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Exit interview: CCI ex-director general KK Sharma speaks candidly on India’s young anti-trust scene

CCI veteran KK Sharma
CCI veteran KK Sharma
Exclusive: As former director general of the Competition Commission of India (CCI) and the architect of the now established merger control department, Kaushal Kumar Sharma who left the regulator last month tells Legally India about wannabe competition lawyers, firmness, Bollywood, the CCI’s historical and future challenges and his plans as a free agent.

Sharma (pictured) had been at the CCI for five-and-a-half years starting out as director general and later groomed the merger control team as advisor (combinations division) until its full powers came into effect in June 2011.

An Indian Revenue Service (IRS) man since 1987, a former Income Tax Appellate Tribunal (ITAT) member and qualified lawyer, Sharma is by all accounts extremely well-versed in the ins and outs of Indian competition law. He is also visibly pleased with the track record so far of his baby, the merger control division.

And the merger control clearance rate of the CCI has won plaudits so far – the first M&A on its books of Reliance Industrial Infrastructure and Bharti AXA Life was cleared within was cleared within 10 business days, while the complex Disney UTV takeover took 16 working days – both well within the unofficially self-imposed 30-day limit the CCI had set itself for the vast majority of mergers.

“Having [drafted the first regulations], having seen practice, having cleared the first [merger control] hearings in 14 days flat, that was a career high point. I thought it better to leave at this point before systemic inertias overtake me,” quips Sharma.

That said, with what are understood to be at least around half-a-dozen mergers now sitting with the Commission and more likely to come its way, the real stress tests are yet to come, and the weight of the CCI’s history and challenges lie heavily.

Attractive staff

“When I came to the Commission in April 2006 […] we had to think of the needs of the Commission in the long run,” remembers Sharma. “When we went with the first tranche of appointments […] we wanted to take some 180 to 190-something [staff and] those numbers were approved.”

The mix was intended to be around 40 per cent lawyers, 40 per cent economists and the rest financial specialists and MBA holders but the Commission has not been able to fill up even the sanctioned strength of a little over 200 to date, he says.

“We are not finding enough suitable candidates.” Many economists initially did not even consider the CCI as an option, and in the law stream good candidates were coming through but the written exams outsourced to IIM Bangalore were tough, says Sharma. “And we do not want to lower our standards.”

Perhaps surprisingly, according to him, pay is less of a hindrance in recruiting at the Commission he claims and candidates from “good law firms” regularly approached the CCI. “At least I can say for sure that people who are right now coming, are coming at half the salary they are getting elsewhere. Now the brand equity and desire to know the subject is high. People are coming to learn.”

The merger control team was being built from May 2010, he says, starting off with four professionals and by February of this year it had grown to a total of 17 under his watch.

But in the arms race with law firms it is hard to keep up, as litigators and law firms discovered the CCI as a new way of exerting pressure on opposing parties outside of the slow-moving courts.

First in, first out (FIFO)

The very first case to reach the Commission – the multiplex cinemas’ battle against the Bollywood producers as first reported by Legally India in July 2009 – should have been dealt with more quickly, according to Sharma who was serving as the CCI’s director general at that time.

“I said if properly handled the Commission can wrap up this investigation and close the case within 60 days,” he says. “I gave a methodology but said we have to follow [it strictly and] not permit adjournments.”

It eventually took almost two years for that case to conclude – in May 2011, 27 Bollywood producers were fined Rs 1 lakh each. It was the first such CCI decision but by then the multiplex’s dispute with the producers was long settled, in which the threat of an action before the untested competition regulator arguably helped expedite matters.

Summary of rejections

Until May 2011 – almost two years after starting up in earnest – almost 90 per cent of 70 anti-competitive behaviour allegations the CCI disposed of it rejected summarily, according to a detailed Legally India analysis of the CCI’s caseload and published orders.

Of those, just over 20 came from the CCI’s predecessor – the Monopolies and Restrictive Trade Practices (MRTP) commission – while the rest were new. However, more than half the investigations were shut by the CCI due to a “lack of evidence” in the complaint or “insufficient grounds” in support of the allegations and there are myriad colourful, shoddily drafted and unintentionally amusing examples.

Approximately 10 filings were disposed of by the CCI on grounds that “no case for abuse of dominant position” was made out and in at least fourteen cases the informants were told to approach appropriate sector regulators or consumer forums.

“The CCI seems to be in the mood to dispose of many of the pending cases before them and we've had a few good orders either closing investigations or not finding any merit in ordering an investigation at all,” commented Economic Law Practice (ELP) partner Samir Gandhi at the time.

Since then a few notable big decisions have come out the blocks: the National Stock Exchange (NSE) has seen crores of Rupees in penalties – despite Monday’s stay by the CCI’s appeals body – and famously property developer DLF has been hit twice, and hard.

But even in the DLF case one could argue that the problem at its heart – the developer being in a dominant position vis-à-vis those who had already bought flats from the developer – is not even a classical competition law issue per se.

Ignorance is bliss

Sharma says that he would “partly concur” with the charge that not all cases that have hit the Commission’s desk since its inception have necessarily involved legitimate competition law issues (see box right: Summary of rejections).

“Anyone who had any reasons was rushing against his business enemy or associate”, filing cases for abuse of dominance and sometimes even going into what are clearly consumer issues such as not receiving an electricity connection in time in a residence, he says.

“Abuse of dominant position is not being understood,” Sharma complains and adds that the CCI should be very prompt in getting badly framed or irrelevant cases off its books. “It’s a new show in town and that ignorance is being expended further by wannabe lawyers that jump onto the bandwagon.”

Law firms, often billing by the hour, were also arguably able to exploit the regulator’s more cautious or tender approach, sometimes for their clients’ benefit.

“Internal management [at the CCI] could have tightened, which was taken for a ride by the law firms, perhaps knowingly,” concedes Sharma. Nevertheless the speed of disposals had now improved “a bit”, he says. “But also when people ask for adjournments for frivolous grounds, there is a need for the Commission to show more firmness. Once you start, people will take you seriously and people will not come up with frivolous requests.”

Clearing the pendency of complaints therefore remains “a problem that the CCI will have to address better sooner than later”, he agrees.

Appealing proposition

Despite the CCI’s appeals body – the Competition Appeals Tribunal or Compat for short – having seen plenty of action, the interplay has been largely a happy and productive one, says Sharma.

“Compat has also started deciding cases. Many cases where there were vexatious complaints in the garb of [Compat complaints against] abuse of the Commission’s powers, Compat has also concurred in many of the cases [with the CCI].”

After the SAIL v Jindal decision by the Compat forced the CCI to give detailed reasons even when arriving at prima facie decisions when rejecting complaints.

But Sharma says he believes that the common law system and judicial principles absolutely demand such transparency, rather than the recording of reasons having slowed down the system: most orders are not beyond three to four pages anyway, he says.

Furthermore, the Compat is fulfilling a necessary role in a system where competition law is still evolving and where there is not yet a consensus on the issues, notes Sharma.

“I would say in some cases, wherever there is some genuine difference in opinion, I would suggest that people would go to Compat for sure.”

Personal challenge

Sharma himself is currently considering his options and is thinking outside of the box, including considering starting up a niche competition law boutique.

“I am open to challenging and exciting opportunities,” he says. “It may be teaming up with somebody who is looking for a high quality resource or starting on my own as super speciality competition resource.”

Or a third option that remains on the table, he muses, is to return to his previous career as a commissioner of income tax.

But with his insider knowledge and obvious passion for the still nascent competition law field, one might wonder whether he will be able to keep himself away from the subject.

Additional research by Neha Chauhan

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