By Vinod Dhall & Gaurav Desai
There has been no shortage of complaints to the Competition Commission of India against firms abusing their position, stretching its limited investigative resources. Over the last three years, on average per year, the CCI has received 58 complaints. In addition, on average, 14 cases have been appealed each year. Parties often resort to the writ jurisdiction to prolong or delay cases. The alleged conveyor belt cartel has been stuck at the directorate general level for almost 10 years now.
The CCI has limited staff. Its approved strength was 185, and this has remained at that level since inception. In its early years, a study by the IIM Bangalore had been commissioned to recommend an organisational structure for the Commission. If memory serves right, it had recommended a strength of around 425.
One development that might come to the CCI’s aid as well of the parties is the introduction by the Competition Amendment Act, 2023 of the pathbreaking regime for Settlements and Commitments (S&C), whereby parties can seek early termination of cases other than of cartels (where a successful leniency facility has existed for years). In the case of Commitments, once the CCI has ordered an investigation by the DG, the parties can offer commitments to address the CCI’s competition concerns. If the CCI is satisfied with the commitments, it can accept the same and terminate the case. The CCI order is non-appealable and does not amount to an acceptance of guilt. It cannot be the basis even for compensation claims against the party.
If the party does not avail of the opportunity, it must wait till the DG’s investigation report is made available. At this stage, the party can apply for a settlement by offering to reform its conduct and pay a settlement amount determined by the CCI. If satisfied, it would pass a suitable order and close the inquiry. However, liability for compensation claims would still lie.
The S&C provisions would unquestionably be beneficial by releasing the time and the tight resources of the CCI for other matters. Since these orders will not be appealable, it will save further time. Similarly, for the parties, there would be considerable conservation of their time and expenses, including legal costs. Reputational risks would also be mitigated as the parties would be viewed as being more respectful of the law. Most importantly, it would mean an earlier restoration of competitive markets, which is the ultimate purpose of the law. The objective is not to punish parties, but to clean up the Indian markets from the viewpoint of competitiveness.
The CCI has rightly sought public comments to its draft regulations. In this regard, a few comments are pertinent. The regulations stipulate time limits for the parties to apply for S&C—45 days from the CCI’s prima facie order in the case of Commitments, and 45 days from the date of receiving the DG’s report in the case of Settlements. The general view from business entities is that the stipulated time is too tight. In the case of a Commitment, the parties would have little to go by for figuring out what Commitments to offer other than the very brief prima facie order.
Markets are complex, more so digital markets, which are often multi-sided. Further, in the case of global companies, they have to consider the implications of offering a commitment or a settlement on their businesses or cases under investigation in other territories. Notably, in the EU or UK, where the regime has been prevalent for some years, there is no deadline before which the parties must apply, though the timing of the offer may have some effect on the terms of the Commitment or Settlement, including the sum payable in the latter case. Considering all aspects, the deadline of 45 days needs serious reconsideration.
A glaring omission in the draft regulations relates to the large volume of ongoing cases. Here, the parties may already have missed the deadline of 45 days and would therefore not have the opportunity to avail of this facility. These cases would have to proceed till their logical end, an avoidable scenario. This could be rectified by inserting provision(s) to the effect that in such existing cases, the parties would be able to apply within the stipulated period (presently, 45 days) from the date the regulations take effect. Any Commitment or Settlement would have to be for a defined period of time, these cannot be in perpetuity since market conditions keep evolving. The concerned party itself would, in all probability, stipulate a finite period in its offer, which would be finalised after consideration by the CCI.
A provision in the draft regulations calls for clarity: it empowers the CCI to reject an offer on the ground that it does not consider it an ‘appropriate’ matter for a Commitment or Settlement. The difference between the offer being ‘not appropriate’ and not satisfying the CCI as addressing the competition worries is not clear. Clear guidance on this aspect is warranted. Besides, if a case does not warrant a Commitment or Settlement, then that view of the CCI ought to be taken early on in the process.
A serious disincentive for availing the S&C facility is that in case the application is unsuccessful, the submission can be used by the CCI against the party itself. Such a provision does not exist in mature jurisdictions. Further, to bring a finality to the S&C proceedings, there should be a provision that the allegations that are the subject of successful S&C cannot again be enquired into by the CCI. This will be in line with the logic of Section 26 (2A) of the Act that bars repetitive complaints.
As in the Settlement regulations, even in the case of Commitment regulations, there need not be any provision to invite comments from the public. This could be an invitation for throwing open the proceedings to all and sundry, whereas the proceedings are essentially in the nature of an administrative arrangement between the CCI and the concerned party.
The draft Settlement regulations state that in calculating the settlement amount the CCI would be guided by the Penalty Guidelines. It has been a long-standing demand from law professionals and businesses that these much-needed guidelines should be put in place. Further, a maximum settlement discount of 15% is not an adequate incentive, especially when it is considered that there is a heavy application fee as well as liability for compensation.
The provision for a S&C regime is a welcome step and the CCI has done well to invite public comments on the draft regulations. The above suggestions must be considered and regulations should be finalised at the earliest.
Vinod Dhall & Gaurav Desai, respectively, former head, CCI and partner, Touchstone Partners, Delhi. Views are personal.