While CLR report is a comprehensive one, few issues remain unaddressed

Published: August 27, 2019 2:02:41 AM

The recommendations call for including section 4A that allows for reasonable exercise of IPR as a defence against allegations of abuse of dominance.

Another recommendation is that the regulatory infrastructure of the CCI should be boosted by opening a couple of regional offices for carrying out non-adjudicatory functions.

By Augustine Peter 

The Competition Law Review Committee (CLRC) has just submitted its report to the minister of finance and corporate affairs. This article looks largely at the anti-trust issues.

A major structural change relates to the recommendation for a Governing Board. The CCI’s remit is an amalgam of advocacy, regulatory, investigative as well as adjudicatory functions. The recommendation is that CCI should have a Governing Board that oversees its advocacy and quasi-legislative functions. Investigative, regulatory and adjudicatory functions, by implication, would remain with the whole-time members of CCI. The idea of Governing Board has been adopted from ex ante regulators like SEBI and RBI. CCI is an ex post regulator, except in case of combinations (merger and acquisitions). CCI has very limited legislative functions, unlike an ex ante regulator, a main function of whose is making rules for the sector concerned. And advocacy does not require a structured system. The wall between regulatory, investigative and adjudicatory powers of the whole-time Members and powers of the part-time Members might turn porous, CCI being an ex post regulator.

Another recommendation is that the regulatory infrastructure of the CCI should be boosted by opening a couple of regional offices for carrying out non-adjudicatory functions. This is welcome. The recommendation to introduce a ‘Green Channel’ for combinations is a long-standing demand within and outside the Commission.

This committee worked on the emerging developments in the digital space and recommended: (i) that provisions may be introduced in the law to identify ‘hub and spoke’ cartels, and (ii) that agreements that do not fall in the category of horizontal (section 3.3) or vertical (3.4) be coupled in the category of section 3.4 to be evaluated under rule of reason. Besides, the committee has also recommended that transaction based threshold should be applied in the case of combination in the digital space.

Merger of the DG office with the commission with separation of investigative and adjudicatory functions has been recommended. This is not a major change in the sense that the current provisions provide for this, except that the appointment of DG, additional DG, etc, are currently done by the Government, which would simply need to be transferred to the commission.

CCI may be granted a one-time corpus fund. It also may be empowered to charge an ad valorem fee for combination filings. Obviously, this would accrue to the CCI corpus fund. This is a major step in providing autonomy to CCI. However, if a Governing Board were to come about, such autonomy is at risk of being compromised.

Introduction of a bench of NCLAT dedicated to hearing appeals under the Competition Act has been recommended. This is a next-best solution to the reinstatement of the old COMPAT.

The chairperson and whole-time members may sit in panels of three in relation to adjudication, and the composition of the panel may be determined by the chairperson. With only four members now at the maximum, flexibility is limited. The recommendation that there will be no “casting vote” may not be relevant because with three members as quorum, the issue of tie would not arise.

A major recommendation relates to introduction of settlement and commitment mechanisms. This is expected to result in swifter disposal of cases. However, this is confined to section 3(4) and section 4 only. While exclusion in the case of cartels is justified, the exclusion of horizontal agreements other than cartels will take away a number of future cases from its ambit.

The recommendation to expand the scope of section 19(3) to make the list of factors for determining AAEC in respect of section 3 violations are very relevant and welcome. However, the provision that any other factor may be determined by regulations would render it less useful. Giving discretion to the commission would be a more effective option. In the current law, a similar provision authorising the commission exists in Section 19(4)(m).

The recommendations call for including section 4A that allows for reasonable exercise of IPR as a defence against allegations of abuse of dominance. There is an issue here. Section 4 effectively envisages per se rule. Abuse of dominance is found to be per se anti-competitive. Rule of reason cannot be introduced for IPR without vitiating the architecture of the section. The recommendation on strengthening of the inter-regulatory consultation mechanism is a step forward, but falls short of the ideal scenario.

While it is a comprehensive report, a few issues remain unaddressed. There is no reference to the concept of single-economic-entity, which came up in a few cases prominently in the recent past. Common ownership and its effect on markets remain unaddressed. The neutrality between public and private sector enterprises has been diluted over the last few years through exceptions to public sector banks in combination process, etc. One expected the committee to recommend roll back of the same, given the combination regime is proposed to be streamlined and modified substantially. Criminalisation of cartels seems to have been merely looked at by the committee. No arguments in favour of or against the same has been made in the report. It is time to start a discussion on the need for criminalisation of cartels to weed out this cancer. Market studies have been recommended. However, there appears to be no recommendation to give statutory powers to CCI to seek and obtain information and data for non-enforcement work like this. Provisions exist in mature jurisdictions like the UK. This will enable the commission to initiate suo motu cases as also to evaluate the state of competition in major sectors of the economy and suggest policy changes to the government.

Visiting fellow, RIS, & former member, Competition Commission of India. Views are personal

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