CCI’s recent order conclusively dispels ambiguity over who can approach the commission

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September 4, 2020 4:40 AM

The Competition Commission’s recent order, in the Harshita Chawla matter, conclusively dispels the ambiguity over who can approach the commission to report a violation of the competition law. It is hoped that parties can’t stall inquiry pleading this

The mere fact that a case has been filed by an aggrieved party under the Competition Act, does not take away its character of being a case in rem involving a larger question of fair and competitive markets.The mere fact that a case has been filed by an aggrieved party under the Competition Act, does not take away its character of being a case in rem involving a larger question of fair and competitive markets.

Who can approach the Competition Commission of India against anti-competitive practice by an enterprise that is in breach of the Competition Act? Must it only be a person or entity that has suffered harm on account of the anti-competitive practice and, therefore, has a proximate cause for approaching the Commission? Or can any individual or company with knowledge of the offensive practice inform the Commission?

This issue has often been raised in debates—and by accused parties in their defence, as a preliminary ground for dismissal of the case at the very threshold. The Commission has not accepted this defence.

However, recently the National Company Law Appellate Tribunal, in the appeal case Samir Agarwal v. Competition Commission, ruled that to have the locus standi to file an “information” before the Commission, a ‘person’ must necessarily be one “who has suffered an invasion of their legal rights as a consumer or as a beneficiary of healthy competitive practices”. The tribunal observed, “When a statute like the Competition Act specifically provides for the mode of taking cognizance of allegations regarding contravention of provisions relating to certain anti-competitive agreement and abuse of dominant position by an enterprise in a particular manner and at the instance of a person apart from other modes viz. suo motu or upon a reference from the competitive government or authority, reference to receipt of any information from any person in section 19(1) (a) of the Act has necessarily to be construed as a reference to a person who has suffered invasion of his legal rights as a consumer or beneficiary of healthy competitive practices.” It expressed the concern that “Any other interpretation would make room for unscrupulous people to rake issues of anti-competitive agreements or abuse of dominant position targeting some enterprises with oblique motives.”

The restrictive ruling of the NCLAT has dismayed many students and experts of competition law. It amounted to severe circumscribing the opportunities to unravel alleged violations of the Competition Act.

The objective of the Competition Act is aptly captured in its Preamble (and reiterated in Section 18): “An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.” In pursuit of this objective, the Act duly empowers the Commission to inquire into and penalise such practices.

Competition is sought to be maintained and sustained in markets not because it is some fancy idea, but in recognition of its considerable benefits for consumers and for the economy on the whole. Countries across the world have discarded state-directed policies and monopolies in favour of market-contest that offers choice and freedom to consumers, lowers the prices they pay, incentivises innovation and enhances efficiencies of various kinds. Most countries have also enacted competition/anti-trust laws to punish practices that suppress competition. Witness the heavy penalties—often in millions of dollars—levied in numerous cases of cartelisation and abuse of dominance in many jurisdictions. In India, most of us will remember the limited choices consumers had in the pre-liberalisation era, even in buying elementary products and services like milk and bread, air transport, telecommunications, cars, etc. Competition has changed all of that.

The Competition Commission recently, in a well-argued and comprehensive order in Harshita Chawla vs Whatsapp and Facebook, clarified the legal position in respect of locus standi. The Commission’s order references the Preamble and various provisions and amendments to the Act, the Supreme Court’s seminal ruling in Commission v. SAIL, previous rulings of the Competition Appellate Tribunal and its own earlier orders, to emphatically assert the point that violations of the Act are offences in rem and not in personam, and no party that approaches the Commission need necessarily be one injured by the impugned practice. The reasoning of the Commission is best explained in its own words: “The Preamble to the Act unequivocally voices the ethos with which the Act was enacted … Clearly, the Act has been conceived to follow an inquisitorial system wherein the Commission is expected to investigate cases involving competition issues in rem, rather than acting as a mere arbiter to ascertain facts and determine rights in personam arising out of rival claims between parties. Further, many a time, even though a case filed by an aggrieved party may appear to be a case in personam, underlying it is a larger question of market distortion. The mere fact that a case has been filed by an aggrieved party under the Competition Act, does not take away its character of being a case in rem involving a larger question of fair and competitive markets.”

Further, “The role of the Commission as an overarching market regulator also finds its foundational footing in the amendments … whereby and whereunder the provisions of Section 19 (1) (a) were amended substituting the words “receipt of a complaint” with “receipt of any information”. This amendment clearly reflected the legislative intention of emphasising the inquisitorial nature of the proceedings of the Commission. Further, there are several other amendments, as also the other provisions of the Act, which reverberate this inquisitorial scheme.” And, “This approach is also evident from the powers available to the Commission to direct investigation and hold inquiries even against persons or entities, who were not party to the information, but who are also suspected to be involved in an anti-competitive conduct.”

The Commission cited the SAIL judgment of the Supreme Court, “wherein the Hon’ble Court specifically noted that the Commission discharges inquisitorial, regulatory as well as adjudicatory functions.”

The Commission recalled its earlier pronouncements about the locus standi of the Informant, for instance, in Reliance Agency And Chemists and Druggists Association of Baroda & Others: “The proceedings before the Commission are inquisitorial in nature and as such, the locus of the Informant is not as relevant in deciding whether the case filed before the Commission should be entertained or not. As long as the matter reported to the Commission involves anti-competitive issues falling within the ambit of the Act, the Commission is mandated to proceed with the matter. Further, it may be noted that as per the scheme of the Act, it is not necessary that there must be an informant to initiate an inquiry or investigation. The Commission is entitled to even proceed suo motu or on any reference being made by the Central Government or State Government or any Statutory Authority. Thus, the Commission is more concerned with the facts and allegations highlighted in the information rather than the locus of the person who provided such information.”

Notably, the Commission has, from time to time, undertaken market studies (e.g. in e-commerce) to better understand the functioning of certain industries and business practices that might be inhibiting competition therein. It is at liberty to commence inquiries on the basis of such market studies, as has often been done by other competition authorities like the European Commission. Similarly, the Act has a whistle-blower provision, incentivising parties to disclose cartels and benefit from substantially-reduced penalties. All these further complement the Commission’s apposite observations.

It is hoped that, given the emphatic and convincing order of the Commission, no informant requires a locus to approach the Commission, this issue is conclusively settled, and parties will not be able to stymie an inquiry on this ground.

The author is Former member & acting chairman of the Competition Commission of India, and senior adviser, Platinum Partners

(With contributions from Shruti Bhat, associate, Platinum Partners)

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