Three cheers to the Competition Commission of India (CCI) on two major decisions. One was the stunning Rs630-crore fine on DLF for just one Gurgaon project, causing its stock price to tank; the second was on the National Stock Exchange (NSE) which was fined Rs55 crore; it quickly fell in line and started to charge a fee on forex derivatives transactions.
The CCI has sent several strong signals with these orders. It is the first Indian regulator to understand the logic behind steep monetary penalties and ‘speaking orders’. The fear of high monetary liabilities (through fines or settlement fees) is the single strongest deterrent to financial crime. Our banking and capital market regulators, and our consumer disputes commissions, refuse to recognise this fact. They continue to hand out niggardly penalties that only discourage consumers from fighting for their rights. Secondly, the CCI has signalled that it will step in to ensure fairplay in sectors where a tight nexus between business and politics delays the appointment of independent regulators. The DLF order sends that message, even as it has specifically recommended the creation of a realty regulator.
The NSE order fetched quick results too. Before it filed a predictable appeal to the CCI Appellate Tribunal against the order, the NSE ended its predatory and unfair trade practice of bleeding its competitors by charging no fees. Interestingly, unlike the realty matter, CCI ended up hearing the NSE case because the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), the joint regulators, failed in their regulatory duty and permitted three exchanges to operate an unsustainable trading segment with no revenue model.
While DLF and NSE would both appeal against the orders, the CCI has definitely shown that it has powerful teeth and won’t hesitate to use them. While NSE has already fallen in line, the DLF case may have even more positive fallout. The fear of a series of crippling orders from the CCI may have builders pleading for an independent realty regulator instead of opposing it. Meanwhile, other regulators should imbibe the CCI’s idea of exemplary punishment which alone can be a strong deterrent.