By Adv Siddharth Narang, Partner Agreya Legal
Antitrust policies are rules that regulate competition in the market. They are there to make sure that companies compete fairly and do not engage in practices that harm competition.
Corporate governance refers to how a company is managed and controlled, including the decisions made by its leaders.
There’s a strong connection between antitrust policies and corporate governance for two main reasons:
- Discipline and Improvement in Management:
- Antitrust policies and competition serve as a kind of check on how companies are managed. When companies know that they can be penalized or even shut down for unfair practices, it encourages them to manage themselves better.
- Good management means making decisions that benefit the company and its stakeholders, like shareholders. When companies know they have to compete fairly, it pushes them to make better decisions to avoid trouble.
- Impact on Decision Making and Behaviour:
- Competition should be a big factor in how companies make decisions. If a company is found guilty of anti-competitive practices, it’s not just about paying fines. It also damages their reputation and trust with shareholders.
- This fear of being caught and punished for anti-competitive behaviour influences how companies decide on things like mergers or cooperating with competitors. They’re less likely to engage in practices like price-fixing or forming cartels, which could lead to higher prices for consumers.
Hypothesis and Expected Outcome:
-
- The idea here is that if companies know they’re being watched closely for anti-competitive behaviour, they’ll be more careful. This, in turn, could lead to better performance outcomes for everyone involved.
- So, the hypothesis is that strong antitrust policies, which promote fair competition and good governance, should discourage companies from behaving in ways that reduce competition. This could lead to lower profits for them but ultimately benefit consumers.