India has for long lacked an agency to control the monopolistic and predatory practices of Indian companies . The old MTRP Act had become quite toothless after the 1991 reforms and the Indian industry had turned into the wild west. Monopolies and oligopolies could operate quite freely and there was nobody to investigate price fixing and cartelization. Industries like telecom, cement and others saw many such abuses. Most of the developed countries like USA and European Union have highly developed and advanced competition regulators which impose hundreds of millions in fines against domestic and international companies who indulge in anti-market practices. The fines serve as a great deterrence where powerful corporates try to undermine the market forces through their sheer size. The landmark anti monopoly legal cases against Microsoft, LCD companies have proved to be very effective in punishing super powerful businesses who have shafted consumers through illegal practices.
However the situation is changing with the advent of a new authority Competition Commission of India. India’s anti monopoly watchdog Competition Commission of India (CCI) had started out a year ago tentatively by finding film producers a pittance of Rs 1 lakh. However with a year behind it, the watchdog has apparently gone to the other extreme by fining top cement companies in India 50% of their profits for the last 2 years instead of the expected 8% of their last 3 year’s revenues (regulation allows for a maximum penalty of 10%) . This comes to around Rs 6300 crores which is almost the whole profit made by the industry. Note there is a seemingly lack of balance about its orders going from one extreme to the other extreme. The order against DLF was a good one finding the right balance , however the cement companies one seems too high and will be overturned in all probability by the Appellate Council.
Not Rs3,500 crore, Rs6,300 crore!
The Competition Commission of India (CCI) on Thursday asked 11 cement companies found guilty of cartelization to pay penalty at 50% of the profits they logged during 2009-10 and 2010-11. That’s way higher than the penalty of Rs3,500 crore the companies were expected to pay, at the rate of 8% of their average turnovers in the last three years.
The 11 companies are ACC, Ambuja Cements, Ultratech Cements, Grasim Cements (now merged with Ultratech Cements), JK Cements, India Cements, Madras Cements, Century Cements, Binani Cements, Lafarge India and Jaypee Cements, the commission said.
Note India desperately needs someone to break the oligopolies and cartels created by numerous sectors such as yarn producers, cement players etc. But you have to find a balance between penalizing them and bankrupting them. However some good has come out with this huge penalty as the yarn producers have lowered their prices fearing a big fine against them.
The yarn prices in domestic market have come down by Rs 5 per kilogram in the last two days following investigation by the Competition Commission of India against the man-made fiber (MMF) manufacturers and spinners across the country.
CCI is probing their alleged indulgence in anti-competitive activities by fixing prices and thereby controlling the supply of yarn – basic raw material for the powerloom weavers.
The office of the Director General of the Competition Commission of India (CCI) started investigation after complaints regarding the alleged fixing of prices and controlling the supply of yarn after the Central government extended the anti-dumping duty on all types of yarns recently.
Some days ago, the CCI issued a notice to the chairman of Federation of Indian Art Silk Weaving Industry (FIASWI), Arun Jariwala to furnish details on the MMF manufacturers based in Surat, Mumbai and other parts of the country indulging in malpractice, controlling the supply of yarn, fixing prices and thereby violating the provision of Competition Act, 2002
