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Protectionist Sitharaman claims competition is anti-consumer

Junior FM Anurag Singh Thakur, however, tried to balance the discourse by speaking against businesses that expect a protectionist state

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New Delhi: Underscoring the left turn of the Narendra Modi government, Finance Minister Nirmala Sitharaman on Friday donned the mantle of a protectionist to urge the Competition Commission (CCI) to prepare for new challenges. She said there was a need to protect Indian enterprises from “excessive abuse” in terms of competition from international players in the changed global economic order.

The protectionist minister, who in July had presented a tax-happy Budget replete with punishment for being rich and also for not meeting the expectation of corporate social responsibility, holds the corporate affairs ministry portfolio additionally. She flagged the issue of competition sans frontières and surprised economists by claiming, contrary to commonsense, that competition has an adverse impact on Indian consumers.

Speaking at an event to celebrate the 10th anniversary of the CCI, Sitharaman said the time had come for the regulator to suo moto examine the impact of global firms on the domestic market in terms of competition. “You have your job with challenges, all of which should guide us both in order to protect the Indian consumers… yet ensure Indian enterprises are not going to be subject to excessive abuse from companies which are existing somewhere else, which do not submit themselves to the Indian law,” the minister said here.

The regulator, which keeps a tab on unfair business practices, has been dealing with various cases related to digital markets.

Minister of State for Finance and Corporate Affairs Anurag Singh Thakur, however, tried to balance the discourse by speaking against businesses that expect a protectionist state. He said that when traditional models of business had been dislodged by the emergence of radical innovation, it had been seen that in some cases traditional players had resorted to lobbying with domestic regulators for the adoption of regulations that can delay or block such innovations.

CCI Chairman Ashok Kumar Gupta said the commission had been acting in a nuanced manner with regard to alleged anti-competitive activities in the digital market.

According to Sitharaman, “Physical borders no longer determine competition within a country and in that way we are dealing with not fair play as it is. We are dealing with an entity which is outside, probably legally, complying with many of the requirements in the jurisdiction in which they exist but having an impact on consumers here both positively and probably unfairly… If that is not abuse, then what can be?” the minister said.

Against this backdrop, the protectionist senior minister said it was the right time for the commission to suo moto take up cases and “probably even direct the government towards what it has to deal with which probably for many reasons government would hesitate to tread on as things stand”.

Further, Sitharaman said there was a very big challenge before the regulator in the new economic context, not just within the jurisdiction that one operated but also from other jurisdictions.

At the G20, Sitharaman had said whole discussions were going into saying “how would you define operations and how would you define profits or turnovers which are generated in a geographical area where one does not operate?”

“… Physically, you are not present but you are making a turnover and earning your profits in an area which is jurisdictionally different from where you are. So if that is the way global competition is evolving… whose impact is so much on us that we are still probably wondering as to how we are going to rein in that kind of, if I may use the word, abuse.

“It is not always abuse, but it is a smoking gun. That’s the smoking gun which governments, not just in India, but also in many of the countries which we think are far ahead of us in understanding competition law,” the protectionist FM added.

Thakur, on the other hand, emphasised that enforcement must find a sweet spot between competition policy and industrial policy. “Neither must the regulator be too soft nor too stringent to kill innovation and disrupt emerging business models. The competition authority should ensure that there is no abuse by dominant players… or no high handedness in the application of law which adversely affects the ease of doing business and stifles innovation,” he noted.

So far, the CCI has reviewed more than 1,000 anti-trust cases and has approved around 670 merger matters. “Besides traditional sectors, the commission has looked into various cases in the new economy industries where abuse by digital players was alleged.

“The commission’s intervention in such markets, however, has been nuanced so as to preserve the innovation incentives while correcting anti-competitive conduct. By way of a cautious approach, the Commission has intervened only in cases where the harm was evident,” Gupta said.

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