Cartels and the Competition Commission

On 20 June, the Competition Commission of India (CCI) made headlines by imposing fines ­totalling Rs 6,307 crore on 11 major ­cement manufacturers and the Cement Manufacturers’ Association (CMA). They were found to have violated the Competition Act by forming a cartel to coordinate their prices and limit production and supply of cement. This was by far the largest fine imposed by the CCI since it began enforcing the Competition Act 2002 three years ago. Apart from the fine, the CCI’s verdict opens the door to follow-on claims for compensation by those who were harmed by the cartel, so that in principle every property developer and individual who built a home or office in recent years can apply for compensation from the cement firms. No wonder the news sent shock waves across the ­Indian business world, which had got used to regulators being ineffective or captured by the interests they were meant to ­regulate.

In the area of antitrust (competition) policy, attempts to control cartels with the Monopolies and Restrictive Trade Practices (MRTP) Act of 1969 were ineffective.¹ More active enforcement should have been a corollary of the economic reforms initiated in 1991, which abolished merger controls and freed producers from restrictions on pricing, product diversification, and capacity creation. But anti-cartel enforcement actually slackened: only seven cartel cases were decided by the MRTP Commission between 1991 and 2007 – the same number as bet­ween 1972 and 1976 – and most of them were dismissed, either by the commission or the Supreme Court. The commission lacked the resources to undertake detailed investigations, and from the 1990s onwards it was overwhelmed by consu­mer complaints and contractual disputes that had nothing to do with cartels or indeed with competition. In the rare cases in which it could come up with evidence, the MRTP Commission could only issue “cease and desist” orders. In fact, two of these cases involved the CMA and some of the same cement producers who have now been fined by the CCI.² It is a sign of the ineffectiveness of the MRTP regime that these complaints were initiated in 1990 and 2001, but the commission’s o­rders were handed down only in 2007!