Context:
The Competition Commission of India (CCI) raided the offices of major media agencies, including GroupM, Dentsu, and the Indian Broadcasting and Digital Foundation (IBDF).
More on the news:
- The CCI’s investigation centres around price manipulation practices within the advertising sector, such as collusion in setting advertising rates, offering discounts, or controlling inventory.
- Legal experts believe the CCI is investigating the potential for cartelization, a practice where players collude to fix prices, which could lead to hefty penalties under Section 3 of the Competition Act.
Cartelization and Price Collusion:
- Cartelization refers to the formation of agreements between competitors to manipulate market conditions, which can include actions like controlling prices, restricting output, or dividing markets to reduce competition.
- Price Collusion is a specific form of cartel activity where competitors directly agree to fix prices or other terms of trade, undermining fair competition and potentially inflating prices for consumers.
About CCI and its role:
The Competition Commission of India (CCI), established under the Competition Act, is a statutory body responsible for preventing anti-competitive practices, promoting competition, protecting consumer interests, and ensuring freedom of trade in Indian markets.
- The Competition Act was passed by the Parliament in the year 2002, to which the President accorded assent in January, 2003.
- It was subsequently amended by the Competition (Amendment) Act, 2007.
- In accordance with the provisions of the Amendment Act, the Competition Commission of India and the Competition Appellate Tribunal have been established.
The CCI investigates combinations (mergers and acquisitions) that cause or are likely to cause an appreciable adverse effect on competition in India.
The Commission is also required to give an opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.
Other recent concerns on Market Monopoly:
- Star India and Reliance-backed Viacom18 merged to create a joint venture called JioStar, worth $8.5 billion. The CCI approved the merger but it had raised concerns about the potential for monopolistic practices.
- Reliance assured regulators that it would drop certain channels and freeze advertising rates to address these concerns.