By Sandeep Parekh
The Centre recently paved the way for the Competition Commission of India (CCI) to enforce competition laws by allowing violators to enter into a settlement it, or make certain commitments to refrain from carrying out anti-competitive activities. Pursuant to the amendment, the CCI has recently proposed the framework for such settlement or commitment mechanism.
Typically, if, upon receipt of information, the CCI is of a prima facie view that there exists a contravention of the Competition Act, 2002, it orders the Director General to carry out an investigation. According to the proposed framework, it is only at this stage than the alleged violator (AV) can file a commitment application (CA). The entire proceedings must culminate within 90 days of receipt of information of violation(s); however, this period may be extended.
In the CA, the AV would have to provide the true and complete facts, including the gravity and impact of the contraventions and how the commitments offered would address the alleged contraventions as well as the modalities for implementation and monitoring of the commitments offered.
While considering the CA, the CCI would share a non-confidential summary of its prima facie opinion on the basis of which the investigation was initiated and other details it deems fit, after which the DG, AV, and any other party may submit their comments, objections or suggestions. Interestingly, in ‘appropriate’ cases, the CCI may even invite comments from the public. It is also interesting that the AV would get an opportunity to be heard only when the CCI is going to reject the application.
Pertinently, if the CA is accepted, it would not operate as an order containing a finding of contravention by the AV, and would not be appealable. However, if the CA is rejected or withdrawn, the CCI’s inquiry would resume. Further, if the commitments offered pertain to only some of the allegations, the CCI can continue to proceed with respect to the remaining allegations, and information submitted by the AV can be used in such investigation.
Lastly, a commitment order may be revoked in the event of false or incomplete disclosure and material changes in facts. Such revocation may be accompanied with costs upto Rs 1 crore and re-opening of the investigation.
An AV may file a settlement application (SA) within 45 days of receipt of the DG’s report. Settlement proceedings must culminate within 120 days of the filing of the application, which may be extended by the CCI.
In the SA, the AV would have to, among other things, provide true and complete facts in relation to the allegations, findings of the DG, how the settlement proposal would address the allegations, details of previous contraventions (if any), gravity and impact of the contraventions, method of implementations of the settlement proposal, etc. Thereafter, a non-confidential summary would be shared by the CCI, similar to the one under the commitment mechanism. The settlement amount may go upto the maximum penalty that can be levied for the alleged violations, however, based on factors such as co-operation and disclosures made, a ‘discount’ of upto 15% may be applied.
If the CCI accepts the SA, it will pass a settlement order, which will not act as a finding of contravention. In case of rejection or withdrawal of the SA, the proceedings under the Competition Act, 2002 will be restored.
It is important to note that unlike Sebi’s settlement regime, upon filing of a commitment or SA, the draft regulations provide that CCI’s inquiry would be kept in abeyance till the disposal of the application, thereby saving regulatory time and resources. The settlement and commitment frameworks incentivise early engagement and cooperation between enterprises under investigation and the CCI, thereby fostering quicker corrections. The proposed frameworks enhance enforcement and resolution of antitrust matters, and would aid in reduction of protracted litigation, thereby giving real effect to the CCI’s mandate. In fact, subject to implementation, the proposed frameworks may significantly enhance the enforcement mechanism and also reduce litigation costs.
The proposed frameworks are broad, and thus allow for flexible mechanisms that can be tailored to address specific issues on a case-to-case basis. Commitments or settlement terms, as the case may be, can be designed to restore competition by measures such as divestitures and behavioural changes to address the anticompetitive effects of the alleged violation. By providing for comments from the other parties, those affected by the alleged anti-competitive practices have been given a voice, and further transparency has been sought to be introduced in antitrust enforcement.
Further, the frameworks can enhance the operational certainty for businesses due to the ease of anticipating the potential consequences and the remedies. The mechanism can also help in preserving the reputation of the business, if they show willingness to address past mistakes and maintain fair competition.
However, owing to the fact that a CA is made at the stage of investigation by the DG, and the SA can be made after the DG’s report, there may be instances of parties filing both applications at the appropriate stages, thereby causing avoidable delays. In such instances, there may exist a risk of destruction of evidence by the AV. Thus, there may be merit in reconsidering whether proceedings should be kept in abeyance during the pendency of a CA or SA.
Further, while determining the settlement amount, the CCI must strike a delicate balance between deterring anticompetitive behaviour and allowing for the benefits of cooperation in appropriate cases. It must carefully evaluate each case on its individual merits, considering the severity and impact of the violations, as well as co-operation and disclosures by the AV. Furthermore, an applicant’s history of compliance with competition laws and its efforts to establish effective compliance programs should be considered when determining leniency. Keeping the broader public interest, consumer welfare, and competitive markets in mind shall help the commission to ensure that settlements ultimately serve the public interest.
Lastly, as the commitment and settlement orders are not appealable, and while there exist provisions in the draft framework for engagement between the CCI and the AV, the DG, other parties, and even the public at large, it is of significant importance that the applicants have adequate opportunities to engage in discussions related to commitment and settlement. Thus, an opportunity to be heard should be granted to the applicant to make the process more meaningful.
The writer is managing partner, Finsec Law Advisors
Coauthored with Parker Karia and Manas Dhagat, respectively, senior associate and associate, Finsec Law Advisors