COVID-19: THE BIGGEST CHALLENGE OF THE COMPETITION COMMISSION OF INDIA

Author: Tejas Chhura – NLSIU

Kavya Shukla – JGU

Samriddhi Jha – JLU

Inderjot Kaur - FIMT

Editor: Tejas Chhura - NLSIU

Introduction

The past two decades have borne witness to some of the biggest challenges to the business world. Right from the dot com bubble burst to the 2008 stock market crash, companies have been forced to come up with innovative ideas to stay relevant. However, nothing could have prepared companies for COVID-19 and its effect on the business world. The fact that competitors that would normally never help each other have started working together to keep each other afloat is a testament to how dire situations have become. However, some companies can use (and have used) this pandemic as a means to skirt the Competition Law in order to make a profit and hence, the burden falls upon the Competition Commission of India and the Competition Act of 2002 to ensure that this doesn’t happen. This article aims to analyze some of the biggest challenges that the Competition Commission of India has had to deal with and see if these decisions were appropriate or not.

The Coming together of Companies

As mentioned above, no company has been immune to the effects of COVID-19. With the lockdown being imposed nationwide, we have seen supply chains that have stood the test of time meet their match. Owing to these circumstances, several companies have found themselves on the negotiation table with some of their biggest competitors in order to support each other in these uncertain times.[1] The ideology behind this joint effort is resource pooling, and the shared resources at the disposal of both companies put together can perhaps help them accomplish what neither of them can do individually. However, this has raised some eyebrows in the business world and the Competition Commission of India. On the one hand, it is a matter of survival for these companies, and everyone knows the independently these companies can struggle to sustain themselves. However, on the other hand, there is no guarantee that after the lockdown, these associations will cease to exist. There are a number of things that can go wrong, and if the companies continue with this joint venture, then they can easily establish a monopoly in the market which will be detrimental to a country trying to crawl its way out of the economic situation that India is in right now.

In order to solve this debate, we can look towards the objectives of the Competition Act. The main purpose which the Competition Act was meant to serve was to prevent the formation of monopolies or similar agreements that would be made to the detriment of the consumers. However, looking at the current situation, we see that these companies are not doing this for the extra buck or for establishing a monopoly, but rather doing this to survive and be able to supply goods. From a purely economic standpoint, if these joint ventures of sorts were not allowed, then it would cause a detrimental effect on our already tanked economy. Hence, reflecting on all of the above, the Competition Commission of India allowed the collaborative efforts between competitors,[2] as they recognized that while the Competition Act of 2002, does restrict conduct that has an adverse effect on competition, this is not applicable in cases where the agreement is made solely to increase efficiency is made in favor of the consumers.

This is absolutely the correct thing to do in a time like this, but the CCI must be wary and keep a close eye on these joint ventures to ensure that the parties involved do not use COVID-19 as a smokescreen to hide their ulterior motives. Hence, in the researcher’s opinion, once the lockdown restrictions begin to ease up and people are able to get back to work, the CCI should determine a date by which all such joint ventures shall stand dissolved in order to prevent monopolies.

Essential Commodities and Price Gouging

If there is one industry that has thrived due to COVID-19 and its effects, it has been the industry which deals with the manufacturing and providing of essential commodities such as healthcare, pharma, telecom, FMCG& retail, etc. With an increased demand for commodities like masks, hand sanitizers and so on, there was increased moral responsibility on these companies to act in a humanitarian manner. While some of them did, others, unfortunately, saw this just as another situation to make some quick and easy money. We are already witnessing a shortage of items and price gouging on a scale never seen before. People and companies alike began stockpiling and hoarding these items in order to see at a higher price than usual, which is an act in bad faith. In addition to this, E-commerce websites were accused of selling hand sanitizers and face masks at exponential prices.

However, fortunately, the Competition Commission of India also noted this and cautioned businesses “not to take advantage of COVID-19 to contravene any of the provisions of the Act.”[3] Thus, any behavior in the form of information sharing on prices, output volumes, customers or delineation of markets or price fixation would be under strict vigilance. The Indian Essential Commodities Act, 1955 has also come into play in the current crisis by putting restrictions on the bulk stock keeping of essential products. The aforementioned ensures that Indian markets do not undergo any shortage of supply and price gouging. However, issues relating to anti-competitive practices such as coordination between the suppliers in order to restrict the supply are not directly covered in the Essential Commodities Act, 1955 and thus, must be read in harmony with the Competition Act, 2002 in light of current circumstances to prevent unfair price-fixing sharing of information, which causes an adverse effect in the market. This above position was even affirmed by the Supreme Court of India in the case of Justice for Rights Foundation v Union of India.[4]

Justice for Rights Foundation v Union of India was a PIL filed by an NGO after noticing this price gouging and unprofessional acts that were taking place, and the writ prayed to the Supreme Court to provide guidelines to help ensure a fair distribution of masks and hand sanitizers. Following this, the Supreme Court issued an order dated 3rd April 2020 to ensure the fair and equitable distribution of face masks and hand sanitizers.

Conclusion

COVID-19 has undoubtedly posed a big challenge to the CCI. The CCI has been tasked with the difficult task of striking a balance between the jurisprudence of the Competition Act and the sections of the Act. However, until now, they have done a great job in handling the situation, but as pointed out above, the biggest challenge will be dissolving these joint ventures that companies have established, and the CCI must pay heed regarding the same. As long as they are able to manage the same, the researchers feel that the CCI will be able to manage these challenges that COVID-19 has introduced and uphold the spirit of the Act.

Citations

[1] Online FE, “Coronavirus Brings Business Competitors on One Table; CCI Allows Firms to Work Together” (The Financial Express April 20, 2020) <https://www.financialexpress.com/industry/coronavirus-brings-business-competitors-on-one-table-cci-allows-firms-to-work-together/1933729/>.

[2] ibid, 1.

[3] Online FE, “COVID-19 Lockdown CCI Cautions Business not to flout Competition Norms” (The Financial Express April 21, 2020) <https://www.financialexpress.com/industry/coronavirus-brings-business-competitors-on-one-table-cci-allows-firms-to-work-together/1933729/>.

[4] Justice for Rights Foundation v Union of India Writ Petition 10792/2020.

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