A Poverty of Antitrust Reasoning: Five Tales from India

Transcription

1 A Poverty of Antitrust Reasoning: Five Tales from India Avirup Bose Assistant Professor, Jindal Global Law School Expert Consultant (Former), Competition Commission of India CRESSE (2016)

2 The Problem On Dec 29, 2015, the Economic Times of India carried a piece titled, Making of an Umpire: India s Tryst with the Competition Commission of India It was critical of the seven year old antitrust regulator, carrying negative quotes from members of the Indian antitrust bar and former Members of CCI. They complained that the agency lacks intellectual rigour lamenting the direction the regulator is progressing. CCI s antitrust reasoning was described as a commonsensical approach to antitrust or one of neosocialism

3 Motivation The paper mainly focusses on theinstitutional and behaviouraldimensions of the Indian antitrust enforcement architecture, to investigate what prevents CCI, despite facing continues criticism, and after deciding more than 570 cases and imposing approx1.8 billion USD as fines, from approaching antitrust enforcement from adopting a more modern economic approach. Importance: India as an antitrust jurisdiction does not allow parties to settle their disputes. Parties are stuck with a decision throughout the appeal process.

4 Antitrust Gospel the merits of any given case, dispute or regulatory decision, must be faithful to the Gospel of Antitrust (i.e., the specific history, logic and objectives that justified the adoption of the US competition laws in the first place (Kovacic& Hyman, 2013) The Indian antitrust gospel is one based on economic efficiency The legislative background of the statute s adoption was to provide a system of regulation of Indian markets premised on modern economic principles rather than ad-hoc bureaucratic discretion. Why has CCI in its enforcement of the Act failed to deliver on such an antitrust gospel?

5 Capability Traps Term coined by LantPrichettand Matt Andrews of Harvard Kennedy School Their work critiques the presumption -that developing countries could simply imitate the convergent institutional forms of successful economies to accelerate their own developmental process. isomorphic mimicry where imitation of forms are not accompanied without building effective functional capability. I argue that the Indian antitrust regime suffers from such mimicry without accompanying local embedding process.

6 Capability Traps - contd There are two reasons a) The antitrust institutions and the antitrust goals were borrowed from those of the EU and US and super-imposed upon India s own unfair trade practices law the 1969 Monopolies and Trade Practices Act (MRTP) b) Act s drafting was an insular one without adequate

7 MRTP s continuing influence The current Indian antitrust regime is a conflation of the form, function and goals of India s modern and erstwhile competition law regimes. The MRTP defines monopolistic trade practices (MTPS) to include maintaining of high prices at an unreasonable level or unreasonably preventing or limiting competition. However, MRTP s insistence on pure price competition to be automatically linked to greater consumer choice by deeming, the maintenance of high prices as prejudicalto public interest continues to influence CCI s decisions SamsherKatariav Honda Sieland others

8 MRTP s continuing influence MRTP also regulated restrictive trade practices and unfair trade practices which mainly dealt with manipulation of prices or conditions of delivery, imposition of unjustified costs, misleading advertisements etc. Later such provisions were codified into India s Consumer Protection Act, 1986 However, 80% of MRTP s cases in 1990s were essentially consumer disputes (OECD 2008) Such antitrust styled consumer disputes continues to influence CCI Belaire Owner s Association v DLF (2010)

9 Insular Drafting Process This has hampered the statute s embedding process The government appointed committee which drafted the law, did not consult any foreign experts, especially the jurisdictions from whom they were borrowing the principles. China s AML went through more than 7 drafts, including extensive consultations with EU and US antitrust experts. EU-China dialogue which has assisted China in both the drafting of the AML and even some of China s secondary antitrust legislations. (Qianlan Wu, European Law Journal. 18(3), )

10 Efficiency v Equity India has inherited the UK s fused system of law and equity Where equitable principles based on conscience and fairness have been prioritized to mitigate harsh and unfair results produced by implementation of formal statutory rules. The Act s provisions structured on notions of efficiency rather than on those of equity The presumption of the Indian legislature that the enactment of an antitrust statute will be accompanies with a simultaneous transplantation of a rule of law based on efficient market behaviour, seems erroneous.

11 MCX Stock Exchange Ltd v. National Stock Exchange of India Ltd. MCX Stock Exchange Limited (MCX) an Indian stock exchange specializing in the trading of exchange traded currency derivatives in India ( CD segment ) sought CCI s intervention against NSE s decision to offer currency derivatives trading free of cost to its investors. MCX alleged that NSE s zero price policy was forcing it to suffer losses due to its inability to levy charges to protect market share. MCX had further alleged that NSE enjoyed economies of scale and had the ability to cross-finance the losses in the CD Segment from the profits made in other segments. While examining if NSE s zero-price policy CCI s majority order held that predatory price is a subset of unfair price

12 MCX Case..contd CCI considered that, unfairness of pricing (as distinct from the concept of predatory pricing) cannot be determined on the basis of some formula or an accounting process. What needs to be analyzed is if NSE s zero-price policy can be perceived as unfair from MCX s perspective? CCI re-casted a predatory price analysis into a a big (NSE) v a small (MCX) paradigm, introducing moral and social value of fairness, without any rigorous economic analysis. This is similar to the MRTP s regime of treatment to predatory pricing cases. Where the causation for prohibiting predatory pricing was a unfair standard than those of a welfare based normative approach.

13 Samsher Kataria v Honda Siel A case dealing with the abuse of dominance of car companies in their auto parts aftermarket in India. CCI imposed a penalty of 2% of annual turnover, besides requiring the car companies to sell genuine auto parts and repair tools in the after market, train independent repairers and garage owners. Car companies are required to file compliance report to CCI. Socialist perception of the economic functions of public institutions required legitimization of markets by providing mechanisms of social protection and insurance (Subramanian 2007, 197-8). The lack of equal opportunities for India s 360,950 independent repairers is being corrected by the regulator.

14 p Thank You