The Competition Commission of India (CCI) has conducted extensive raids on the offices of major global advertising agencies over alleged IPL ad rate fixing.

Reason for Investigation

• Suspected price-fixing and discount collusion by top broadcasters and advertising agencies.
• Complaints from smaller agencies or advertisers alleging overcharging and unfair market practices.

About Price Fixing 

• Price-fixing occurs when multiple companies collude to set prices at an agreed level instead of allowing market competition to determine prices.
• Context in Advertising: In the advertising industry, price-fixing can involve collusion between media buying agencies, broadcasters, and even smaller advertising firms to manipulate prices and discounts.

How Price Fixing Works in Advertising?

• Collusion Between Agencies and Media Buyers: Media-buying agencies negotiate rates with broadcasters and digital platforms on behalf of advertisers.
  • If agencies agree to fix prices at a specific rate, it limits competition and inflates costs for advertisers.
  • This can involve traditional TV broadcasters, social media platforms, and streaming services.
• Discount Manipulation: Agencies may collude to restrict the amount of discount offered to clients.
  • This ensures no single agency or broadcaster provides a significant advantage, artificially keeping prices high.
• Impact on Advertisers and Clients: Advertisers end up paying higher rates for ad slots or media placements.
  • Reduced competition limits negotiating power, harming marketing budgets and campaign efficiency.

About Competition Commission of India (CCI) 

• Establishment: Statutory body established in 2009 under the Competition Act, 2002.
  • Replaced the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) based on the recommendations of the Raghavan Committee.
• Ministry: Operates under the Ministry of Corporate Affairs.
• Aim: To promote and sustain competition, protect consumer interests, and ensure freedom of trade in India.
• Purpose:
  • Prevent anti-competitive practices.
  • Promote and sustain market competition.
  • Protect consumer interests.
  • Ensure freedom of trade in Indian markets.
• Composition: Consists of a Chairperson and 6 Members appointed by the Central Government.

• • Members must have at least 15 years of professional experience.
  • Serve a five-year term to ensure informed decision-making in complex market cases.
• Nature: Quasi-judicial body that adjudicates cases and provides opinions to statutory authorities.
  • Its orders and directions are binding on the parties involved.
• Appellate Authority:
  • Competition Appellate Tribunal (COMPAT) was created in 2009 to hear appeals against CCI orders.
  • In 2017, COMPAT was replaced by the National Company Law Appellate Tribunal (NCLAT).
• Key Functions of CCI:
  • Review Mergers and Acquisitions: Scrutinizes mergers and acquisitions involving Multinational Corporations (MNCs) to ensure they do not adversely affect market competition.
  • Eliminate Anti-Competitive Practices: Works to eliminate practices that have an adverse effect on competition.
  • Provide Opinions on Competition Issues: Offers expert opinions on competition-related matters to statutory authorities.
  • Ensure Fair Competition: Promotes fair and healthy competition in economic activities across the country.