NEW DELHI: The country's competition authority has asked the department of telecommunications to consult it before finalising any merger-and-acquisition policy to avoid regulatory overlaps.
In its letter to DoT, the Competition Commission of India has emphasised that it has a clearcut responsibility to regulate anti-competition combinations while sectoral regulators such as the Telecom Regulatory Authority of India and the Insurance Regulatory and Development Authority have the mandate to frame policies to encourage competition.
The antitrust watchdog's missive, which has industry-wide ramifications, was prompted by a recent TRAI proposal to allow mergers even if the combined market share of the merged entity was less than 60%, a substantial increase over the current 40% limit.
"The TRAI proposals can have an adverse effect on competition as it will encourage companies to merge and dominate markets," a senior CCI official told ET Industry and experts have said that giving administrative agencies overlapping jurisdiction leads to duplication or conflicting regulation, which is inefficient and cumbersome.
Section 3 & 4 of the Competition Act 2002 prohibits anticompetitive agreements and abuse of dominant position, giving the CCI the powers to investigate arrangements that appear anti-competition. The commission also said the sectoral regulators may also not have the requisite expertise to deal with competition issues.
"( The commission) has the necessary resources and the expertise to analyse complex competition issues from a legal, economic and financial perspective, which may or may not be readily available with the sector-specific regulatory authorities," it said in the letter, adding that the CCI and other sector-specific regulatory bodies need to work in tandem to avoid policy uncertainty. Experts say M&A activities in the overpopulated telecom sector are likely to rise and some of these need a closer scrutiny.
"Market share is often used as proxy to determine whether an enterprise is in a position of dominance and, globally, enterprises with a market share exceeding 50% are viewed as being dominant," said Samir Gandhi, competition partner, Economic Law Practices, a legal consultancy firm.
A DoT panel, which examined Trai's recommendations, has called for rejecting the proposal as it could lead to a "monopoly market situation" and has suggested that the market share ceiling of the combined entity be reduced to 35%. But this has to be approved by the Telecom Commission, the apex decision-making body of the communications ministry.
Sunday, December 11, 2011
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