Competition Commission of India: Overview
The article gives an insight into the Competition Commission of India and the landmark cases dealt by it.
The article gives an insight into the Competition Commission of India and the landmark cases dealt by it. The article also covers the importance of the Raghavan Committee, the powers of the Commission and the penalties it can impose.
Introduction
The concept of having a legal system to regulate competition in the market is very old; however, this concept came to be heard in India only in 2002. The Indian Parliament came out with the Competition Act in 2002 to regulate competition in the market by repealing the Monopolies and Restrictive Trade Practices Act of 1969. The Competition Act of 2002 has been amended twice, once in 2007 by virtue of The Competition (Amendment) Act, 2007 and then in 2009 by virtue of The Competition (Amendment) Act, 2009.
There are two principal features of the Competition Act of 2002 namely, the establishment of the Competition Commission of India and not only to promote the competition which is positive and healthy in nature but also to prohibit all the anti-competitive practices prevailing in the Indian market.
The new Competition Act got enforced in the year of 2002 and was drafted in such a way that it lays down certain tools and legal frameworks in order to make sure that the competition policies are being followed and to do away with the anti-competitive practices and if any of such policies are followed, the Act provides punishment for the same. The Act, inter alia, works to protect the free, fair and healthy competition in the market, freedom of trade and interests of the public at large.
One of the main objectives with which the Competition Act was brought is to do away with those practices that create an adverse impact on the competition.[1] There are three ways by virtue of which there can be appreciable adverse on the competition, namely, anti-competitive agreements, combinations and abuse of dominance. The Act has also cast a duty upon the Competition Commission of India to prohibit all those practices that produce an adverse impact on the competition in the Indian market and to get all the objectives stated in the preamble implemented.[2]
Raghavan Committee
Since 1991, the Indian government had come up with various reforms in the economic policies of the country due to the atmosphere of liberalization all across the world. Further, in 1999, to be in line with the guidelines by World Trade Organization, the Indian government has led to the formation of the Raghavan Committee, a high-level committee with a major focus on competition policies and competition laws for the country.
This committee was entrusted with the duty to provide advice on the modern competition law with a view on the developments that take place in the international market and also to provide suggestions on the legislative framework that is in tune with the developments internationally or provide suggestions to amend the MRTP Act.
The role of the Commission is not limited just to enforcing the competition law in all the markets across the country. The commission is also expected to take part in all those activities that are directed towards formulating the economic policies for the country, which are in the capacity to affect the economic performance, business conduct and competitive market structure adversely.
Thus, the commission with the duty to perform the role of the competition advocate as well so that the policies can be drafted by the Government in such a way that removes the obstacles for entering, promoting deregulations and liberalization of trade along with the promotion of competition in the markets in the country. This is how the implementation of competition law, as well as competition advocacy, are directly proportional in nature.
CCI is also encased with the duty to build a relationship between the various regulatory bodies and the Departments and Ministries of the Government and any other body for the formulation and administration of the policies that create an impact on the demand and supply chain in the market so that the program of competition advocacy can be successful.
These kinds of relationships will try to improve communication and search for alternatives which are less harmful in nature for not only the competition but also the welfare of the consumers.
The possible ways for the Commission to achieve these goals can be encouraging debates on the matter and promotion of a better and more informed way of making any decision.[3] It is important to keep the competition advocacy transparent and open so that the integrity and capability of the Commission can be safeguarded.
Cases dealt by CCI
The CCI in the matter of FICCI Multiplex Association of India v. United Producers/Distributors Forum [4] held that the distributors or the producers by virtue of their collective market power, came to provide the guarantee that till the time the multiplex owners did not provide their consent to the offer of enhanced revenue share, they will not get any matter for film exhibition.
Hence, the CCI pronounced that any conduct of the producer that results in the formation of cartel-like conduct is in contravention of the provision of the Act[5] and are in the capacity to cause an adverse impact on the competition.
Further, in the landmark case of Builders Association of India v. Cement Manufacturers Association and Other,[6] the CCI has imposed a penalty of around Rs. 6000 crores over eleven cement producers who were leading the market then. It was done because they were found guilty of forming cartels amongst themselves in order to have control on the supply, production and costs of the cement sold in the market. As per CCI, it had found them guilty of violating the provisions of the Competition Act, 2002.
CCI had penned down certain points to determine whether there is an abuse of dominance by any industry or enterprise, such as :
- If it causes limitations on scientific development or any kind of production
- If it denies any kind of market access to anyone
- If it imposes any kind of discriminatory or unfair condition or price in sale or purchase
- If it takes into use its position in one relevant market to protect or enter into a relevant market
- If it comes into agreement subjected to supplementary obligations
Also, an approach based on effects was also adopted by CCI in some of the cases wherein the effect of anti-competition was seen due to the abusive conduct or the market was distorted due to any conduct of the organization or when consumers have to face any harm due to abusive role played by the dominant player of the market.
The CCI had come out with another observation in the matter of GAIL & Anr[7], wherein CCI got substantial justification regarding the execution of a long-term agreement of regasified liquefied natural gas entered into by GAIL according to the products and nature of the involved industry.
Another finding of CCI is that the allegations on any enterprise regarding the abuse relating to imposition of Pay or Take Liability, which is imposed when a company has agreed to take a certain quantity of gas but failed to take as per the agreement, the CCI herein provided that the examination of any such conduct is to be done according to the effect that is created by the evidence.
In another matter of Bicon Limited v. F Hoffmann-La Roche AG,[8] the CCI had observed that there could be a possibility that the enterprise with the dominant position uses legal processes to exhaust or to oust the rivals that are small in nature along with delaying or preventing their entry in the relevant market that will be contributing to another kind of abuse under the meaning provided by the Act.
There can be seen in another case whereby CCI had reviewed the protectionist conduct of the enterprises dominating in the market. In the matter of HPCL Mittal Pipelines Limited v. Gujarat Energy Transmission Corporation Limited & Ors,[9] it was alleged that the enterprise, State Load Dispatch Centre, GETCO Gujarat (SLDC) was denying open access as it was required for sourcing electricity by consumers via alternative suppliers.
The CCI noted that every consumer who is hoping to avail the open access for getting the supply of electricity in Gujarat was expected to take the prior approval of SLDC leading the SLDC to acquire the dominant position in the market. While assessing the alleged abuse by the SLDC, it was found by CCI that the actions of the SLDC are in contravention to Section 4 of the Competition Act, 2002.
In addition to this, it was noted by CCI that SLDC was using its dominant position to create an adverse effect on the competition especially in the downstream market, where it was carrying out its functions with the help of a group of entities.
In the matter of Hindustan Zinc Limited v. Coal India,[10] wherein it was found that Coal India Limited (CIL) and its other subsidiaries were violating section 4 of the Act. The CCI levied a penalty amounting to around 17.7 billion rupees in the year of 2013. The order of CCI was appealed in COMPAT by providing that the CCI had failed to observe the principle of Natural Justice as a ground in its appeal.
When the order of this appeal was passed in the year of 2017, the amount of 5.9 billion rupees was decreased from the earlier order on the basis of the transformative steps that were taken by the enterprise after the passing of the original order by the CCI and during the time when the proceedings were pending.
Powers of Commission
The Commission is empowered to control the abuse of dominant position by any of the players of the market and pass orders by virtue of Section 27 of the Competition Act, 2002.
It may give directions to the parties to discontinue from the existing agreement or not to re-enter into any such agreement ever or may give directions to do modifications in the agreements or may give directions to the concerned enterprises to follow all the orders that are passed by the Commission or abide all the directions passed by it, along with the payment of costs. Further, the Commission is also empowered to pass any other order as required by the situation.
Inquiry
The Competition Commission of India is empowered to proceed with inquiry[11] in all those matters that are contrary to the provision prescribing for abuse of dominant position by any of the players of the market.
When a prima facie case of such abuse can be made as per the satisfaction of the Commission, it is empowered to give directions to the Director-General to investigate the matter and submit the report. The Commission is granted powers that are equivalent to that of the civil court prescribed under the Civil Procedure Code. Some of the powers can be enlisted as receiving evidence on affidavit, production and requirement of documents on oath, enforcing or summoning attendance of any person on oath and so on.
Penalty
The Commission is also empowered to levy penalties on the offenders. The amount of penalty can range up to 10 per cent of the average turnover of the company during the last three financial years upon all those enterprises or the individuals that are parties to offences.
There are a lot of factors that have to be considered while imposing the penalty on the offenders. For instance, one of the factors to be considered is the relevant steps that were taken by the opposite party during the period of filing of information with the complaint of abuse of dominance and the order of CCI.
It has to be seen whether such steps were taken to reduce the concerns of the competition law along with the determination of the penalty that is to be imposed. Other factors which help the CCI to take decisions are denying the market access, severe and prolonged abusive conduct and so on.
There can be other situations where the enterprises have entered into such offenses with the help of cartels, the Commission is empowered to provide them with a penalty of around three times of the profit for all those years during which the agreement was continued or ten per cent of the turnover for all those years during which the agreement was continued, whichever is higher between them to all those who are parties to the agreement may be service producers, traders, distributors, sellers or producers.
This indicates that the penalty imposed by the Commission can be severe and can lead to high financial losses to the offenders.
However, if a company makes a full, true and vital disclosure pursuant to which such cartels can be busted out, the Commission is empowered to show some mercy to such enterprises and reduce the amount of their penalty.[12] If it is found that the party made partial disclosure or furnished false evidence or if the disclosure is not vital in nature, the Commission may opt to not show any of such leniency.
[1] Preamble of the Competition Act, 2002
[2] Section 18 of the Competition Act, 2002
[3] Prof Pallavi Gupta, Concept of Competition Advocacy and Role of CCI in India: A Practical Approach; Available Here
[4] Case No. 01 of 2009
[5] Section 3 (3) of the Competition Act, 2002
[6] Case No. 29 of 2010
[7] Case Nos. 16-20 & 45 of 2016, 02, 59, 62 & 63 of 2017
[8] Case No. 68 of 2016
[9] Case No. 39 of 2017
[10] Case No. 46 of 2018
[11] Section 19 of the Competition Act, 2002
[12] Section 46 of the Competition Act, 2002