CCI split over suo motu probe power

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Oct 29 2011, 16:56pm hrs
The question whether the Competition Commission of India (CCI) can act on commercial transactions undertaken without formal/written agreements has divided the regulator. This issue has come to the fore after the CCI received several complaints over real estate firms shortchanging home buyers by citing industry practices which are not necessarily covered under the formal agreement between the two parties.

While CCI is internally debating the issue, competition experts have joined the discussion. The outcome will hinge on how a provision in the Competition Act (Section 3.3) is interpreted.

While some within CCI feel the regulator can initiate investigations suo moto even in cases where there are no formal agreements, others feel the commission should only take up a probe when there are definitive agreements in place. The CCI, keen on fair play of market forces, can act against anti-competitive agreements, abuse of dominant position, and mergers and acquisitions that can have appreciable adverse effect on competition in the relevant market.

The final interpretation is critical in the backdrop of CCI's efforts to initiate action on its own against real estate companies. Following the R630-crore fine it slapped on India's largest real estate company DLF in August, it has been flooded with complaints from home buyers' associations against several realty companies. (DLF has challenged the CCI order in the Competition Appellate Tribunal and the matter is pending with the latter).

Section 3 (3) of the Competition Act reads thus: Any agreement entered into between enterprises or associations of enterprises or persons or association of persons or between any person and enterprise or practice carried on... (emphasis added). The concept of industry practice also extends to Section 4 that deals with abuse of dominance.

We need to take a call on whether CCI can suo motu order investigations in the absence of any written record, a CCI official told FE. Discussing the pros and cons of the concept, the source said that while on one hand it could become very difficult to substantiate claims of anti-competitive practices without any formal agreement, the commission is also aware that enterprises engaging in such practices would have deliberately not put them in writing, lest it becomes proof of their breach of law. Competition law is still very new in the country. Such difference of opinion is but natural, he added.

Some experts feel the Commission is indeed empowered to order investigations even if the parties concerned haven't entered into any formal agreement. Noted competition law expert and former CCI member PN Parashar feels the issue is very important. He said: If similar practices are followed by different commercial enterprises, then the Commission must look into even if there are no formal records of those practices.

Parashar said the duty to prove abuse of dominance and its industry practice lies with the investigation officers. Head of competition law at Vaish Associates MM Sharma too backed Parashar's view that CCI must intervene even in the absence of written statements. If any practice carried out by a dominant enterprise leads to abuse of its position, then it must be investigated by the commission irrespective of whether there are any written agreement or not, Sharma said.