29 Sep 10 ACCC and The MRTPC / CCI…

Recently, I read an article that reported – the Australian Competition and Consumer Commission (ACCC) blocked an acquisition bid by an Australian major wealth management company, NAB over its rival AXA Australia. ACCC, the competition regulator, is an agency that enforces the Trade Practices Act which covers unfair market practices, mergers and acquisitions of companies, etc. The ACCC stated that there were concerns over the merger’s impact on the competition in the industry. To counter this, NAB filed another bid with a conniving clause that would have resulted into NAB selling the ‘shell’ of the AXA business while retaining the ‘core’…and the ACCC foiled this one too; that too within a span of about a month after filing of the renewed bid.

If we compare the efficient Australian regulator with the Indian counterpart, the MRTPC (Monopolies and Restrictive Trade Practice Commission) and its successor, the CCI (Competition Commission of India) – the findings are dismaying (as usual if I might add!). Both the ACCC and the MRTPC were established in late 60’s and restructured in late 90’s; however the MRTPC/CCI falls way behind the ACCC in terms of regulatory efficiency and progress…

The ACCC has an elaborate organization structure whereas CCI still lacks a formal organization structure with divisionary roles; the CCI had only 15 employees (at December 2009) as opposed to ACCC’s total 702 employees by the same time; the ACCC has listed a set of functions to follow while the CCI on the other hand still lacks teeth as its powers are yet to be notified.

As a result of the above-mentioned shortcomings, by December 2009, CCI reported nine pending cases which included that of for instance, the Jet – Kingfisher (airlines) alliance.

Jet Airways and Kingfisher airlines formed an alliance by end 2008 for fuel management, ground handling, cross-selling of flight tickets to select destinations and majorly route-rationalization. Their combined market share rose to over 45% of the domestic civil aviation industry. Obvious reports of price hikes and charges of cartelization followed but, MRTPC could not do much; it probed into the case for almost a year! and finally ruled in September 2009 that there was no cause for an inquiry. However, in June 2010, CCI had to re-start the inquiry based on a consumer complaint; the verdict is awaited (and it’s the close of September 2010 now…). Some CCI officials have stated issues such as under-staffing to be the main reason for its backlogs!

…and this leads me to another (related) thread of thought about difficulty in getting regulatory approvals, setting up infrastructure for doing business in India. Moreover, at a time when the government is aiming to spend $1.5 trillion over the next 5 year plan period on infrastructure, I wonder if the soft infrastructures in place are adequate / efficient to support it. According to the World Bank Group report, 2010 that ranked 183 economies on ease of doing business, India ranked a lowly #133.

• Considering the individual evaluating parameters such as ease of hiring staff, India ranks #104 whilst Australia, U.S. both rank #1.
• In terms of ease of enforcement of contracts (number of procedures to be followed from time of filing the application, total time for processing in calendar days etc.), India ends up at a second last rank #182 whereas Australia and the U.S. rank #16 and #8 respectively.

I got a detailed insight on this aspect while working on India entry strategy for a Factoring services company; wherein I found that the lead-time for registration of the company post-submission of the application to the RBI is approximately 6 months. Also stamp duty on the service i.e. Factoring, is a state level subject and there is no uniformity in the rates of stamp duty across states…all of which renders doing business in India an unsurmountable task !!

My question is – In view of such inefficient regulatory systems / hurdles; can India aspire to join the league of economic / financial superpowers such as Australia / U.S. / U.K.?