CCI + Settlement

A competition law co-blogger recently complained about how the European Commission was turning into a “settlement Junkie”. While this is a debate which no doubt all EC competition law jurists and lawyers will seek to actively participate in and discusss, the post did get me thinking on any future prospective settlements with the CCI in India.

As far as I know, the CCI has till date not settled any case either related to an anti-competitive agreement or an abuse of dominant position. And on a perusal of the Act, there is a good reason. The Commission doesn’t have the power to settle cases !! No section of the Competition Act seems to allow the CCI to settle a case if it wishes to do so. The Section which seems to come closest to granting such a power to the Commission may be Section 36 (Power of the Commission to Regulate its Own procedure). However, that the power to settle a case can be interpreted under this Section seems a doubtful proposition.

Of course, this may not necessarily be a bad thing, as we can see from the above mentioned blog post.

Status And Effect of Cooperative Joint Ventures under Indian Competition Law

My article titled “Status And Effect of Cooperative Joint Ventures under Indian Competition Law” has recently been published in the Competition Law Reports (January, 2013 Edition)

In the article, I elaborate in detail the competition law regarding cooperative joint ventures and present the measures and methods which may be adopted by the Commission when it is finally called upon to handle such issues. Part I being the introduction, Part II elaborates upon the concept of cooperative/contractual joint ventures and provides a definition for the phrase and elaborates as to what exactly would constitute a cooperative joint venture. Part III elaborates in detail the EU law regarding cooperative joint ventures, including the important Orders and Judgements in EU competition law on the same. Part IV focuses on the competition law (or anti-trust law) in the United States of America (U.S.A.) regarding such agreements. Part V deals with the problem of cooperative joint ventures under the Competition Act, 2002 and suggests the preferred method of analysis which may help the Commission best analyze such ventures or agreements.

Click here for a copy of the article and please do leave your comments and feedback on the same.

Eastern India Motion Picture Association v. Ms. Manju Tharad, Appeal No.17 Of 2012 with I. A. No.31 Of 2012

To be honest, I did not know what to write about this Order (begins from page thirteen of the document), which is the primary reason for the delay to this post. The issue arose more as a result of bad drafting and communication rather than any actual serious question of law. Furthermore, what the Tribunal has actually enumerated is a well accepted principle of natural justice rather than a recognition of any previously unrecognised principle of competition law.

Nevertheless, important growths and developments always have small beginnings, and so till that extant this decision stands on its own. To quickly reiterate the facts, the Appellants challenged the Order passed by the CCI whereby all the appellants were imposed a penalty of Rs.25,000/- per day under Section 43 of The Competition Act, 2002 (hereinafter the ‘Act’). It was further provided that if the information asked was not supplied within 30 days, the penalty was to be Rs.50,000/- per day for the next 30 days and Rs.1,00,000/- per day thereafter, till penalty amount culminates to Rs.1.00 crore. Before the Commission, the Respondent in the present case approached the Commission under Section 19 of the Act with an information because of the action taken against her by Eastern India Motion Picture Association, the Appellant. The matter was referred to the Director General for Investigation under Section 26 (1) of the Act and the Director General in his report observed that the action taken by the appellant was not anti-competitive or in violation of Section 3 of the Act. The CCI however directed the Appellants to appear before the Commission on 03.11.2012 for making submissions. The CCI later in a meeting observed that the members of the Appellant’s association did not comply with the directives of the CCI as they had failed to file their individual profit and loss statements as called for by the CCI and directed the Appellant to file the individual financial statements and issued a show cause notice, consequent to which, the penalty.

Important portions of the Order:

We have found nothing in the impugned order justifying the action only against the four office bearers. The learned counsel pointed out before us that at the relevant time, there was 28 members of the Executive Committee of first appellant and that was clear from the records. (Paragraph 21)

We must clarify that the directions which are to be followed imperatively under Sections 48 read with Section 36 cannot be given casually. There must be some application of mind before issuing such directions and the orders must reflect such application of mind…. A look at the complaint would suggest that there were no allegations against the office bearers individually. If that was so and more particularly when the DG had exonerated the first appellant, it is not known as to why the CCI thought it fit to call the information about the personal accounts of appellant Nos.2, 3, 4 and 5. (Paragraph 22)

The last words of Clause of sub-Section (4)(a) [of Section 36] namely — “the examination of which may be required for the purposes of this Act” would in our opinion entail and would require the Commission to state at least prima-facie as to why the examination of the books of accounts was required. The Clause of sub-Section (4)(b) also uses the similar words. Therefore, the Commission would have to show before issuing any such direction that it has come to the conclusion that it would be necessary to examine such books or documents or for that matter the Commission would have to come to the conclusion that the information in possession of such persons would be required for the purposes of this Act. The Section is not meant to give an untrammeled and uncontrolled discretion to the Commission to ask for any information from anybody. It cannot be a mere ipse-dixit on the part of the Commission to decide to call for the production of books and documents or supply of information and the non-compliance of which would result in the penalty under Section 43. We find that the language of sub-Section (4)(a) and (b) of Section 36 would require a deeper examination of the issue as to whether production of books or documents in custody of such persons are necessary at all, the examination of which would be required for the purposes of the Act. (Paragraph 23)

Analysis of The Competition (Amendment) Bill, 2012 [Part – 2]

The previous post on the Competition Amendment Bill, 2012 discussed amendments upto Section 9. Continuing therefrom, is as follows:

6. Amendment to Section 20 and Section 21 and Section 21A

In Section 20 of the Act, in sub-section (2), the words “or reference” are to be omitted. Whereas, in Section 21, in sub-section (1), for the words “is raised by any party” and “authority may”, the words “arises” and “authority shall” are to be substituted respectively. Furthermore, the proviso is also to be deleted.

While the amendment to Section 20(2) merely fixes a clerical error, the amendments to Section 21 are important as the intention is without a doubt to try and bridge the differences which have arisen between the CCI and various other regulatory bodies on jurisdictional conflicts between them (For previous posts on this issue, see here, here and here). Similarly, the amendments to Section 21A will ensure that the sector specific regulatory bodies do not feel left out by putting a vice – versa obligation upon the CCI as well.

While the amendment puts a compulsion on any sector specific regulatory body to refer a competition matter to the Commission (which is good), it however, does not clarify as to who exactly decides if a competition related issue has arisen. It does not clarify whether the CCI or the regulatory body is to be the final arbiter of this question and this does tend to encourage ambiguity and this will without a doubt be submitted as a preliminary objection by lawyers in such disputes. However, once can assume that the term “arises” would refer to any violation of the provisions of the Competition Act.

7. Amendment to Section 26

This is again a clarificatory amendment on the Commissions power to refer the matter back to the Director General for further investigation by inserting the line “and make appropriate orders thereon after hearing the concerned parties” after each Sub-Section.

8. Amendment to Section 27

There are two amendments proposed in Section 27

(i) In clause (b), after the proviso, the following proviso shall be inserted:

“Provided further that no such penalty shall be imposed by the Commission
under this section without giving an opportunity of being heard to the producer,
seller, distributor, trader or service provider, as the case may be.”

(ii) In clause (g), after the proviso, the following proviso shall be inserted:

“Provided further that while passing orders under this section, the
Commission shall give due regard to the opinion given by the statutory authority,
where such opinion has been obtained under the provisions of sub-section (1)
of section 21A of this Act.”.

These additions into Section 27 do not seem to serve any useful purpose. The first proviso to be inserted provides an unnecessary extra procedural hurdle whereas the latter proviso was not really needed considering the Commission would anyways have to do the same under Section 21A. However, since it does not seem capable of causing any foreseeable harm in the future, so be it.

9. Amendment to Section 31

The Amendment to Section 31(11) seeks to reduce the statutory time available to the Commission to decide on notices of Combinations from two hundred and ten days to one hundred and eighty days. At the same time, the Amendment to Section 31(12) allows the parties to the Combination to apply for another one hundred and eighty days to comply with the Commissions Order/modifications from the previous period of upto ninety days. While these amendments are welcome, they will not be able to deliver the desired effect unless the Commission is adequately staffed. From what one has heard through the grapevine, the CCI is still grappling with recruitment problems for various vacant posts.

10. Amendment to Section 41

This is by far the most important amendment proposed to the Act. It aims to ensure the Commission of full and effective control by conferring the authority on the Commission to grant powers of search and seizure to the Director General’s office as and when required. this is similar to powers given to U.S. and E.U. competition authorities and will go a long way in effectively enforcing the Act. While such sweeping preeminent powers have been much criticised in the E.U. (especially in the case of dawn raids), I feel the puzzle pieces shall overtime fall into place with the help of judicial interpretation and CCI regulations.

11. Amendments to Section 43, Section 51, Section 53A and Section 63

A few small clarificatory and clerical amendments have also been proposed:

In section 43 of the principal Act, for the words “punishable with fine”, the words “liable to a penalty” are proposed to be substituted.

In section 51 of the principal Act, in sub-section (2), in clause (a), for the words “the Registrar”, the words “the Secretary” shall be substituted.

In section 53A of the principal Act, in sub-section (1), in clause (a), for the words, brackets and figures “sub-sections (2) and (6)”, the words, brackets and figures “sub-sections (2), (6), (7) and (8)” shall be substituted. This has probably been proposed in response to arguments raised in Singhania & Partners LLP v. Microsoft Corporation and Jindal Steel & Power Ltd. vs Steel Authority of India Ltd. [Attached our the main Orders of the Commission. Please visit the COMPAT website for the Tribunal Orders on the Appeals, where such grounds were raised.]

In section 63 of the principal Act, in sub-section (3), after the words “Every notification issued under”, the word, figure and letter “section 5A”, shall be inserted.

CONCLUSION

Overall, its a good bill, and in all probability the treasury benches shall face little opposition on it. the real question is when it will come up for vote and be passed. In the meantime, here’s hoping for a better competition regime in the Country soon.

P.S.: If I had to rate the Bill, I would give it a 7/10. Please do reply with with your thoughts on how you would rate the Bill in the comments sections below.

Analysis of The Competition (Amendment) Bill, 2012 [Part – 1]

The Government on 10th December finally introduced the much awaited (and speculated upon, considering the number of pieces I read in the Economic Times on it) Competition Amendment Bill, 2012. Obviously, we have been looking forward to write a post on the Bill (and i’m sure the readers have been waiting as well). So, hereunder, is a detailed analysis of the Competition Amendment Bill, 2012.:

1. Amendment of Section 2

Section 2(y) defines the term “Turnover” . In it, as per the Bill, after the words “goods or services”, the words “excluding the taxes, if any, levied on sale of such goods or provision of services” are to be inserted. This amendment does help to provide a clarification on the turnover threshold for combinations. However, what is also important is to note that it also reduces the quantum of penalty which can be levied by the Commission under Section 27 of the Act, which relies heavily on this term to ascertain the quantity to be levied. Personally, I do not consider this to be irrelevant as considering the intention of the Competition Act is to take punitive action against violators of the provision of the Act, any amendment whose consequence is to reduce the punitive burden on the violator in case of contravention is not suitable in the long term interest of enforcement of the Act. Some may choose to disagree, but I have always been a firm believer that competition law violators need to be hit hard where it hurts the most (their wallets) in order to ensure the desired effect.

2. Amendment to Section 3

Section3(4) enumerating the definitions of various vertical restraints to appropriately include “services” wherever necessary. I had noticed this lacunae during my early readings of the Act around two years ago, and in fact, the restrictive definition was also a contention in a moot court competition. While my argument was rejected then, it is nice to find one’s stand partially vindicated. 🙂

3. Amendment to Section 4

In section 4(1), after the words “or group”, the words “jointly or singly” are to be inserted. This will help in enforcing the concept of “collective dominance” under competition law as recognised in the EU and shall provide some much needed clarification on the interpretation of the Act. (See here for one of my previous posts which partially discusses this issue)

4. Section 5 and the new Section 5A

firstly, just to clarify, the amendment to Section 4 shall ensure that the Commission does not need to rely on the definition of “Group” under Section 5, which may have caused some confusion since the purpose of that definition is to aid Section 5 exclusively. Moving on, in the Explanation, in clause (b), in sub-clause (i), for the words “twenty-six per cent.”, the words “fifty per cent.” shall be substituted as per the bill. It narrows the definition slightly, but it probably will not have a significant impact on it. What is more relevant is the insertion of a new Section 5A which states as follows:

“5A. Notwithstanding anything in section 5, the Central Government may, in
consultation with the Commission, by notification, specify different value of assets
and turnover for any class or classes of enterprise for the purpose of section 5.”.

The insertion of this new section is primarily intended to supplement the power of the Central Government under Sections 54, 55 and 56 of the Act.

5. Amendment to Section 9.

This is a needless Amendment. In intends to formulate two different procedures for the selection of the Chairperson and the other members of the Commission respectively. this would have made sense if the intention of the Government is to try and circumvent the delay which is often accompanied in the appointment of various Tribunal and Regulatory heads by ensuring that the Commission continues to function. However, such a purpose will not be fulfilled by this amendment since the amendment requires that the Selection Committee first recommend the names, which basically brings everybody back to square one !!

(TO BE CONTD.)

Supporting And Growing Our Premise

In our post titled “Executive Actions And Indian Competition Law:A Premise”, we tried to develop a premise on when the executive actions may be considered anti-competitive under the Competition Act. In an attempt to grow on that post, a recent article in Mint titled “Ending India’s Food Cartels“ helps us to further stress on the point in the above post. The article focuses on the monopoly of the Food Corporation of India (FCI) and the Agricultural Produce Marketing Committees (APMC’s).

While I do not entirely agree with the article ( APMC’s cannot be considered for anti-competitive practices, the reasons for which please read the previous posts and “hoarding” by the FCI is forgetting the fact that the FCI is also the organisation to manage the buffer stocks of the country), I do feel there may be a case against the FCI with regards some of its procurement policies. However, only a detailed in-dept investigation can reveal more.

Cabinet Approves Amendments To the Competition Act, 2002

As per a press release by the Ministry of Corporate Affairs,

“The Union Cabinet has approved the proposal of the Ministry of Corporate Affairs to further amend the Competition Act, 2002, with a view to fine tune it and to meet the present day needs in the field of competition, in the light of the experiences gained in the actual working of the Competition Commission of India in the last few years.”

Unfortunately, we could not find a draft of the Amendment Bill on the Ministry’s website. Will write a detailed piece on the same as soon as it is made public. In the meantime, if anybody finds the draft, please post the link to the same in the comments below.

Executive Actions and Indian Competition Law: A Premise

In one of our previous posts, I had tried to highlight that a regulatory authority of the government could not in most cases be challenged as anti-competitive or an abuse of dominant position. Using the facts of that particular case, I had tried to show that in most cases such authority of a ministry or a sub-division of the ministry could not be challenged.

To grow upon that post, I submit the Commissions order in Arshiya Rail Infrastructure Ltd. (ARIL) vs Ministry of Railway (MoR) & Ors. (Main Order/Per S.N. Dhingra, Member/Per M.L. Tayal, Member/Per R. Prasad, Member (Dissenting)) is one of the few cases where executive actions could be challenged as anti-competitive. While once again the Commission dismissed the case on merits, the Order helps in clarifying the Commissions stand regarding this issue and consequently, also helps us to update our previous premise to as follows:

1. Exercise of executive authority through regulations or rules issued by an executive authority for the purposes of regulation of the provision of any goods or service cannot by itself be considered a service on the part of the Government. It is merely the exercise of the legitimate state authority, and thus cannot be challenged as anti-competitive or an abuse of dominant position.

2. Any action of such a government authority when a subdivision of that ministry or authority ( in this case, the Indian Railways) wherein the ministry or executive authority’s position results in a DIRECT relation as a competitor in the relevant market may be challenged as anti-competitive or an abuse of dominant position as the ministry or its sub-division would end up coming under the ambit of the definition of “enterprise” under Section 2(h) of the Act and thus could also be interpreted under the definition of “group” as given under clause (b) in the Explanation to Section 5.

We welcome your comments, criticism and feedback on the above premise.