CCI forms committee to resolve differences on Competition Act

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Nov 30 2011, 08:44am hrs
Differences within the Competition Commission of India (CCI) over how to interpret certain provisions of the Competition Act, including those defining the powers of the Commission, have prompted the regulator to form an internal committee to resolve the matter. This amounts to a formal recognition of certain loopholes in the Act, which a section within the commission have long felt existed.

According to sources, the internal committee has come to the view that there was a need to fine-tune certain provisions in the Act, especially the one which deals with the commission's power (or lack of it) to close a case, overruling the findings of its investigation wing. The committee has recognised certain ambiguity in the Act on this and said that it needs to be removed, to expressly state that the commission indeed enjoys the power to close a case in its wisdom, notwithstanding the directorate-general (investigation) confirming contraventions of the Act by the parties it had probed. Further, the committee felt that in case of such closure of cases, the complainants should have the remedy for appeal and this needs to be stated in the Act.

Over the last two years, there have been over 30 instances where the commission virtually overruled the DG's probe reports. For instance, in the much-hyped case regarding pre-payment penalties charged by banks, the DG found contravention of section 3(3) (b) of the Act but the commission had closed the matter after its own inquiry.

The CCI's process goes like this: once a complaint is filed with the commission the members deliberate on the case and judge it purely on the basis of the merits of the complaint. It can either dispose of the matter immediately or can form a prima-facie view following which the DG investigation is asked to conduct a probe. After the investigation report is submitted the commission conducts its own inquiry into the case (which includes hearing the parties involved) after which it passes an order.

The internal committee is also learnt to have recommended giving DG powers for search and seizure and tightening the commission's control over trade associations.

Section 26 (8) of the Competition Act states, If the report of the Director General referred to in sub-section (3) recommends that there is contravention of any of the provisions of this Act, and the Commission is of the opinion that further inquiry is called for, it shall inquire into such contravention in accordance with the provisions of this Act. Further the following section of 27 merely lists out the various orders the commission can give once it has conducted its own inquiry pre-supposing that the commission's view would be the same as the DG's.

This is a grey area in the Act. It has been so far ignored but it could come up as we move forward with very complex matters. That's why the committee has proposed certain changes to bring in more clarity, a source told FE said. According to him the committee has proposed inserting two more sub-sections 9 and 10 under section 27 which would clearly state that despite DG's observations the commission can close the matter apart from giving the right to appeal to the complainant. Earlier the committee headed by former chairman Dhanendra Kumar on the National Competition Policy had also proposed clarifying section 27.

Another source in the commission said, If the DG's report is not taken seriously then whats the point in conducting a probe in the first place. Countering this view former member of the commission PN Parashar said that DG report is not final. DG report is only one of the many parameters on which the commission forms a view. It holds discussions with the concerned parties and questions them on the findings of the investigation report. But it does not mean that the commission is bound to take DG report as the final view.

Delhi-based competition lawyer MM Sharma said while the Act empowers the DG to conduct an investigation, CCI can initiate inquiry. He said, Both these terms have their own significance. It means that the commission would not blindly accept the DG report but would do it own due diligence on the matter. He however said only anomaly in the proceedings is that no member of the DG investigation team is present when the commission holds discussions with the parties concerned.