Competition- Yama of Cartelization

Have you ever thought the reasons for cartelization? One of the basic factors that drive the sustenance of a cartel is lack of distinction. It is no wonder that most of the proven and averred cases of cartelization are in industries which have a low level of differentiation such as cement, fertilizers, tyres etc. or which are either commoditised like oil, food, grains, sugar etc. Secret cartel agreements are a direct assail on the principles of competition.
Cartelization is not peculiar to India. Even the Asian Shippers Council complained that shipping lines are conspiring to slap additional charges on Asian exports.
Do you think that the approval granted to Shree Renuka Sugars from the FMC for buying 5% in NCDEX is a signal towards cartelization? As we think that these approvals would allow the players to virtually check the prices of commodities and at the same time also profit from the price movements on the exchange.
To curb cartelization, CCI, which got the statutory powers in 2007 by an Act of Parliament, has been formed by the government, to promote and sustain competition in the market and protect interests of consumers. If it finds any company guilty of being part of a cartel or abusing their position, it can impose penalty up to 10% of the average (three-year) turnover of the firm or companies involved. That is in contrast to MRTPC’s powers, which can only ask companies to abstain from such activities.
Do you think that the pressure by the Indian Inc. on government to stall the notification of Section 3 and 4 of the Competition Act which make it mandatory for the companies to seek prior approval of CCI on matters related to mergers and acquisitions (M&A) is a sign of cartelization in future?
But the recent cartel formed by the airline companies and the concomitant withdrawal of the stike threats foreground the facts that cartel in India will increasingly find it difficult to withstand public scrutiny in the information age and retaliation by regulatory authorities for consumer protection.
Export-oriented industries such as software in India are examples of limited cartelization with active government support. With increasing scrutiny of industry data it will become difficult for cartels to justify their actions to the civil society.

Share your views!