Reviewing the competition Act: The Act needs to deal with new technologies

Published: December 26, 2018 1:11:49 AM

The Act needs to deal with new technologies, define ‘dominance’, reform the institutional framework of CCI.

Competition Commission, CCI fine, Competition Commision fine, fine on Hyundai, Hyundai Motor India, anti-competitive practices, car maker, non-recommended lubricants and oilsThe Act, as such, has mixed up both the proceedings, which are gross legal errors that need to be rectified at the earliest.

By Nidhi Singh

The Union government, on September 30, 2018, constituted a nine-member Competition Law Review Committee to review the Competition Act, 2002, which has been in operation for more than a decade and a half. According to the press release, the committee has been entrusted with three tasks:
To review the Competition Act, Rules, Regulations, in view of changing business environment and bring necessary changes wherever required;
To look into international best practices in the competition fields, especially antitrust laws, merger guidelines and handling cross-border competition issues;
To study other regulatory regimes, institutional mechanisms and government policies that overlap with the Act.

All the aforementioned areas are quite broad, but the committee is expected to complete this mammoth task and submit the report within three months of the date of its first meeting. Nonetheless, it will be interesting to read the recommendations and to observe the outlook of the committee that comprises of antitrust experts, scholars and civil servants, on the current Indian competition law regime.

This column deals with five areas under the current Competition Act, which begs a reform. The first challenge is to address the need for a modern and robust regulatory framework to deal with disruptive technologies like Artificial Intelligence, Internet of Things, algorithmic pricing, virtual competition, cryptocurrencies and blockchain. For example, blockchain—it’s decentralised, anonymous and immutable—could give rise to multiple questions regarding detection of unilateral practices and identification of perpetrators. Though such disruptive tools are yet to undergo a drastic evolution, the basic question the committee needs to ask is: “Whether the current Competition Act fits into technology?” Finding an answer to this will lead to more certainty and facilitate ease of doing business in India.

Second, ‘dominance’, under Explanation to Section 4 of the Act, means the ‘ability to operate independently of competitive forces prevailing in the relevant market’ or ‘affect its competitors or consumers or the relevant market in its favour’. The Act lays down 13 factors under Section 19(4) to determine dominance. Applying this concept of dominance in the aforementioned virtual space can be dangerous. The possible reason is that, in digital markets, it is common to find dominant players. Equating dominance in this case with market power (like palpable from the factors listed under the Act) becomes an inevitable consequence, thus leading to reduction in overall investment.

The third facet is the need to reform the institutional framework of the Competition Commission of India (CCI). The Union Cabinet, in April 2018, downsized the CCI to a body of four members including the chairperson. More number of members adds to diversity of opinion, and better reasoning and judgement. Interestingly, the CCI, under Section 7(4) of the Act, is empowered to establish multiple benches across India. The increase in the number of benches with a minimum quorum of 3-5 shall help in reducing the workload, expeditious disposal of cases with high qualitative standards, and facilitate ease of doing business in the country.

The current workforce in the CCI comprises of either civil servants or officers from other government offices who are on deputation only for a few years. An example in this case could be drawn from the Competition and Markets Authority of the UK, which comprises of antitrust scholars and experts at higher level. Staffing the CCI with such experts who have substantial knowledge, expertise, practice and scholarly experience in antitrust law shall raise the qualitative analysis and standards of the judgements being passed.

Fourth, the Union Government, via Finance Bill, 2017, has scrapped the Competition Appeal Tribunal. This was a blunder done by the government, given that a specialised law like competition requires a robust appellate authority, which is crucial for smooth development of a specialised regulation. Under Section 61 of the Act, no civil court has the jurisdiction to entertain any suit or proceeding in respect of any matter that the CCI or the appellate tribunal is empowered under this Act.

Applying the real intention behind Section 61, a dedicated tribunal that is independent from other forums could be established to deal with competition appeal cases. Another area that draws frequent appeals is when the aggrieved party is in disagreement with the report of the investigation of the Director-General. Currently, under Section 26 of the Act, there is no provision for preferring an appeal against the order of the CCI where they disagree with the report of the Director-General. Inserting a similar provision could prevent frivolous appeals against the CCI before higher courts and thus reduce substantial workload.

Finally, the Competition Act provides only for civil consequences for breach of its provisions. Section 27(b) provides for penalties in event of contravention under Section 3 and 4 of the Act. The CCI can also impose monetary penalty of up to 10% of an enterprise’s turnover for preceding three financial years. Three reforms are required in this provision of law:
The CCI hasn’t promulgated penalty guidelines, with no specific factors to be taken into account while computing fines;
The CCI has not recognised the concept of ‘relevant turnover’ and has fined multi-product companies on the total turnover despite single product being the subject for breach;

Lastly, as rightly argued by Somasekhar Sundaresan, the Act uses both the words ‘fine’ and ‘monetary penalty’, with the former being used generally for criminal monetary punishments and the latter for civil monetary punishments. The Act, as such, has mixed up both the proceedings, which are gross legal errors that need to be rectified at the earliest.

The author is Counsel, Delhi High Court, and founder and senior research fellow, Institute for Commercial Law & Policy Research

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