
chairman, citing seniority.
A post-graduate in economics, Chawla has had two stints in the
finance ministry and been the aviation secretary. The 1973-batch
Gujarat cadre IAS officer also headed Sardar Sarovar Narmada Nigam
and IPCL when it was divested to Reliance Industries.
"He (Chawla) can put across a completely different point of view
in a pleasant manner without any signs of confrontation," says
Shakikanta Das, additional secretary, finance ministry. "At the
same time, he takes a stand whenever required."
Das worked under Chawla during the latter's stint as finance
secretary between 2009 and 2011. Chawla's final stint in North
Block came in the aftermath of the collapse of Lehman Brothers,
which triggered the global financial crisis in September 2008.
As finance secretary,
Das adds, Chawla developed good coordination among the five
departments within the finance ministry and focus on the
At CCI, where he has a five-year term, Chawla wants to apply a
tight filter on what kind of cases it takes up. And he wants to
combine it with high-profile orders.
A higher number of
orders raises the profile of CCI, which is struggling to attract
talent from outside the government.
secretary general of CUTS International, a consumer rights
organisation, says more orders from CCI is good. “It helps build
its image. This, in turn, will act as a disincentive to other
businesses involved in anticompetitive practices,” says Mehta, who
is a member of the committee drafting the National Competition
competition culture, especially by curbing anti-competitive
practices, is a marathon, not a sprint." Samir Gandhi, partner at
AZB & Partners, broadly agrees with that thought, even as he
expresses reservations about the strength and legal validity of
some of the CCI orders.
"The greater the number of cases decided, the larger the number of
precedents created," says Gandhi, who represented one of the
cement companies before CCI in that particular case. Quality of
orders, though, remains a concern, and there's a feeling that some
orders will be overturned in the appeals process.
In that context, the question mark is over the pool of people the
CCI has. Chawla—who does not have specialised training in
competition matters, like heads of anti-trust bodies in Europe and
the US do—faces significant challenges to build CCI.
The first is improving its investigating capabilities. More than
half the positions in the CCI's investigating arm are vacant.
Government officials from arms like the revenue services, who are
trained to deal with business, are unwilling to join the CCI as
the postings are not permanent and service conditions don't match
"Every time there is a deputed officer, he/she has to be trained,"
says Mehta of CUTS. "At the end of the tenure of deputation, the
officer is fully equipped with all the techniques and skills, but
he/she cannot serve anymore. Due to this unskilled entry and
skilled exit, the quality is bound to suffer. Alas, the government
does not permit them to engage young professionals from the
According to Chawla, the CCI has asked the government to change
the rules to allow for allow for permanent staffing in the
investigating arm. "I believe they have agreed to that," he adds.
These are still early days for the CCI, in what is only its third
year with powers, and each decisive move—more orders, faster
decisions, better people and smoother processes— goes a long way
in building an institution.
In its short history
of three years, CCI has given two verdicts that have made an
impression on India Inc: fining real estate major DLF Rs 630 crore
for abusing its dominant position to impose onerous conditions on
buyers of a high-end residential building in Gurgaon, and fining
11 cement companies Rs 6,300 crore for fixing cement prices.
But whether they leave a lasting impact on the way India Inc does
business will depend on what is the last word on them.
The last word will be said either in the CCI appeals forum or, if
it goes further in appeal, in the country's highest court. The
hearing in the DLF case is currently on in the Competition
Appellate Tribunal (COMPAT). And, all indications are the 11
cement manufacturers charged will also land up there.
In both cases, the defence revolves around a central concept, and
the verdict would set a precedent for similar cases. In the DLF
case, the concept is that of a 'relevant market': how should a
market be defined to see if a player abused its dominant position?
DLF argues CCI has defined the relevant market too narrowly. CCI
defined it as the high-end residential segment in Gurgaon: if
buyers did not opt for the DLF flat, they would have opted for
similar flats in the same suburb.
DLF argues they could have gone anywhere in the entire National
Capital Region (NCR), and so that should be the relevant market.
In the more recent cement order, the issue is whether a written
agreement is needed to establish the presence of a cartel.
According to cement companies, CCI rules mandate the need for a
written agreement. CCI doesn't think so and has based its order on
circumstantial evidence: it alleges companies were synchronising
production cuts and price hikes.
"The CCI order is based on very thin evidence to prove price
parallelism and meeting of minds," says Urmik Chhaya, a cement
analyst with Mumbai-based brokerage Fortune Equity Shareholders.
Adds Samir Gandhi, partner with AZB & Partner: "CCI appears to
have accepted that it will not have direct proof of cartel
behaviour and has taken to relying on purely circumstantial
evidence to prosecute cases." Gandhi represented one of the cement
firms before the CCI, and his comments do not relate to the cement
A senior official of
CCI, who did not want to be identified, says there are different
views on the issue. "Some countries say behavioural evidence is
enough to prove cartel cases, but in others, physical evidence of
an agreement is required," he says.
"The COMPAT and higher courts have to take a call on this." CCI
officials have increasingly relied on behavioural factors instead
of hard evidence as they have limited powers of search and
seizure, as well as to wiretap. At present, to search and seize,
CCI officials should have specific information of evidence and the
permission of the district metropolitan magistrate.
"We are yet to use
this provision," admits another senior official at CCI, not
wanting to be named. A proposal is currently with the government
to vest approval powers for search and seizure with the CCI
chairman. "This will be operationally easier to handle," says CCI
chairman Ashok Chawla.
"A full-fledged, autonomous regulator should have all the powers
to investigate, enquire, probe, search, seize, survey," says
Pradeep Mehta, secretary general of CUTS, a consumer rights body.
"It is not correct that they are not given such powers in the
The other key concept that is likely to be tested in the cement
case is whether price and production parallelism—companies
changing prices or output in tandem—can be taken as behavioural
evidence in a market dominated by few market players.
Thus, the judgments in the appeals process will have a huge
bearing on how India Inc does business and whether the CCI can
give orders that can withstand the toughest legal scrutiny.
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