This article has been written by Oishika Banerji of Amity Law School, Kolkata. This article discusses The Competition Act, 2002 with the intention to cover every related aspect associated with it, such as the purpose behind the enactment of the Act, its provisions, possible challenges in its implementation, recommendations for the future, etc.
The first step to success is competition. When markets stabilise, the economy gains sustainability, earnings, effectiveness, advancement, and long-term advantages. One such law is the The Competition Act, 2002, which aims to eliminate anti-competitive behaviour by prohibiting anti-competitive agreements and mistreating market domination situations. As long as it is done in a legal manner, competition is regarded as a healthy practice for fostering chances and acting as a motivator in any profession. Perfect competition is characterised by a market outcome in which all firms sell a homogeneous and perfectly divisible product, all producers and consumers accept prices, all firms have a small market share, and buyers and sellers are fully informed about the market, including the product’s price and quality, and there are no externalities. It is the cornerstone upon which the market system and the economy are built. Since consumers frequently are unaware of the effects of such actions and fail to comprehend market monopolies, increasing public awareness of competition law is absolutely necessary. Competition law and policy in India have undergone active interpretation over a period of its evolution. The present article discusses The Competition Act, 2002 by simplifying the same for the readers in terms of its traits, purpose, objective, loopholes, present changes, and overall functioning.
The Competition Act, 2002
The Vajpayee government developed the concept of the ‘Competition Commission’ and introduced it as the Competition Act, 2002. It was considered that competition and private enterprise needed to be encouraged, particularly in light of the 1991 economic liberalisation of India. Modern competition rules are based on the Competition Act of 2002, as updated by the The Competition (Amendment) Act of 2007. The President gave his approval to the Competition Act of 2002 in January of 2003, after Parliament enacted it in 2002. The Competition Commission of India (CCI) and the Competition Appellate Tribunal have been constituted in compliance with the Amendment Act’s requirements.
The Act forbids anti-competitive agreements, corporate abuse of dominant positions, and combinations (including acquisitions, takeovers of control, and mergers and acquisitions) that have or are likely to have a materially negative impact on competition in India.
In order to not only prevent negative effects on competition but also sustain and foster pro-competitive behaviour, the Competition Act was passed in 2002. The Act also aims to safeguard the freedom of trade practised by all market players in India, as well as any issues related to or incidental to freedom of trade. The new law’s framework not only fixed the shoddy setup from its predecessor, but it also made adjustments and provided equipment for the time’s economic environment. Extraterritorial jurisdiction, harmonisation with Intellectual Property Rights and other laws, overlaps between the Competition Act, 2002 and sectoral regulatory laws, and competition advocacy, were some of the Act of 2002’s special features that, when combined with the spirit of the entire globalisation phenomenon, were extraordinary for their time.
The Act controls three anti-competitive behaviours, namely, mergers and acquisitions (combinations), abuse of dominant positions, and anti-competitive agreements. The basic standard for the control of anti-competitive behaviour is that such behaviour should not significantly harm competition within India. The definition of anti-competitive agreements is provided in Section 3 of the Act, which divides these agreements into two groups, namely, horizontal agreements and vertical agreements. It stipulates that, with a few exceptions as given in Section 3(5), all anti-competitive agreements that have the potential to have a materially adverse impact on competition in India shall be void.
Through the CCI, which the Central Government established with effect on October 14, 2003, the Act’s goals are intended to be accomplished. The Central Government appoints the chairperson and six other members of the CCI. The commission has a responsibility to stop activities that harm competition, foster and maintain it, safeguard consumer interests, and guarantee trade freedom in Indian markets. The commission is also required to provide an opinion on competition-related matters in response to a referral from a statutory authority established by any law, engage in competition advocacy, raise awareness among the general public, and impart training on competition-related matters.
The Competition Act of 2002 must now be explored, questioned, and investigated for its effectiveness in the technological age, in the face of digitalization, commercialization, and the Internet of Things. India has now reached another critical juncture, a crossroads in its antitrust regime. Consideration of whether India urgently requires a long-term amendment to the Competition Act, 2002, is becoming more and more necessary as the last remaining brick-and-mortar stores steadily disappear and internet behemoths graze the opulent savannah of the country’s largely unregulated and greatly diverse economy.
Objective and scope of The Competition Act, 2002
The Competition Act of 2002 is a piece of legislation that aims to defend consumer interests from anti-competitive behaviour, foster and sustain market competition, safeguard consumer interests, and guarantee other market participants’ freedom of trade. The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), which formerly applied only to India, has been replaced by the new law.
The three foundational pieces of competition legislation upon which the Competition Act has been built are the National Competition Policy (NCP), the Competition Appellate Tribunal, and the Competition Commission of India (CCI).
The major reason for passing this legislation is to make sure that market competition operates as intended and that customers have access to a broader variety of goods at reasonable costs.
Important definitions under the Competition Act, 2002
The Act includes a number of crucial terminologies that must be understood in order to comprehend how the Act operates. The same has been discussed hereunder.
An organisation of producers, sellers, distributors, traders, or service providers is referred to as a cartel under the Act if it has an agreement to limit, control, or attempt to control the production, distribution, sale, or price of goods or the trade in them or the provision of goods or services. Cartels have been classified as those anti-competitive agreements in which producers, sellers, and makers of similar items agree to regulate production, supply prices, and other aspects of goods in order to obtain desired profits and market domination.
According to Section 2(h) of the Act, “enterprise” refers to and includes any person or government department that engages in any of the following activities:
- The creation, maintenance, supply, distribution, acquisition, or management of goods or articles;
- The rendering of any type of service;
- Purchasing, investing in or holding shares or other securities of any other legal entity, either directly or via a subsidiary.
However, for the purposes of the Act, a government department carrying out operations related to the government’s sovereign functions, including those related to atomic energy, money, defence, and space, shall not be referred to as an “enterprise.”
The definition of “person” is broad in Section 2(l) of the Act. According to this, a “person” includes the following:
- A person, a Hindu undivided family, an organisation, or a firm.
- A group of individuals, whether or not they are incorporated in India or elsewhere.
- Any corporation founded by the federal, state, or local governments, or a government company as described by the Companies Act, 2013.
- Any corporation formed by or in accordance with the laws of a nation other than India.
- Any cooperative society, regional government, or artificial legal entity.
According to Section 2(r) of the Act, determining what constitutes a ‘relevant market’ depends on two criteria, namely ‘relevant geographic market’ and ‘relevant product market.’ Either the ‘relevant geographic market’ or the ‘relevant product market’ must be mentioned by the commission, or both.
- A relevant geographic market refers to a market in a region where uniform conditions apply to different facets of trade and commerce. Such circumstances set them apart from markets in surrounding regions.
- The term “relevant product market” refers to a market where the goods and services are interchangeable or replaceable with other goods and services offered in that market.
Section 3 of The Competition Act, 2002
Any arrangement between businesses or individuals that could significantly harm Indian competition is prohibited by Section 3 of The Competition Act, 2002. There are certain exclusions to this rule. In Section 3(3) of the Competition Act of 2002, a list of the agreements that are considered anti-competitive is provided, namely,
- Price setting or any other type of trade condition (i.e. price-fixing).
- Restricting or managing service provision, investment, markets, technological advancement, or manufacturing (i.e. limiting production).
- Allocating a specific geographic market area, a specific product or service, a certain quantity of clients, or a source of production (i.e. market sharing).
- Preventing or restricting competitors’ access to the market (i.e. entry control).
Any agreements made by businesses or groups of businesses, or by people or associations of individuals, in connection with the production, provision, allocation, stockpiling, collecting, or acquisition of products or the provision of services linked to:
- Research and development,
- Technical data,
- Testing resources,
- Accessibility to cutting-edge technology,
- Marketing, and
- Export-related operations.
Section 4 of The Competition Act, 2002
One of the three criteria outlawed by The Competition Act of 2002, along with anti-competitive agreements and abuse of dominance, is the dominant position. One of the key challenges that competition law, often known as antitrust law, addresses is dominance. The concept of “dominance” refers to the ability of a firm or group of firms to influence output or pricing in the relevant market. Abuse refers to the misuse, exploitation, or excessive use of a person’s power. Therefore, to abuse a dominant position in the relevant market, one must misuse, exploit, or overuse it. According to Section 4(2), consideration must be given to all or all of the following considerations when determining whether a company has a dominant position:
- The business’s size and resources;
- The magnitude and significance of its rivals;
- The company’s financial strength includes commercial advantages over rival businesses such as the right patents, licences, and permissions;
- The enterprise’s vertical integration, including any backward or forward integration;
- To compete successfully in a market where such supplies are dependent on other businesses, having access to sources of commodities or raw materials is crucial;
- Where there is reliance on other businesses for such markets, the ability to access marketplaces for goods or services is critical to effectively compete in those markets.
Features of The Competition Act, 2002
Some of the notable features of The Competition Act, 2002 have been laid down hereunder:
- Anti-competitive agreements: Any agreement between two or more businesses or individuals to preserve market competition and protect consumers’ interests in India is prohibited by the competition law. These agreements may be horizontal or vertical. Horizontal agreements are those between businesses at the same level of production, whereas vertical agreements are those between businesses at various phases of production.
- Anti cartels: Any business that abuses its dominant position will face consequences.
- Anti-abuse of dominance: Any arrangement between businesses or individuals that lessens competition would be regarded as illegal.
- Combination regulations: Only if a merger or acquisition does not damage market competition will the commission make a decision.
- Informative nature of this Act: Before taking any action or signing any agreement, an organisation must tell CCI of its dealings that are likely to harm market competition in order to ensure transparency and prevent any misunderstandings between businesses or individuals.
What is the primary goal of The Competition Act, 2002
The goal of the competition policy is to establish a level playing field for all domestic and foreign businesses. Consumers will receive high-quality products at reasonable prices if there is competition in the market. Additionally, it will give producers incentives to innovate and raise productivity and efficiency. In the end, this will contribute to increased economic growth that is equitable and efficient.
Three stage transition that The Competition Act, 2002 went through
The Act calls for a three-stage transition that will replace the MRTP Commission with the CCI over the first three years following the date of announcement of the Act.
- The MRTP Commission will cease to function at the beginning of the first year, and CCI will take over as an advising body.
- The Consumer Protection Act of 1986 provides for the transfer of the Consumer Protection Commission’s open unfair trade conduct proceedings to the relevant consumer courts.
- The CCI must take up the pending cases involving monopolistic and restrictive trade practises for adjudication.
During the second year, CCI would scrutinise the anti-competitive practices.
The CCI would start regulating mergers and acquisitions that would have a negative impact on competition during the third year.
Key concepts to know under The Competition Act, 2002
To understand the purpose, underlying principles, and functioning of the Competition Act, 2002, certain key concepts dealt with by the Act need to be known. The same has been explained hereunder.
Anti-competitive agreements are those between the parties to a business transaction that have the potential to undermine competition in a specific market or that favour one person or group unreasonably above the interests of others. The Competition Act of 2002 forbids such anti-competitive agreements. According to the definition of “agreement” under Section 2(b) of the Act, the agreement need not take the form of a formal document that the parties have signed. It may or may not be written. It is obvious that the definition given is broad, inclusive, and not exhaustive.
Because those participating in anti-competitive acts are not permitted to enter into formal written agreements to keep them secret, the term “agreement” has taken on a broad meaning under competition law. Cartels, for instance, are typically shrouded in secrecy. Any arrangement regarding the production, supply, distribution, storage, purchase, or control of commodities or the provision of services that substantially lessens competition within India is prohibited by Section 3 of the Act. Any agreement that violates this clause will be void, according to Section 3(2).
Abuse of dominant position
A person or business is said to be in a dominating position when it is in a strong position that allows it to function independently of the competitive dynamics present in the relevant market or has a favourable impact on its rivals, customers, or the relevant market. In the competition legislation of numerous other jurisdictions, the dominant position has been described in broadly comparable terms. The European Commission’s glossary explains that “a corporation is in a dominant position if it has the power to function independently of its competitors, customers, suppliers, and finally, the final consumer.”
The meaning of “dominant position” for the purposes of the Competition Act of 2002 rests on the definitions of “relevant market” that were previously discussed. Therefore, in order to establish an abuse of dominance, it is first essential to establish that the firm in question held a dominant position in terms of the market for a certain product and the geographic market for that product.
Control of such abuse is provided for under Section 4 of the Act. It states that no enterprise or organisation abuses its dominant position. It also outlines specific instances of behaviour that constitutes an abuse of a dominant position. The following behaviours are defined as “abuse of dominant position”:
- Imposition of unfair or discriminatory terms or pricing (including predatory prices) in connection with the purchase or sale of goods or services may be done directly or indirectly.
A “predatory price” is when a product is sold below what it costs to produce it or to provide the service in an effort to drive out or lessen competition. For the purpose of calculating the cost of predatory pricing, the Competition Commission of India (Determination of Cost of Production) Regulations, 2009 have been introduced. Average variable cost will typically be used as a stand-in for marginal cost, as per Regulation 3(1).
- To the detriment of customers, limiting or restricting the production of products or services or placing restrictions on technical or scientific progress related to such goods or services.
- Engaging in actions that in any way prevent access to the market.
- Using one relevant market’s dominant position to defend or penetrate another relevant market.
One critique of Section 4 of the Act is that, unlike in the case of anti-competitive agreements and combinations, the offence of “abuse of dominant position” is not dependent on a determination of an appreciable adverse effect on competition. When dealing with matters falling under Section 4, the sole place where anti-competitive agreements (AAEC) is to be taken into account is in the list of considerations that the Commission is obligated to take into account when considering whether an entity enjoys a dominant position under Section 19(4) of the Act. According to Section 19(4)(1), when determining whether an enterprise enjoys a dominant position, the Commission may take into account “any relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition.”
Combinations and their regulation
The third area of competition law’s concentration is the regulation of combinations. The three types of combinations regulated by the Competition Act, 2002 are as follows:
- A person or business buying the stock, voting rights, or assets of another entity.
- Individuals gaining control over an enterprise.
- Combinations or mergers between or among businesses.
Combinations are defined in Section 5 of the Act by a set of cutoff points below which they are not subject to the Competition Act’s scrutiny. The fundamental reasoning for imposing such restrictions is that joining forces between tiny businesses or entities may not significantly harm competition in Indian marketplaces. However, an exception has been made in the case of any covenant in a loan agreement or an investment agreement in favour of governmental financial institutions, foreign institutional investors, banks, or venture capital funds.
Additionally, the provisions of the regulations for combinations are covered under Section 6 of the Act. It stipulates that within 30 days of the execution of any acquisition instrument or the board of directors’ acceptance of the request for amalgamation or merger, the Commission must be notified in writing of the specifics of the proposed combination, together with the required costs. 210 days after giving notice to the commission or the date on which the commission has rendered any order with respect to that notice, whichever comes first, are required for the combination to go into force.
Limitations under Section 5 of the Competition Act, 2002
The limitations set forth in Section 5 of the Act are described below:
- In the event that shares, voting rights, or control are purchased: The shareholder and the company whose shares, assets, or voting rights are being acquired must both have:
- Assets in India: More than 1000 crores
Turnover: More than 3000 crores
- Aggregate assets in India or outside India: More than 500 million dollars including at least 500 crores in India.
Turnover: More than 1500 million dollars including at least 1500 crores in India.
- In the event of a merger or amalgamation, the business that remains after the merger or the business that results from the amalgamation should have:
- Assets in India: More than 1000 crores
Turnover: More than 3000 crores
- Aggregate assets outside India: 500 million dollars, including at least 500 crores in India, or
Turnover: More than 1500 million dollars, including at least 1500 hundred crores in India.
Regulatory framework under The Competition Act, 2002
Any law must be successfully implemented within an institutional structure, and competition law is no exception. The Raghavan Committee’s mandate included, among other things, the requirement to suggest both the legislative framework and the administrative setup for the modernised competition regime in India. This was done in recognition of the need for an appropriate legislative as well as administrative set up to implement the law. While the judiciary is frequently tasked with enforcing competition laws, the Raghavan Committee believed that placing this responsibility in a specialised agency and naming it the “Competition Commission of India” would improve the administration of competition law and consumer welfare in an era of specialisation. Additionally, it was suggested that the CCI should be a body with multiple members.
- Independent and unaffected by political and financial restraints.
- Should have independent prosecutorial, adjudicative, and investigative functions.
- Should follow rules and be transparent, non-discriminatory, and
- Should engage in constructive advocacy for laws that influence competitiveness.
The Competition (Amendment) Bill, 2006 was referred to the Parliamentary Standing Committee for review and report, and, as a result, recommendations made by that committee were taken into consideration. In the latter half of 2007, the Act of 2002 was extensively changed. Beginning on May 20, 2002, the law’s two enforcement facets, “anti-competitive agreements” and “abuse of dominance”, began to be put into operation. This coincided with the installation of a new government at the centre. The third area, titled “regulation of combination,” was brought into force soon during that time as well. The MRTP Act, 1969 was repealed as of the first of September 2009, according to a notification from the government. As a result, CCI is currently the only national authority to handle competition-related issues.
Competition Commission of India (CCI)
The Competition Commission (CCI) was founded on October 14, 2003, and the Act of 2002 was enacted essentially along these lines. However, the government was unable to fully implement the Act’s provisions because a writ petition was filed against some of them before the Honourable Supreme Court. When deciding the writ petition on January 20, 2005, the Court stated that if the Union Government were to establish an expert body, it might be appropriate to consider the formation of two distinct bodies, one with expertise for advisory and regulatory functions and another for adjudicatory functions based on the constitutionally recognised doctrine of separation of powers. The CCI consists of a chairperson and six members appointed by the Central Government.
Purpose of CCI
According to Section 18 of the Act of 2002 and its Preamble, the CCI has a legal obligation to end activities that have a significant negative impact on competition, foster and maintain competition, safeguard consumer interests, and secure other participants’ rights to engage in trade in Indian markets. The Raghavan Committee recommended, among other things, that the CCI be the exclusive receptacle of all complaints involving violations of the Act from whoever the source may be, whether it be a person, a business or other body, the Central or state governments. It should also have the authority to take action on its own when there is a perceived violation. All of them have been unequivocally codified in Section 19(1) of the 2002 Act. The Commission has a responsibility to stop activities that harm competition, foster and maintain competition, safeguard consumer interests, and guarantee trade freedom in Indian markets.
The Competition Commission of India makes the following efforts to fulfil its goals:
- Make the markets function in a way that benefits and protects consumers.
- To promote faster and more equitable economic growth and development, and ensure fair and healthy competition in all economic activities across the nation.
- In order to ensure the most effective use of economic resources, implement competition policies.
- To guarantee that sectoral regulatory regulations are smoothly aligned with competition law, establish and maintain effective relationships and contacts with sectoral regulators.
- To build and promote a culture of competition in the Indian economy, effectively carry out competition advocacy, and enlighten all stakeholders about the advantages of competition.
Jurisdiction and authorities under CCI
Section 61 of the Act of 2002 expressly forbids civil courts from hearing any lawsuit or action that the Commission is authorised to decide in order to augment and add to the CCI’s jurisdiction in identifying and eradicating anti-competitive behaviour. Building a strong competitive culture and eliminating anti-competitive acts and structures are two commendable goals that must be accomplished. To do this, a number of institutions, including,
- The Director General, an investigative arm of the CCI.
- The Chief Metropolitan Magistrate, Delhi.
- The civil courts.
- The Tax Recovery Officer.
- The Central Government, states governments, statutory authorities, and
- The two apex bodies, namely the Competition Appellate Tribunal (CAT) and the Supreme Court.
To maintain “check and balance,” each person has a designated job. In addition, everyone must work together to achieve “maximum customer welfare through a competitive process.”
Powers and duties of the CCI
The establishment of the Competition Commission of India was essential to stop such trading in today’s highly technological and competitive world, where industrialised and rich nations frequently attempt to control the markets of emerging nations. Put simply, enforcement of the Competition Act of 2002 is the main responsibility of CCI. All three features of the Commission are covered in full in Chapter IV of the Competition Act of 2002, from Sections 18 to Section 40.
Investigations into anti-competitive agreements and the abuse of dominant positions in the Indian markets are subject to the jurisdiction of the Competition Commission. The Competition Act addresses these difficulties in Sections 19 and 26 to 28. An agreement to fix prices, stabilise supply, engage in collusive bidding, etc. are examples of anti-competitive agreements. On the other hand, predatory pricing, ludicrous terms and conditions, and entry obstacles that have a negative effect on customers and small producers trying to enter a new market are examples of abuse of dominance.
Powers of the CCI
- Any party or the information from the state and Central governments may bring a case relating to the problem. The process of the CCI’s investigation is mentioned in Section 26. According to it, the subject is then forwarded to the Director General for investigation if the Commission establishes a prima facie case. Then, after working with the complainant to draft a report, the commission further considers the case and renders a decision.
- In accordance with Section 33, it may also impose a temporary injunction to stop the party from performing the act. One of the most well-known CCI cases is the DLF case. DLF was fined by the commission for abusing its market dominance and engaging in unfair business practices.
- According to Section 19(1) of the Act, the Commission has the authority to investigate any alleged violation of Section 3 or Section 4 either on its own initiative or based on:
- Receiving information from any individual, consumer group, or trade organisation;
- The Central Government, a state government, or a statutory authority makes reference to it.
- The CCI is allowed to investigate specific types of agreements and enterprise dominant positions under Section 19 of the Act. The Commission is given the authority to investigate any alleged violation of the terms in sub-section (1) of Section 3 (i.e., anti-competitive agreements) or sub-section (1) of Section 4 (i.e. abuse of dominant position) under Section 19’s subsection (1).
- A certain merger and acquisition or combination may be implemented on several occasions with the aim of undermining the competition. The Competition Commission investigates these claims and renders a decision. However, on occasion, they must determine by balancing the harm to competition with the economic growth brought on by the merger.
- Additionally, any statutory authority’s decision must cite the Commission if it conflicts with the Competition Act. According to Section 32 of the Act, the Commission is authorised to conduct an investigation into any agreement that, despite being formed outside the nation’s borders, has an impact on India.
- As have been time and again observed in cases such as Surendra Prasad v. Competition Commission of India (2015) and Harshita Chawla v. WhatsApp Inc (2020), the 2002 Act is designed to operate under an inquisitorial structure, where the Commission is anticipated to investigate matters containing competition-related concerns in rem rather than serving as a lone arbiter to discover facts and decide rights in personam arising out of competing claims between parties. Consequently, the informant need not be an injured party in order to bring a case before the CCI.
- The government may also use the commission’s recommendations. Although these recommendations are not required for policy implementation, they assist the government in understanding the effects of its various policies on market competition.
Duties of the CCI
- The basic goal of competition law is to advance economic efficiency by helping to create markets that are responsive to consumer preferences through the use of competition as one of its primary tools.
- The Competition Act aims to combat the ills of the nation’s economic system, which directly harm the interests of the general public and consumers. One of the stated goals of the Act is to advance consumer welfare by eliminating market distortions brought on by business practices and agreements that work against consumers’ interests and competition.
- By its very design, the competition law anticipates scenarios in which the Commission must play a role and exert control over how businesses behave in the marketplace in order to promote consumer welfare. According to the Preamble of the Act, Section 18 of the Act requires the CCI to “remove” anti-competitive acts and advance free trade, competition, and consumer interests. Other Act provisions must be followed in order to utilise the authority granted by Section 18.
- The Commission’s objective is to establish a system of fair competition that is compatible with the advancement of consumer interests.
Procedural requirements to file information with the Commission
The Competition Commission of India (General) Regulations, 2009 lays down the procedural requirements to file information with the Commission:
- Contents of information or reference (Reg. 10).
- Signing of information or reference (Reg. 11).
- Procedure for filing of information or reference (Reg. 12).
- Procedure for filing of information or reference in electronic form (Reg. 13).
- Procedure for scrutiny of information or reference (Reg. 15).
- Power of Commission to join multiple information (Reg. 27).
- Amendment of information (Reg. 28).
- Confidentiality of identity of informant (Reg. 35).
- Fee under clause (a) of sub-section (1) of section 19 of the Act (Reg. 49).
Locus to file information with the Commission
No prerequisites are listed in the Competition Act of 2002 for those wishing to submit information under Section 19(1)(a). Furthermore, nothing in the plain language of Sections 18 and 19 read with Section 26(1) suggests that the Commission has the authority to deny a request for an investigation into allegations of violations of Sections 3 and 4 solely on the grounds that the informant lacks a personal stake in the issue or appears to be acting at someone else’s direction. As a result, the informant need not be an injured party in order to bring a complaint before the Commission. Additionally, the Commission defends its orders in relevant circumstances before higher forums regardless of who filed the case before it, which is not a typical practice in adversarial procedures due to the inquisitorial architecture of the Act.
Informant vs. complainant
The aforementioned stance regarding the informant’s locus standi was approved by the Honourable Supreme Court in Samir Agrawal v. Competition Commission of India (2021). The following justification was used by the Supreme Court to reach the aforementioned conclusion:
- According to the Competition Commission of India (General) Regulations, 2009, and the Competition Act, “any individual” is permitted to provide information to the CCI. In Section 2(l) of the Competition Act, the term “person” has a broad and encompassing definition that encompasses all natural and artificial juridical persons. If the definition of “consumer” in Section 2(f) of the Act is placed in contrast with the aforementioned definition, which is explicit that only individuals who purchase things for payment or hire or use services in exchange for payment are recognised as consumers.
- The Competition Act originally allowed for the “reception of a complaint” from any person, consumer, or their association, or trade association, as can be seen by looking at Section 19(1) of the Act. The 2007 Amendment later replaced this phrase with the phrase “reception of any information in such manner.” This substitution has important implications. A complaint could only be made by someone who felt wronged by specific conduct, but information can come from anyone, regardless of whether they are personally harmed or not.
This is because the Act’s proceedings are real processes that have an impact on the public interest. Section 19(1) of the Act additionally stipulates that the CCI may investigate any alleged violation of the Act’s provisions on its own initiative. Furthermore, even when exercising suo motu powers, the CCI may get information from anyone, not just someone who is offended by the alleged wrongdoing.
This can also be inferred from a reading of Section 35 of the Act, which now reads “person or an enterprise” in place of the earlier term “complainant or defendant” and specifies that the informant may appear before the CCI either in person or through one or more agents to present the information he has gathered.
- Since false statements and willful omissions of material facts are punishable by fines of up to one crore rupees, Section 45 of the Act serves as a disincentive to anyone who intentionally or recklessly gives information to the CCI. The CCI is also entitled to issue such orders as it sees fit.
- Regulation 10 of the Competition Commission of India (General) Regulations, 2009 does not require the informant to explain how the Competition Act violation has personally harmed him. Additionally, Regulation 25 of the Competition Commission of India (General) Regulations, 2009 demonstrates that the CCI must prioritise the public interest when deciding whether to grant a request made in writing by a person or enterprise that has a significant stake in the outcome of the proceedings to participate in them. Additionally, it is crucial to take note of Regulation 35 of the Competition Commission of India (General) Regulations, 2009, which requires the CCI to keep informants’ identities secret upon written request in order to protect them from harassment by those implicated in Act violations.
- In order to exercise its authority under Section 19(1) read with Section 26(1) of the Act, the Commission is not required to wait for receipt of a reference from the Central or state government, a statutory authority, or formal information by someone. Instead, the Commission has the authority to suo motu take cognizance of any alleged violation of Section 3 or Section 4 of the Act and hold an inquiry. The Commission may suo motu take cognizance of the facts constituting a breach of Sections 3(1) or 3(4) of the Act in a given case instead of acting on information filed under Section 19(1)(a) and ordering an investigation.
Additionally, the Commission has the authority to recognise reports in print or electronic media, as well as anonymous complaints or representations that suggest a violation of Sections 3 and 4 of the Act, and to direct an investigation under Section 26(1) of the Act. Even if a complaint is made anonymously, the Commission may still take suo motu cognizance of the matter. The Commission must feel that there is a prima facie basis for ordering an investigation into the allegation of a violation of Section 3(1) or 4(1) of the Act in order for that power to be used.
Determination of Anti-Competitive Agreements
According to Section 19(3) of the Competition Act of 2002, the Commission must consider all or any of the following considerations when deciding whether an agreement has AAEC:
- The construction of hurdles to new market entrants;
- Eliminating current rivals from the market;
- Eradicating competition by obstructing admission into the market;
- The development of consumer benefits;
- Advancements in the manufacture, sale, or delivery of goods or services; or
- Advancing technical, scientific, and economic progress through the manufacture, sale, or provision of goods or services.
Horizontal agreements (agreements between competitors) of the kind mentioned in Section 3(3) of the Act are assumed to cause AAEC. In these situations, the onus of proof shifts from the Commission to the opposing parties, who must provide sufficient evidence to show that the agreement does not cause AAEC. The CCI must consider the factors listed in Section 19 of the Act and determine whether all or any of them are established in the event that such evidence is presented to refute the presumption.
The agreement would once again be treated as one that may or is likely to cause an appreciable adverse effect on competition, obliging the CCI to take further remedial action in this regard as provided under the Act. This also happens if the evidence gathered by the CCI leads to one or more or all of the factors mentioned in Section 19(3). The sole agreement entered into through joint ventures that is exempt from this AAEC assumption with regard to horizontal agreements is one that improves efficiency in the production, supply, distribution, storage, acquisition, or control of commodities or the provision of services.
Section 19(3)’s paragraphs (a) to (c) address “negative factors” that limit competition in the markets where the agreements operate, while clauses (d) to (f) address “positive factors” that improve distribution efficiency and promote consumer welfare (positive factors). An agreement that raises entry barriers may also lead to advancements in product distribution or promotion, or vice versa.
International Cooperation by the CCI
With the prior consent of the Central Government, the Commission may engage in any agreement or memorandum with any foreign agency. After receiving approval from the Government of India, the Commission has signed Memorandums of Understanding (MOU) with the following competition authorities till March 2019 in accordance with Section 18 of the Competition Act, 2002:
- Federal Trade Commission (FTC) and Department of Justice (DOJ), USA.
- Director General Competition, European Union (EU).
- Federal Antimonopoly Service (FAS), Russia.
- Australian Competition and Consumer Commission (ACCC).
- Competition Bureau (CB) Canada; and
- Competition authorities of the Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China and the Republic of South Africa (BRICS Countries).
The Administrative Council for Economic Defense (CADE) of Brazil and the Japan Fair Trade Commission (JFTC) were the two MOUs that the Commission processed in the 2018–19 fiscal year. To sign the MOUs, the Commission must first get permission from the government.
In addition to the MoUs already mentioned, CCI is a member of the BRICS, the International Competition Network (ICN), and UNCTAD with the status of an independent observer. The CCI also participates in the Organization for Economic Co-operation and Development’s Competition Committee (OECD). The United Nations Conference on Trade and Development, which is the primary force behind development, and UNCTAD (a UN agency tasked with addressing development challenges, notably international trade), have been actively engaged by the Commission.
The Director General (DG)
The DG’s role as the CCI’s investigative arm is to support the CCI in looking into any violations of the Act’s rules or regulations as well as to provide an investigation report for any cases the CCI refers to. While the CCI is not obligated by the conclusions in the DG’s report, it is required that it send the matter to the DG for investigation and request an investigation report if it makes a prima facie opinion that a case of Section 3 or 4 infringement has occurred. The report from the DG may be consulted by the CCI in the event of inquiries into combinations. With permission from the CCI, the DG may, of course, also look into the actions of connected organisations.
The DG is granted the same authority as a civil court has while hearing a case, enabling them to handle such tremendous obligations. Additionally, the DG is empowered to initiate an unannounced raid to perform a “search and seizure.” All of these help the DG support the CCI more successfully. Although the DG is supposed to support the CCI, it is the DG’s responsibility to conduct the inquiry fairly and impartially and to come to his conclusions in the report. His conclusions must be supported by logic in order to stand up to the referrer’s or charged enterprise’s counterarguments, as applicable.
To maintain the DG’s independence, the CCI is not allowed to direct how an inquiry is conducted. The Central Government is also responsible for the DG’s nomination, remuneration package, and the number and type of employees who work in his office. Furthermore, the law expressly states that his compensation cannot be changed laterally to his detriment in order to provide freedom and autonomy in reporting. Once the Directorate has the necessary manpower, it is necessary to train them in the necessary abilities and provide them with cutting-edge equipment so that investigation, prosecution, and regulation can work in harmony.
Chief Metropolitan Magistrate, Delhi
The Act stipulates that an unannounced raid can only be carried out after obtaining permission from the Chief Metropolitan Magistrate of Delhi if the DG suspects during the course of the investigation that documents or records in the possession of the charged or related party may be destroyed, mutilated, or tampered. The goal of giving CMM, Delhi this authority is to ensure that the DG’s “search and seizure” will not be publicly reported. The goal is to make sure that any information about a future raid is kept secret and that, in the case that it is, the leaker may be identified.
In the UK, an Office of Fair Trading request for permission to undertake a “raid” is not listed before the appropriate authorities, and the procedures take place behind closed doors. A comparable mechanism needs to be developed in India as well. For instance, in the Court of CMM, an application might be filed under a sealed cover, and any hearings should not be open to the public. Additionally, a structure must be developed so that the DG, under the proper supervision of the CMM, is able to enlist the aid of other Central/State Government investigative agencies, including the police.
When an order is disobeyed, the CCI/CAT is required to file a complaint in the Court of CMM, Delhi. The Court will then take cognizance of the offence and issue orders, including determining the appropriate financial punishment. The CMM must therefore understand the harm that is being done to consumers, businesses, and the economy as a whole as a result of violating the Act or disobeying the instructions. It would also be a good idea to designate a CMM as the concerned CMM for the purposes of the Act if that CMM has authority over the area where the CCI’s headquarters are located.
Tax Recovery Commissioner/Officer under the Income Tax Act, 1961
If the Act, rules, or regulations are violated, the CCI may impose a monetary fine; alternatively, the CMM in Delhi may impose a fine after receiving an application from the CCI or CAT for disobeying their directives or orders. If the financial penalty issued is not recovered, the CCI may send the matter to the relevant Tax Recovery Officer for recovery as “tax owing” under the Income Tax Act, 1961. The Tax Recovery Officer must proceed to recover from the assessee by attaching moveable or immovable property, appointing a receiver to manage the assessee’s properties, or by arresting or detaining the assesses in accordance with the Income Tax (Certificate Proceedings) Rules, 1962.
A reference from the CCI would amount to the drawing of a certificate under Section 222 of the Income Tax Act, 1961. Since unreasonable enrichment by the delinquent enterprises must be disgorged, the CCI and the Income Tax Authority must act in concert to enforce the recovery of the penalty imposed. They must also make a contribution to the corpus of the Consolidated Funds of India for use in the greater good of society.
It will be appropriate to bring up the sentiment shared by the esteemed poet Kalidasa in the Raghuvansh, who noted that “he collected taxes from his subjects exclusively for the benefit of his subjects, just as the sun collects moisture from the earth to give it back a thousand fold.”
Competition Appellate Tribunal (CAT)
The Appellate Tribunal is tasked with hearing and ruling on:
- Appeals against any directive made by the CCI, decision made by the CCI, or order passed (apart from an order relating to the opening of an inquiry),
- Appeals are based on decisions made by Tax Recovery Officers in accordance with references made under Section 39 of the Act, and
- To decide on claims for compensation, including their recovery, that may result from CCI findings due to violations of Act provisions, decisions from the Appellate Tribunal, or violations of CCI and CAT orders.
Therefore, the direction or order of the CCI may be confirmed, modified, or revoked by the Appellate Tribunal after providing the parties with a chance to be heard. The Supreme Court is the appropriate forum for an appeal against a Tribunal order. Therefore, in that regard, the Act stands alone as a complete code. The appeal clauses also aim to make sure that the orders and instructions follow the law. If the regulator enjoys the trust of the appellate bodies, the situation will be favourable. Over time, effective competition regulation jurisprudence must be developed, and this requires a cogent strategy.
If the CAT is unable to carry out its order, the Appellate Court may send any of its orders to the civil court whose jurisdiction includes the locality where the offender resides, conducts business, or engages in gainful employment. Although the CAT order should be regarded as a decree of the court to which it was forwarded, enforcement and execution actions are started by the executing court at the request of the decree-holder. The CAT will be deciding on compensation claims, and the awardees will be asking the relevant civil courts to carry out the decree, which will begin for him yet another round of unpleasant court appearances. Order XXI of the Civil Procedure Code, 1908 codifies the intricate ceremony.
Since the timely and effective execution of a CAT order is essential to the implementation of the law, it is important to educate district-level judges about the value of having free and fair competition in markets, the necessity of doing so, and the extent of the harm that can result from violating the law and/or a CAT order. The advocacy will be a step in creating a culture of compliance, and in the absence of it, a decree holder will experience “failure in victory.”
Central/state governments/statutory authority
It is vested in the Central Government the authority to:
- Exempt a class of enterprises from the applicability of the law.
- To issue directions to the CCI and
- To supersede the CCI.
Although the law specifies a few conditions that must be met before using these provisions, it is anticipated that such uses will be the exception rather than the rule. The Central Government is in charge of the financial grants and the staffing capacity of the CAT and CCI.
While the law does grant the Central Government, state governments, and statutory authorities the right to submit a suspected infraction to the CCI for the commencement of an inquiry, empirical evidence reveals that the “frequency of such references” was extremely low prior to the MRTPC. The MRTPC received less than ten references from the Central Government over its nearly four-decade journey and just one reference from a state government in support of the establishment of an inquiry. While the CCI has the authority to open an investigation into its motion, the lack of a party who has been wronged frequently makes it more difficult to establish the violation and the severity of the harm.
The need is for the governments and statutory authorities to take responsibility under the new system and notify the CCI of more alleged Act violations. The governments, both Union and states, must also use Section 49 (1) to end anti-competitive practices resulting from their statutes, laws, policies, and procedures. The law thus stipulates a thorough administrative and enforcement framework for its successful and efficient implementation, yet the CCI must significantly rely on a number of satellite entities. To make India a zero anti-competitive zone, it is essential that they all collaborate and act in unison.
Notable cases dealt by the CCI
- When onion prices reached 80 rupees in December 2010, CCI launched an investigation to see if there was any cartelization among dealers, but it was unable to locate enough proof of market manipulation.
- 11 cement companies were fined 63.07 billion yen ($790 million) by CCI in June 2012 for cartelization. According to CCI, cement businesses gathered frequently to fix pricing, maintain market share, and limit supplies, all of which allowed them to make illicit profits.
- Apartment buyers’ contracts with real estate business DLF Limited had terms changed by CCI in January 2013. Moneycontrol.com, a business and finance portal, praised the decision, calling it “a landmark decision that would help property owners all around the nation.” Several significant changes included:
- Beyond the approved building plan that was provided to the buyers, the builder is not permitted to carry out any further construction.
- The open areas in the portion of the residential project that is not sold will not be entirely owned by the builder.
- Any defaults will be the responsibility of both the customer and the builder.
- Buyers must only make payments based on building milestones, never “on demand.”
- It won’t be up to the builder alone to create the owner’s organisation.
- The Board of Control for Cricket in India (BCCI) was fined 522 million rupees ($6.5 million) by the CCI on February 8 for abusing its dominating position. The CCI concluded that the terms of the IPL franchise agreements were biased in favour of BCCI and that franchises had no input into the contract’s provisions, making it unfair and discriminatory. The CCI ordered BCCI to “cease and desist” from any future practices that might restrict potential competitors’ access to the market and to stop using its regulatory authority to make decisions about its commercial activity.
- Google was penalised by CCI in 2014 with a fine of 10 million for disobeying the Director General’s requests for information and documentation.
- On August 25, 2014, CCI levied a punishment of 2544 crores against 14 Indian automakers for failing to give independent mechanics access to branded spare parts and diagnostic equipment, which limited their capacity to fix and maintain specific car models. Maruti Suzuki, Mahindra & Mahindra, Tata Motors, Toyota, Honda, Volkswagen, Fiat, Ford, General Motors, Nissan, Hindustan Motors, Mercedes Benz, and Skoda were among the organisations that received fines.
- Following a complaint by Reliance Jio on the cartelization by its rivals Bharti Airtel, Vodafone India, and Idea cellular, the CCI ordered a review into the operation of the Cellular Operators Association of India in May 2017.
- Alphabet Inc, the parent company of Google, was fined 135.86 crore rupees on February 8, 2018, for “search bias.”
- The Disney-Fox agreement was approved by the CCI on August 12, 2018.
- The Federation of Gujarat State Chemists and Druggists Association, the Amdavad Chemist Association, the Chemists and Druggists Association of Baroda, the Surat Chemists and Druggists Association, the Chemists and Druggists Association, Glenmark Pharmaceuticals, Hetero Healthcare Ltd, Divine Saviour, and their staff and officers were all fined by the Commission in July 2018 for violating the Competition Act of 2002 by requiring No Objection Certificates before appointing stockists.
- The CCI sent letters to handset manufacturers in June 2019 requesting information on the terms and conditions of their contract with Google. This is to find out if Google placed any limitations on their use of the company’s apps in the eight years starting in 2011.
- After first giving its approval in November 2019, CCI withdrew its support for Amazon’s investment in a Future Group company in December 2021. Amazon has been accused of hiding the extent and details of its investment while requesting authorisation.
- A 60-day probe into Apple Inc’s business practices, including the company’s use of a proprietary payment mechanism, was mandated by CCI on December 31, 2021.
Landmark judgments on Competition Law
As now we have a general idea of the Competition Act of 2002, it is necessary to note how the legislation has been interpreted and applied by courts in disputes in relation to competition law. Some of the landmark decisions have been elaborated hereunder.
Google Inc. & Ors v. Competition Commission of India (2015)
The writ petition was submitted by the three appellants, namely, Google Inc., California, United States of America (USA), Google Ireland Ltd., Dublin, Ireland, and Google India Pvt. Ltd., Bangalore.
The CCI opened an investigation into Google’s practices for Android devices and Google apps. The case’s complainants charged Google with engaging in anti-competitive behaviour. This action, which has been with the CCI since 2012, originally focused on the “unfair” search results provided by the internet giant. The CCI discovered that Google is abusing its position by slanting and manipulating search results and blocking access to rival products. Additionally, the CCI investigated Google’s contracts with Original Equipment Manufacturers (OEMs). This case resembles the antitrust case brought by the European Commission, which resulted in a $5 billion penalty against the search engine giant. The Commission was of the opinion that Google “kept and improved its market position by implementing a strategy on mobile devices” in the European case, which came to a conclusion in 2018. Google Search was already pre-installed on Android smartphones by the firm, making it the default search engine.
According to the Delhi High Court in the present case, the CCI can recall or review its order under specific conditions, but only sparingly and not in every instance where the investigation has been conducted without a sufficient hearing.
M/S Voltas Limited, Bombay v. Union Of India & Ors (1995)
On the Dutt Committee’s proposal, the MRTP Act was passed, covering all of India with the exception of Jammu and Kashmir. This Act was passed with the intention of preventing the concentration of economic power in the hands of a small group of wealthy individuals. The Act supported the prevention of monopolistic and restrictive commercial practices as well as their control. Trade unions, businesses taken over by the government, businesses registered as cooperative societies, businesses controlled by the government, businesses formed by any central or state law, and any financial institutions are all exempt from this Act’s application. The court had looked at the actions that constitute “restrictive trade practices” and that are detrimental to the public interest in the case of M/S Voltas Ltd., Bombay v. Union of India (1995).
The decision and order of the Monopolies and Restrictive Trade Practices Commission (“the Commission”) had been appealed under Section 55 of the Monopolies and Restrictive Trade Practices Act, 1969. The appeals were granted and the Commission was instructed to re-examine the issues at hand using the evidence presented on behalf of the parties and to vacate the impugned order it issued following its 15 inquiries.
The Commission will be free to ask any of the parties to provide more testimony, either oral or written, in order to help it reach a decision. There won’t be any expense orders given the facts and circumstances of the instances. The defendants engaged in trade practices that were both restrictive and detrimental to the public interest, according to the court’s ruling.
Vinod Kumar Gupta v. WhatsApp Inc (2016)
In its market assessment of the telecom sector, released on January 22, 2021, CCI recently demonstrated a significant shift in attitude by noting that privacy can take the shape of non-price competition. It was then swiftly put into practise through this suo motu investigation order against Whatsapp, wherein CCI acknowledged its departure from the prior ruling in the Vinod Kumar Gupta case, stating that unreasonable data collection and sharing could give dominant players a competitive advantage, potentially leading to abuse of dominance. For the sake of this study, it will be limited to critically analysing CCI’s methodology and domain while identifying Whatsapp’s ostensibly exploitative behaviour at the intersection of privacy and competition law.
M/s Fast Track Call Cab Private Limited v. M/s ANI Technologies Pvt. Ltd (2015)
The request for interim relief submitted by M/s Fast Track Call Cab Private Limited in its application pursuant to Section 33 of the Competition Act, 2002, was made to be obsolete by this decision. The informant’s main request was for the Commission to issue an order directing M/s ANI Technologies Pvt. Ltd to stop engaging in the alleged predatory pricing practice. According to the CCI, disruptive pricing, which offers consumers and drivers more incentives and discounts compared to the income earned, drives out existing players from the market and raises entry barriers for future players, was in violation of Section 4 of the 2002 Act. When looking for acts that violate Section 4, a variety of resources and the demand of the consumers in the relevant market for no substitutes are also important things to take into account.
Mcx Stock Exchange Ltd. & Ors v. National Stock Exchange Of India (2011)
Considered to be one of the first cases of abuse of dominant position. The present case commenced on the basis of information submitted by MCX Stock’ Exchange Ltd. (MCX-SX) on November 16, 2009. On March 30, 2010, the Commission issued an order under Section 26(l) of the Act of 2002 expressing its belief that there was enough evidence to support the claim and directing the Director General to look into the situation. Further investigation was conducted in accordance with the Competition Act of 2002’s requirements and any applicable rules made thereunder. The National Stock Exchange (NSE), MCX-SX, and other parties were given every chance to review all pertinent records and present their arguments before the Commission orally and in writing.
Following the conclusion of the entire process, the Commission determined that sections 4(2)(a)(ii), 4(2)(b)(i)&(ii), 4(2)(c), 4(2)(d), and 4(2)(e) of the Competition Act, 2002 were being violated. It was therefore necessary to emphasise that NSE was served with a show cause notice for violating the Act’s provisions based on the aforementioned conclusion, in accordance with the majority opinion, in order to get its response before deciding on penalties or remedies.
Mohit Manglani v. M/s Flipkart India Pvt. Ltd. & Ors (2015)
In accordance with Section 19(1)(a) of the Competition Act, 2002, Mr. Mohit Manglani had complained against a number of e-commerce and portal companies for allegedly violating Section 4 in the present case. The informant claimed that these e-commerce websites had engaged in anti-competitive behaviour with the providers of products and services in the form of “exclusive agreements.”
Due to these tactics, the informant claimed that the customer was obligated to acquire the product in accordance with the website’s conditions or refrain from making any purchases at all, regardless of the terms and prices of the goods and services. This might be viewed as a decision that may have an impact on the development of accountability and openness in the legal system, as well as fair trade legislation. The Competition Commission of India further went ahead to investigate whether agreements between manufacturers and online merchants about resale prices violate any competition laws or not. The answer of which came in affirmative.
Loopholes in The Competition Act, 2002
To improve the effectiveness of India’s competition regime, several factors still need to be taken into account by the government and the Commission. Being a late arrival, Indian competition law had the benefit of absorbing a few aspects of other nations’ competition laws.
- Experts believe that the present Act might have included a number of significant issues of competition law that Indian law has overlooked. For instance, settlement and plea agreement provisions, which are present in other nations, speed up and improve the regulatory and adjudicative process. India chose not to adopt such a measure, which is one of the causes of delays in receiving a final decision.
- The ambiguity in the powers of commission is another issue that has recently come up. A number of cases that were heard by the Competition Appellate Tribunal have been dismissed because the Commission did not follow the rules of natural justice or committed other procedural blunders.
- Another issue that needs to be addressed by the government is the growing backlog of cases as a result of staff shortages. The Commission needs to reconsider the role that competition laws play in the overlap between intellectual property laws and competition rules, which is another area. To accomplish the desired goals for which the Competition Act was adopted, such matters must be seriously considered by the relevant authorities.
- If the Director-report General identifies a violation of the Act, there is no provision in the present Competition Act, 2002, for the Competition Commission of India (CCI) to close a case. Even if the DG claimed otherwise, the Commission has closed the majority of cases. Although Section 26 of the 2002 Act makes reference to a number of circumstances, it does not cover the situation in which the Commission can disagree with the DG after discovering a violation. It appears that the present Act’s authors did not consider this possibility while they were writing it.
When a case is submitted, the Commission instructs the Director-General to launch an inquiry into the claims, following which the DG is required to deliver a report within a given timeframe. The Commission begins hearing from the affected parties based on the report. The CCI only passes a final order after concluding its own proceedings in the manner it sees suitable. The Act, however, makes no provision for the CCI to close a matter if the DG identifies a violation in its report.
A situation where the aggrieved party is left without the ability to appeal to higher authorities such as the Competition Appellate Tribunal (COMPAT) or the Supreme Court once the case is overturned by the commission results from the absence of such a vital provision.
- The business environment has seen significant change both internationally and in India since the passage of the Competition Act, 2002. More and more companies are now operating online, and there are novel business models that were unthinkable ten years ago.
Due to the rapid rate of innovation in high-tech disruptive marketplaces, traditional understandings of terms like “market,” “monopoly,” “dominance,” and “agreement” have become problematic for competition law. Another reason to be concerned is the present tendency in India of regulators to create their own silos and try to control businesses in their own fields unilaterally, whether it be the Telecom Regulatory Authority of India (TRAI) or the Competition Commission of India.
CCI’s regulation-making power
A well-known type of delegated legislation is regulations that are created by authority while acting on the authority granted by the enabling statute. Using the authority granted by the Competition Act, the CCI has also created a number of regulations. But a detailed examination of the regulations’ content would show that, in some instances, the boundaries of legal legislative power delegation are crossed. For instance, the merger control provisions of the Competition Act exempt many transactions from the mandatory prior notification requirement under the CCI (Procedure with regard to the transaction of business connected to combinations) Regulations, 2011 (the “Combinations Regulations”).
Furthermore, neither the Competition Act, 2002 contains any specific language giving the CCI the authority to exempt combinations, nor has the legislature offered any instructions on how the CCI should utilise this authority. Given the foregoing, it could be argued that these regulations are not an acceptable type of delegated legislation and could face a constitutional validity argument.
Interface with other sectoral regulators
Complex challenges arise at the intersection of sector-specific regulation and competition policy, particularly with regard to the appropriate jurisdiction for matters of competition law. Due to a lack of clarity on the division of duties between the CCI and sectoral regulators, there have been multiple instances of turf wars between the CCI and various regulators as well as forum shopping by plaintiffs. By implementing the appropriate changes to the Competition Act, 2002 and sectoral regulations, regulators must be required to use the cooperation/consultation process in order to homogenise decision-making. In addition, the Central Government can definitively specify which regulator, in the event of concurrent powers, will have priority jurisdiction in aspects of competition law, following the lead of the UK Enterprise Reform Act, 2013. Clarifying the CCI and sectoral regulators’ roles in questions of competition law will stop different regulators from expressing conflicting opinions and the ensuing practice of forum shopping.
Issues at the appellate stage
The Competition Act of 2002 specifies an indicative six-month time frame for handling appeals. Statistics from the CCI’s Annual Reports, however, indicate that 46% of cases are still pending with the appellate body after more than a year.
There are no stage-by-stage timetables for the appellate process in any of the applicable rules or regulations, including the CCI (General) Regulations, 2009, the Competition Appellate Tribunal (Form and Fee for Filing an Appeal and Fee for Filing Compensation Applications), Rules, and the Competition Appellate Tribunal (Procedure) Regulations, 2011. The Companies Act, 2013 and the rules that follow it require the NCLAT to use all reasonable efforts to resolve an appeal within three months of the date of filing, but they make no mention of any suggested stage-by-stage time frames for doing so.
Furthermore, unlike several countries, including the UK and Singapore, neither the NCLAT nor the CCI are required to hold case management conferences, which are believed to increase efficiency. In actuality, the NCLAT was initially intended to be an appellate body for just issues involving corporation law. She is not required to have knowledge of competition law, policy, or economics under Section 411(3) of the Companies Act, 2013, which sets forth the requirements of a technical member of the NCLAT.
Unsurprisingly, the current NCLAT members’ profiles (as listed on the NCLAT website) show that none of the technical members have prior expertise in the fields of competition law and economics. In this regard, it is appropriate to make reference to the Law Commission of India’s 272nd Report, which made the recommendation that “persons of proven ability, integrity, and standing, having special knowledge and professional experience or expertise of not less than fifteen years in the particular field,” should be considered for appointment to specialised tribunals.
Furthermore, the NCLAT now only has three members, despite having a maximum permitted strength of 11. There is an urgent need to appoint more members given that the NCLAT serves as the appellate authority for the purposes of the Companies Act, 2013, the Insolvency and Insolvency and Bankruptcy Code, 2016, and the Competition Act, 2002. This is necessary to prevent the number of appeals pending before the NCLAT from growing out of control, as has happened with several other tribunals in India, including the Customs, Excise and Service Tax Appellate Tribunals (CESTATs) and Debt Recovery Tribunals (DRTs).
Digitalization and The Competition Act, 2002
Recent large-scale mergers, particularly the merging of Facebook and WhatsApp, have sparked debates about the effects on competition law of obtaining ownership of “big data” and how such data is treated as an asset for determining market dominance. Additionally, it has been noted that there is a chance that some algorithms with strong predictive capabilities would be able to conspire and control markets without any assistance from humans. The competition laws must be periodically reviewed and updated in light of technology advancements that were not considered when the laws were first drafted in order to sustain competitive marketplaces. It is crucial to undertake market studies in order to comprehend how these technological advancements will affect the competitive environment in India. Additionally, efforts must be made to increase the technical proficiency of the competition law authorities by hiring professional advisors, taking part in sector-wide coordination processes, and holding training sessions.
Competition Bill, 2022 : an analysis
- The Competition Amendment Bill 2022, which calls for several modifications to the Competition Act of 2002, was introduced by the government on August 6, 2022. The Bill has, in fact, been forwarded to the Standing Committee on Finance for additional examination. The proposed measure includes several revisions to the Competition Bill, 2002, including a larger framework with regard to anti-competitive practices as well as mergers and acquisitions. It will be addressed during the winter session of the Parliament.
- One of the major changes sought by the Competition Bill is to Section 5 of the Competition Act of 2002, which deals with business mergers and acquisitions. The choice was made since the CCI is frequently not notified of numerous digital mergers and acquisitions with minimal transaction values. The government has established the transaction threshold at Rs 2,000 crore in order to allay this worry and encourage healthy competition.
- The proposed Bill also aims to cut the entire assessment time limit for combinations from 210 days to 150 days. If the parties are required to file additional material or fix errors in the notice, the assessment time may be extended for a maximum of 30 days.
- The Competition Bill was presented after the Competition Commission of India increased its examination of e-commerce companies’ anti-competitive practices. The competition authority has summoned online food aggregators Swiggy and Zomato as well as cab aggregators Ola and Uber in recent months to warn them about market monopolies and anti-competitive behaviour.
- Another significant change that has been suggested concerns the penalty under Section 48 of the Competition Act, 2002 in the event that businesses participate in cartelization. Any enterprise against whom an inquiry is launched may, in accordance with Sections 48(A) and 48(B), submit a written application to the CCI for the payment of a fee against the alleged infractions.
- Notably, the bill also aims to change Section 41 of the Act, which grants the Director General authority to look into cases involving violations. The proposed bill stipulates that violations are subject to punishment. The fine cannot exceed 10% of the average income from the previous three fiscal years, subject to certain restrictions.
- Furthermore, if “any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, causes or is likely to cause an appreciable adverse effect on competition in India,” the enterprise will be fined for violating the law.
The Competition Act of 2002 was passed by the government as a measure to keep up with the rapidly evolving economic conditions and is consistent with the new economic paradigms of globalisation, privatisation, and liberalisation. It shows the country’s readiness to transition from a planned economy to one with a free market but with sufficient checks and controls. Market rivalry that is healthy is crucial for innovation and economic expansion. Injurious trade practices, including the formation of cartels and monopolies, are against public policy, even though the Indian economy has advanced from its protective position regarding domestic sectors.
In addition to emphasising regulation, the Act also adopted the idea of “Competition Advocacy” to advance competition, raise awareness, etc. By imposing severe penalties on the parties involved in anti-competitive acts, the Commission occasionally makes its presence felt in the market. The consumer now benefits from healthy market competition and has the opportunity to choose the most affordable and advantageous choice available to him, which is the main advantage of such acts. Because the general population is now required to accept the ludicrous terms and conditions imposed by the major participants in the market, it hurts not only the little manufacturers but also them. The ideal of economic equity is undermined when the wealthy increase their wealth at the expense of the poor. To monitor such tactics, a body like the Competition Commission of India is necessary.
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