'FDI in retail to encourage competition'

Coming to the defence of the government facing stiff opposition over opening multi-brand retail to foreign investment, the Competition Commission of India today said that entry of big players in the retail market would encourage competition.

"This (FDI in multi-brand retail) will promote competition, as we see it prima facie. At least by the stated objective. Let's see how it works. Once they come, their functioning will be clear and then we can see if at all there is a need to step in," CCI chairman Ashok Chawla said.

Notwithstanding the uproar by political parties, Chawla said that there would be no over-vigilance of multi-brand retail. The sector, he said, would be regulated 'like any other sector with no special dynamics'.

Government's decision to allow 51 per cent FDI in multi-brand retail prompted UPA ally Trinamool Congress to withdraw support to the government. Other political parties including opposition BJP and Left parties too expressed their reservations on opening of multi-brand retail to FDI.

The decision, however, was welcomed by the industry which described it as 'a huge mood lifter'.

Experts too have viewed the move as a pro-reform process and something that would benefit all stakeholders – farmers, small manufacturers as well as customers.

Director, Nathan India Ram Tamara, said, "If in the medium and long-term consolidation happens in the industry with a few retailers controlling a majority of the market, there could be tendencies for anti-competitive behavior, either in the form of vertical restraints - where the dominant retailers exercise their market power on their suppliers - or horizontal arrangements such as cartel behavior."

He, however, said "This is just a scenario that could emerge and not necessarily what will actually transpire."

Consumer organisation CUTS said that fears relating to possible anti-competitive practices of predatory pricing and abuse of dominance by big players was unfounded "because of low entry barriers for unorganised retail.

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