The Competition Commission of India (CCI) has completed a decade since the enforcement provisions of the Competition Act, 2002 (Act) were implemented in 2009. In the ten years since its establishment, the commission has undertaken numerous measures to assure ease and freedom of trade and prevention of unfair trade practices in the Indian Market.
Over the years, CCI has finely played both administrative and quasi-judicial roles to eliminate practices having adverse effects on competition, promote and sustain competition, protect the interests of end consumers and ensure freedom of trade in the markets of India. So far, it has been quite a decent check on the anticompetitive agreements and abuse of dominant position of enterprises as envisaged u/s 3 and 4 of the Act.
CHALLENGES FACED BY CCI
During the course of gaining stability, CCI has faced many challenges starting from the implementation of competition law, transition in antitrust issues of the current era, changing business practices to examination of issues involving the digital economy and e-commerce. It has now become a necessity for CCI to move away from strategies used to examine a conventional business and include parameters of data accessibility, network effects and multi-sided markets for getting better grip on new age areas like digital economy and e-commerce industry.
POPULAR CASE OVERVIEWS
- June 2012-11- Cement companies were accused of meeting regularly to fix prices, control market share and hold back supply, leading to market dominance and gaining illegal profits. CCI had imposed a fine of Rs. 63.07 billion on 11 cement companies for cartelism.
- 2013 - CCI imposed a penalty on the Board of Control for Cricket in India (BCCI) for misusing its dominant position. It was found that the IPL ownership agreements were unfair and discriminatory. The terms of IPL franchise agreements were one-sided and highly in favour of BCCI and the franchises had no say in the agreement.
- 2014 - A fine of Rs. 10 million was imposed on Google due to its failure to comply with the directions of the Director General (DG) seeking information and documents during the investigation.
- 2015 - CCI imposed a fine of Rs. 258 crores on three airlines namely Jet Airways, IndiGo and SpiceJet, for cartelisation in determining the fuel surcharge on air cargo. "The basic concern in the present case is the overcharging of cargo freight, in the garb of fuel surcharge, by the air cargo transport operators which adversely affect consumers beside stifling economic development of the country. Such cartels in the air cargo industry particularly undermine economic development in a developing country..." a CCI order stated.
- CCI had also ordered probe into the functioning of the Cellular Operators Association of India (COAI) in response to the complaint filed by Reliance Jio against the cartelization by its rivals - Bharati Airtel, Vodafone India and Idea Cellular.
- The commission also ordered an antitrust probe against the internet major – Google - for abusing its dominant position with android to block its market. This probe is based on the analysis of a similar case investigated by European Commission where Google was found guilty and penalized. Google is being investigated for its alleged abusive conduct in the market for Android operating systems for mobile devices to foreclose its competitors' operating systems and apps in past 8 years since 2011.
- CCI undertook investigations against the alleged anti-competitive practices of technology and internet-based companies. Online travel agencies such as MakeMyTrip and Oyo are being investigated for allegedly imposing vertical restrictions and abuse of dominance by denying market access, predatory pricing, etc.
- Intel's conduct for its alleged unfair and discriminatory provisions in its warranty policy for boxed micro-processors is also being scrutinised by the CCI.
- The National Company Law Appellate Tribunal (NCLAT) affirmed the special responsibility of a dominant entity and held that such an entity cannot protect its commercial interests at the cost of the competition.
- The automotive sector has also been subject to investigations across a wide-spectrum of competition law concerns. Maruti Suzuki, for instance, is being investigated for allegedly imposing resale prices on its dealers.
- Similarly, Honda is being investigated for its conduct pertaining to vertical restraints by allegedly imposing discount control mechanisms, exclusive supply agreements, tie-in arrangements, and abuse of dominance.
CONSTITUTIONALITY CHALLENGED BEFORE THE DHC
The auto parts case: In 2014, it was alleged that M/s Honda Siel Cars India Ltd., Volkswagen India Pvt. Ltd. and Fiat India Automobiles Limited, had violated sections 3 and 4 of the Competition Act by restricting the supply of genuine spare parts in the open market, where CCI imposed a penalty against 10 biggest car manufacturers including Honda India, Volkswagen India and Fiat India at the rate of 2% of the infringing parties' average annual turnover. The order of CCI was challenged before COMPAT and CCI's order was upheld with a reduced penalty to 2% of their average 'relevant turnover' (i.e., the average annual turnover of spare parts in the aftermarket) in the appeal.
On April 10, 2019, the Delhi High Court disposed 12 writ petitions filed by 10 car manufacturers (i.e., BMW, Mercedes Benz, Fiat, Skoda, Volkswagen, Honda, General Motors, Tata Motors, Hindustan Motors and Mahindra & Mahindra) and India's largest music label and movie studio, T-Series – Super Cassettes Industries Pvt Ltd challenging the constitutional validity of certain provisions of the Act, which directly impacted the validity of the CCI's final order in Auto Parts case.
ISSUES DETERMINED BY THE DELHI HIGH COURT
- Whether the CCI is a tribunal exercising judicial functions;
- whether the composition of the CCI is unconstitutional and violates the principle of separation of powers;
- whether the "revolving door" practice at the CCI vitiates any provisions of the Act and more specifically, if the manner for decision-making provided under section 22(3) of the Act is unconstitutional; and
- whether an expansion in scope of inquiry by the CCI is illegal.Findings
Ruling on the first issue, the Delhi High Court observed that in discharging their investigative functions, the Director General and the CCI are not concerned with a dispute between two parties over a legal relationship, status or private property, but rather whether the Competition Act has been breached. In view of the specific functions performed by the CCI (i.e., advisory, investigative, administrative and adversarial), the court held that it does not perform the exclusive adjudicatory functions of a tribunal. However, the court ruled that this finding does not mean that CCI's orders are not quasi-judicial. In this regard, the court observed that CCI orders are subject to appeal to a tribunal (i.e., an appellate tribunal). Further, they are open to judicial review as regards any procedural flaw under Article 226 of the Constitution.
On the second issue, as regards the CCI's membership, the Delhi High Court relied on the Supreme Court's decision in Utility Users' Welfare Association, which concerned section 113 of the Electricity Act 2003 – under which the appointment of a judicial member is not mandated – which states as follows:
"We are, thus of the unequivocal view that for all adjudicatory functions, the bench must necessarily have at least one member, who is or has been holding a judicial office or is a person possessing professional qualification with substantial experience in the practice of law and who has the requisite qualifications to have been appointed as a Judge of the High Court or a District Judge."
Accordingly, the Delhi High Court held that when the CCI issues adjudicatory orders (especially final orders), the judicial member's presence and participation is necessary.
As regards the necessary qualifications to be appointed as a member of the chair of an appellate tribunal under section 53D of the Competition Act, the Delhi High Court observed that the tribunal performs judicial functions by hearing and deciding appeals of CCI orders. However, the mandate that the chair must have been a former Supreme Court judge or high court chief justice and obtained the approval of the chief justice and at least one Supreme Court judge is sufficient to guarantee their judicial experience.
As regards section 53E, which was challenged on the ground that the selection committee which appoints the chair and members of an appellate tribunal is overseen by the executive, the Delhi High Court referred to Madras Bar Association v Union of India and held that the personnel chosen for the task assigned to COMPAT must be approved by the chief justice and at least one judge of the Supreme Court. Consequently, section 53E, as it stood prior to the 2007 amendment, was declared unconstitutional.
The third issue was objection to section 22(3) due to the 'revolving door' policy, which enables members to participate in only one or some proceedings or cease from participating at their will, which does not guarantee a fair hearing and violates the basic principle of 'one who hears must decide'. The revolving door allegation was based on the premise that certain persons who had heard the final arguments in the original case before the CCI had chosen not to sign the final order of August 25, 2014.
The Delhi High Court held that the possibility of a 'revolving door' did render section 22(3) invalid. The court supported this view by referring to the Supreme Court's decision in State of Rajasthan v Union of India and Sushil Kumar Sharma v Union of India, in which it was observed "the mere possibility of [an] abuse of [a] provision of law does not per se invalidate a legislation. It must be presumed, unless contrary is proved, that administration and application of a particular law would be done not with an evil eye and an unequal hand."
However, bearing in mind the undesirability of a decision by a smaller number of members when a hearing is undertaken by a larger body, the Delhi High Court issued certain directions which will guide the CCI in its hearings and when rendering final decisions. The court stated that when all evidence has been heard, the CCI should set down the case for a final hearing. When the final hearing commences, the membership of the CCI should be constant and the same number of members should write the final order. The court further ordered that no member should take an individual break during the course of the proceedings and re-join the proceedings later as such walk-out/walk-in practice is detrimental to the principles of natural justice.
Further in line with the fourth issue, the Delhi High Court noted that Excel Crop Care Ltd. v. CCI dealt specifically with the question of subject matter of expansion and that the Supreme Court had clarified that the Director General can expand the subject of investigations, which are not limited to the parties against which allegations have been levied, but may be extended to other associated ones (e.g., third parties). Accordingly, the court was not convinced by the petitioners' plea that the CCI had acted in an illegal manner.
As per the recent amendments in regulations, the parties are required to fill information under the Act to disclose any pending litigation to the CCI. This would enable speedy disposal of cases, prevent forum shopping and overlaps with other sectoral regulators.
The amendments also provide the CCI with the option to reveal the identity of the party filling the information, in the interest of expediency, in cases where confidentiality has been claimed over such identity.
Towards the end of 2019, the CCI also saw the appointment of Justice Sangita Dhingra as a judicial member, in keeping with Delhi High Court's ruling in the Mahindra case that stressed on the requirement of a judicial member while passing the final orders.
The graph of CCI's enforcement has evolved substantially in many sectors and, in the years to come, we expect that its stance will continue to progress, particularly in emerging areas such as digital markets and e-commerce sector. It is expected that the CCI would take some measures to implement a framework for adequate transparency and define basic conditions for e-commerce industry and digital market platforms. In 2020, we also anticipate further streamlining of various substantive and procedural aspects of competition law, based on the Competition Law Review Committee recommendations.
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