Competition Law and the Not-so-Free Market in India: The Realities of our Second Best Universe

In 2023, a Three Judge Bench of the Supreme Court, in Coal India Ltd v. CCI [1], negated an argument that the Competition Act does not apply to Coal India Ltd. Textually, conceptually, and historically, the argument seemed tenuous. The statutory language could not be clearer. The prohibitory sweep of Sections 3 and 4 applies to any “enterprise”, and the definition of “enterprise” could not be broader. The Raghavan Committee Report – the precursor to the Competition Act – was also very clear that any workable competition law regime had to apply to public and private sectors alike. And the Supreme Court answered accordingly.

But even when we accept, conceptually, that the Act applies with the same rigour to the public and private sectors, key questions remain unanswered. For better or worse, India is not a classically free market polity by any means. The Preamble to our Constitution declares our nation to be “socialist”, among other things. While refusing to ascribe to this word a doctrinaire economic philosophy, the Supreme Court has interpreted it as encompassing what is required of a welfare State. [2] And in any case, it is a simple reality that, for enormous swathes of our economy, the government either dominates or co-exists in some manner with private enterprise.

In the Coal India Ltd case, CIL essentially complained that it is burdened in ways that a private competitor would not be. In other contexts, judges have acknowledged that public sector enterprises may sometimes be hamstrung in ways that the private sector is not (for example, being subject to writ jurisdiction in a range of scenarios including employment law).

But there are also ways in which the public sector is advantaged, in almost incalculable ways, that are so ingrained in our way of functioning that we scarcely pause to consider these. Take an example from our courts. Any regular litigator on the civil or commercial side would be familiar with orders routinely passed to deposit monies, during the pendency of litigation, in a fixed deposit with a bank for safekeeping. Seemingly innocuous, but pause further, and recall that the order almost inevitably mentions – “with a nationalized bank”. More than that, try remonstrating with a judge on this – and the response would likely be that this is “safer”. And the point is, this may well be true! There is an implicit sovereign guarantee, unwritten but baked into the system, that an ‘SBI’ is too big to fail.

And so competition law in India, especially when it deals with the government or the public sector, has to perform an incredibly challenging task. In a certain class of cases, it must decide whether the public sector has behaved fairly in the whole context in which it operates. That is, in the best of times, a challenging inter-disciplinary task. But here, it must do so weighing both the headwinds and the tailwinds faced, and a regulatory environment which (aspirations aside) differentiates and distinguishes between the government and the private sector in complicated ways.

And even in the context of the private sector interacting with the government (in the regulatory or judicial domain), we face familiar situations of opaque governance and arbitrary decision-making. While an in-depth analysis would digress too much, the story of the telecom sector over the past two decades is a cautionary tale, and the consequences are there for all to see.

Side by side with this, we face the other harsh reality - of private actors cutting corners and manipulating public actors to serve illegitimate private ends. On the first point, government tenders are a prime example of opaque (and sometimes harsh) decision-making by governmental entities. In more than one case, the Commission has chided governmental actors for actions that shroud decision-making in opacity. Anecdotally and off-the-record, clients have complained heartily about arbitrary and unrealistic cost-cutting by the government (in public procurement tenders, for example), to stave off allegations of corruption or profligacy. At the same time, and in apparent contradiction, private actors pocket unreasonable profits through unfair means, exploiting under-enforcement of government regulations and often imposing negative externalities on society as a whole. (To make it more real through a concrete example, monolithic entities such as the Railways may negotiate vendors down to a situation of marginal or no profit. But self-interested private actors often go along quite willingly. It’s hard to avoid the suspicion that, in some cases, the profit comes from compromising on quality, safety standards, and the like.)

And so, in a universe where there are these overarching macro-economic realities – firstly, the public sector dominating in certain sectors in the manner in which it does, and secondly, private enterprise routinely obtaining unfair advantage through illegitimate means - it is both unrealistic and conceptually incoherent to expect the competition law regime to cure all ills. If we aim to achieve a truly level playing field and sustainable consumer welfare, we need to think more broadly about rule-based and transparent governance. And in a whole range of matters far beyond the remit of the Competition Commission.

The larger point, I think, is that competition law, while a good and worthy aspiration, works coherently and completely only in the context of a society and polity more firmly anchored to the rule of law, than the case in India today. Else, we think of competition law only when flight tickets soar to rupees fifty thousand one-way, and forget about it soon thereafter. Competition law, to adapt a nifty phrase, is too serious a matter to be left to competition lawyers alone! [3] Notes & References:

1. (2023) 10 SCC 345.

2. See Dr. Balram Singh v. Union of India 2024 SCC OnLine SC 3433.

3. "Politics are too serious a matter to be left to the politicians." - famously said by Charles de Gaulle, French solider and President of France from 1959 to 1969.

About the Author

Dr. Rishad Ahmed Chowdhury is an Advocate-on-Record at the Supreme Court of India. By way of disclosure, he represents the Commission in CIL v. CCI and connected matters. However, views expressed are personal and academic in nature.