Effects of Downsizing CCI

Why in news?

The Union Cabinet recently approved rightsizing of Competition Commission of India (CCI) by halving the number of its members.

What is the recent decision?

• CCI currently has a chairperson and 6 members.
• With the recent downsizing, it will now have a chairperson and 3 members.
• The decision is in pursuance of the Government's objective of 'minimum government, maximum governance'.

What are the proposed reasons?

• Workload - The assets and turnover threshold for mergers and acquisitions (M&A) deals that would need CCI approval has been raised recently.
• The raised threshold and low coverage would reduce the workload of the CCI.
• Time - The corporate affairs ministry had also contended that the reduction would speed up the CCI’s work.
• Few members would lead to faster turnaround in hearings that is expected to result in speedier approvals.
• This is because all members in office have to sign on to an order, and 4 members would facilitate this faster than earlier 7.
• Decision making - Downsizing especially reduces the scope for dissenting judgments.  
• DG's Office - The director-general’s office, the CCI’s investigation arm, with just 14 people, is undoubtedly understaffed.
• It urgently needs more people to perform this critical role.
• It is argued that CCI's downsizing could help expand the director-general’s office.
• Besides, competition regulators in advanced jurisdictions in UK, US, Australia and Japan also have minimum possible members.

Will downsizing benefit CCI?

• Process - In CCI's case, the downsizing may prove counterproductive due to various factors.
• The paperwork and processes that are required for companies to file for approvals remain voluminous.
• How efficiently can a small CCI take up these is highly uncertain.
• Decision making - If 7 members widened the scope for dissent, a quorum of 4 hardly diminishes it.
• The question of a possible 2:2 tie and a deadlock in decision remains unaddressed.
• Moreover, the law defines the chairperson as a member.
• So the issue of a casting vote becomes contentious.
• Composition - Technology is adding manifold degrees of complexity to commerce.
• The global dimension of business today also requires sectoral expertise.
• Global M&As may have unique local consequences or standard global practices may impact Indian consumers differently.
• Given these, general expertise in corporate and M&A law increasingly demands specialist knowledge to supplement.
• Thus, fewer CCI members may not provide scope for the addition of sector experts.
• Sector experts working on a rotating roster of cases may serve the cause of the competition regulator better than a reduced CCI.
• DG's Office - The two i.e. the CCI and the DG’s office have distinct functions.
• So it is difficult to see why expanding one should prevent enlarging the other.
• In all, in CCI's case, a reduction in members is less likely to serve the perceived cause of efficiency.

Source: Business Standard