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CCI, the Indian competition regulator, has a debt collection problem

On October 19, the Indian competition regulator imposed a fine of approximately 223 crore on travel portal MakeMyTrip for entering into preferential pacts with hotel partners. At current exchange rates, that’s about $27 million, or about 9% of the company’s 2021-22 revenue. Share MakeMyTrip fell only about 0.7% that day, underscoring what the market thought about the material impact of the Competition Commission of India (CCI) order. In its 13-year operational history, the CCI has delivered anti-competitive orders of broad imports and imposed huge fines, but collected very little.

In the eight years from 2011-12 to 2018-19, the CCI imposed a cumulative fine of 13,339 crore in 177 cases, but only collected a 60.4 crore, or 0.4%, as of March 31, 2019, shows the latest available data. A large proportion of the CCI orders alleging cartels and imposing a significant fine are ultimately challenged in higher legal forums, namely the National Company Law Appellate Tribunal (NCLAT), high courts and the Supreme Court.

CCI statements can be roughly split into two sets. The first set revolves around anticompetitive issues. An example is recent CCI orders against Google India, which fined the total 2,275 million euros. The second set is approvals for mergers and acquisitions that could potentially weaken competition in the specific sector. The first set is where the orders and challenges lie. Of the 867 orders that CCI took between 2011-12 and 2018-19, 304 orders have been appealed, or 35%. In the last two years of this period, the occupation exceeded 50%.

European whip

The apparent financial gap between imposition and collection ultimately dilutes the effectiveness of the CCI as an authority committed to preserving a free market and competition in the Indian industry, both in letter and spirit. When it comes to fulfilling such a regulatory role, the European competition regulator is cited as an effective global benchmark. Between 1990 and 2022, the European supervisor reviewed 152 decisions in cartel cases.

Several of these cartel cases involved industry leaders in different sectors: for example Daimler in trucks (2016, € 1 billion fine), Saint Gobain in automotive glass (2008, € 715 million), VW Group in car emissions (2021, € 502 million). ) and Deutsche Bank in euro interest rate derivatives (2013, 466 million euros). Since 1990, the European competition regulator has imposed fines of around 31.9 billion euros in cartel cases. After legal proceedings, it has realized 29.5 billion euros of this. Or, 92%.

Absence of closure

In comparison, take a look at the status of one of the high-profile cartel formation orders issued by CCI. In 2014, the CCI jointly fined 14 leading car companies 2,544 crore on charges of not making their spare parts freely available on the open market to independent repairers. The car companies approached the Delhi High Court, which in April 2019 said the companies could approach NCLAT. Information in the public domain does not indicate further updates in this case. Similarly, CCI cases or orders against cement companies for alleged conspiracy to fix product prices are pushing their way through multiple legal hoops.

The CCI, for its part, has been handling cases. In the 10-year period between 2009-10 and 2018-19, the latest available, the CCI has identified 1,008 antitrust cases. Ten sectors account for about two-thirds of these cases, led by real estate, autos and finance. However, closure with high fines is elusive.

in higher appeal

Some cases have arisen from complaints. For example, the 2016 case in which the CCI fined 11 cement companies 6,300 crore for cartel was filed by the Builders’ Association of India, a trade association. The CCI is addressing issues itself, such as an injunction it passed in April 2018 investigating the presence of a cartel in zinc-carbon dry batteries.

In terms of fines, this was the big order of 2018-19. The collective fine imposed on 20 parties was: 214.8 crore, representing 60% of the full year amount. Four of these parties paid the fine, the rest went to NCLAT. In 2018-19, fines were imposed in 31 cases. Fines were paid or paid in 19 cases, but this amounted to only 2.1 million dollars. The remaining 12 cases, with a collective fine of 355.6 crore, appealed. And that typifies the state of affairs of the CCI rulings today.

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