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Institutional Framework under the Indian Competition Act, 2002

G.R. Bhatia endeavours to explain that while the statutory duty to eliminate the anti competitive practices from the Indian soil devolves on the CCI but the latter heavily bank up several other institutions, namely – (i) the Director General in carrying out investigation into the infringements of the Act and to
furnish the report, (b) the CMM, Delhi – in giving permission to the DG to go for an unannounced raid on the delinquent and in determining penalties for violation of the orders of CCI and the CAT, (iii) the Tax Recovery Officer for recovery of penalties imposed under the Act, (iv) the Civil Courts for execution of order of CAT and execution of decrees in favour of applicants for compensation, (v) Competition Appellate Tribunal to hear appeals, and (vi) the Central Government to give policy directions. Thus, the need for all is to act in tandem and harmony in making India an anti competitive nation.

The institutional framework is the key to successful implementation of any law and competition law is not an exception to the general rule. Recognising the need for an appropriate legislative cum administrative set up to implement the law, the terms of reference of the High Level Committee on Competition Policy & Law (also known as Raghavan Committee) inter-alia were required to suggest both the legislative framework as well as the administrative set up for the modernised competition regime in India. While in many countries, the enforcement of competition law is entrusted to the judiciary, the Raghavan Committee in its Report viewed that in an era of specialisation, competition law administration would be better administered and consumer welfare would be better served, if it be placed in a specialised agency and such body be christened as ‘Competition Commission of India (CCI)’.

It was further suggested that the CCI should be
  • a multi members body,
  • independent and insulated from political and budgetary controls,
  • should have separate investigative, prosecutorial and adjudicative functions,
  • should have transparent, non discriminatory and rule bound proceedings, and
  • should undertake positive advocacy in shaping policies affecting competition. To ensure all these, the Committee also recommended that the law should provide

    • a system of checks and balances by ensuring due process of law,
    • have extra territorial reach and
    • have punitive provisions for punishing the offenders besides other remedial methods.
The Act of 2002 was enacted broadly on the above lines and the Competition Commission (CCI) was established on the 14th Oct., 2003 but it could not made fully functional by the Government due to filing of a writ petition challenging some of the provisions of the Act, before the Hon’ble Supreme Court. While disposing of the writ petition on the 20th January, 2005, the Court held that if an expert body is to be constituted by the Union Government, it might be appropriate to consider the creation of two separate bodies, one with expertise for advisory and regulatory functions and other for adjudicatory functions based on the doctrine of separation of powers recognised by the Constitution.

Keeping in view the judgement supra, the suggestions which the Government received in the meantime and also to give effect to the recommendations made by Parliamentary Standing Committee to which the Competition (Amendment) Bill, 2006 was referred for examination and report, the Act of 2002 was substantially amended in the later half of 2007. The two enforcement dimensions of the law namely the ‘Anti Competitive Agreements’ and the ‘Abuse of Dominance’ have been enforced with effect from 20th May, 2002 and the timing of enforcement of law coincides with the installation of new government at the Centre. The third sphere namely ‘Regulation of Combination’ is likely to be made effective shortly. The Government has also notified the repeal of the MRTP Act, 1969 with effect from Ist September, 2009. With this, CCI is now the sole national authority to deal with competition matters.

The details of institutional framework, how the CCI is inter dependent on a host of other institutions and what is imperative of all to do, in order to achieve the intent and purpose of law, is narrated herein below:-

A. Competition Commission of India (CCI):

A statutory duty is cast upon the CCI to eliminate practices having appreciable adverse effect on competition, promote and sustain competition and to protect the interest of consumers and ensure freedom of trade carried on by other participants, in markets in India as mentioned in section 18 as well as the Preamble of the Act. The Raghavan Committee inter alia suggested that the CCI should be the sole recipient of all complaints regarding infringement of the Act from whatever sources it may be; an individual, a firm or an entity or the Central or State Governments. In addition, it should also have suo motu powers for initiating action against any perceived infringement. Unhesitatingly, all these have been enshrined in the section 19(1) of the Indian Competition Act. To complement and supplement the domain of the CCI in determining and eliminating anti competitive practices, section 61 specifically prohibits civil courts to entertain any suit or proceeding which the Commission is empowered to determine.

In order to achieve the twin laudable objectives i.e. to build strong competition culture and to eradicate the anti competitive conducts and structures, it requires pro-active and positive role of host of institutions, namely
  • the Director General, an investigation arm of the CCI,
  • the Chief Metropolitan Magistrate, Delhi,
  • the Civil Courts,
  • the Tax Recovery Officer,
  • the Central Government, States Governments, Statutory Authorities, and
  • the two apex bodies, namely the Competition Appellate Tribunal (CAT) and the Supreme Court.
Each one’s role has been provided for to ensure the ‘check and balance’ and further all have to act in tandem and in harmony to achieve ‘maximum consumer welfare through competitive process’.

B. The Director General (DG)

The DG, an investigation arm, is meant to assist the CCI in investigating any contravention of the provisions of the Act / rules/regulations and to furnish an investigation report in respect of matters referred by the CCI. While, the CCI is not bound by the findings in the report of the DG, it is obligatory for the CCI to refer the matter for investigation to the DG and seek an investigation report once it forms a prima facie opinion that a case of infringement of Section 3 or 4 has occurred. In case of enquiries into combination, the report from DG may be called upon by the CCI. The DG can also investigate the conduct of related entities, of course, with the authorisation from the CCI.

To undertake such enormous responsibilities, the DG is blessed with powers as are vested in a civil court while trying a suit. Moreover, the DG is armed with powers to conduct an unannounced raid to undertake ‘search and seizure’. All these strengthen the DG to effectively assist the CCI. Although, the DG is to assist the CCI, it is incumbent upon DG to be fair & impartial in carrying out investigation and in drawing his conclusions in the Report. His findings have to be reasoned so that they can meet the counter arguments of the charged enterprise or the referrer, as the case may be.

To ensure the independence of the DG, in its functioning, the CCI is not to dictate the manner of investigation and his appointment is made by the Central Government, the compensation package, and the number and kind of manpower in his office is also to be prescribed by the Government. Further, in order to ensure freedom and autonomy in reporting, the law explicitly provides that his remuneration cannot be varied to his disadvantage at a later stage. Once the adequate manpower is there in the Directorate, there is a need to develop the required skills, equip them with modern tools for developing synergies between investigation, prosecution and regulation.

C. Chief Métropolitan Magistrate, Delhi:

When during the course of investigation, the DG apprehends that documents or records in possession of the charged or related party may be destroyed, mutilated or tampered, the DG may go for unannounced raid but as a check and balance measure, the Act provides that an unannounced raid can be undertaken only after obtaining permission from the Chief Metropolitan Magistrate, Delhi.

The power of such authorization has been purposely conferred on CMM, Delhi so as to ensure that the ‘search and seizure by the DG’ remains unannounced. The purpose is to ensure that the information regarding a potential raid remains confidential and that in the event of leakage, the responsibility can be pinned down. In the UK, an application for authorisation to go ahead with a ‘raid’ by the Office of Fair Trading is not listed before the competent authority and the proceedings are conducted in camera. In India too, a similar arrangement needs to be worked out. For example, an application can be moved in a sealed cover in the Court of CMM and proceedings ought not to be held in public. Further, a system needs to be evolved whereby the DG with proper direction of the CMM is able to take the assistance of other investigating arms of the Central/State Governments including the police.

In the event of disobedience of an order, the CCI/CAT is required to file a complaint in the Court of CMM, Delhi to take cognizance of the offence and to pass directions thereon including determination of quantum of monetary penalty. Thus, the CMM has to appreciate the harm being caused to the consumers, business and the economy as a whole consequent upon the infringement of the Act or disobedience of the orders. Moreover, it would be advisable also to designate a CMM in whose jurisdiction the headquarters of the CCI is situated, as the concerned CMM, for the purposes of the Act.

D. Tax Recovery Commissioner/Officer under the Income Tax Act, 1961:

A monetary penalty may be imposed (a) by the CCI itself for infringement of the provisions of the Act/ rules/ regulations, or (b) it may be determined by the CMM, Delhi on filing of an application by the CCI or CAT for disobedience of their directions/orders. In the event of failure to recover the monetary penalty imposed, the CCI may make reference to the concerned Tax Recovery Officer for recovery of the penalty as ‘tax due’ under the Income Tax Act. A reference from the CCI would amount to drawing of a certificate under Section 222 of the Income Tax Act, 1961 and the Tax Recovery Officer is to proceed to recover from the assessee by attaching moveable/immovable property or appointing receiver for the management of assessee’s properties or by arrest or detention of the assesses in terms of the Income Tax (Certificate Proceedings) Rules, 1962.

Thus, the CCI and the Income Tax Authority have to act in coherence in effecting recovery of penalty imposed so that there is disgorgement of unreasonable enrichment by the delinquent enterprises and a contribution to the corpus of consolidated funds of India for its use in larger public interest. It will be apt to mention the philosophy echoed by the revered poet Kalidasa in the Raghuvansh:‘It was only for the good of his subjects that he collected the taxes from them just as sun draws moisture from the earth to give it back a thousand fold’.

E. Competition Appellate Tribunal (CAT)

The Appellate Tribunal is to hear and dispose of
  • appeals against any direction issued or decision made or order passed ( except order relating to institution of an enquiry) by the CCI,
  • appeals arising out of an order of a Tax Recovery Officer pursuant to reference under section 39 of the Act, and
  • to adjudicate on claim for compensation including recovery thereof that may arise from the findings of the CCI consequent upon infringement of the provisions of the Act or the orders of the Appellate Tribunal or the violation of the order of CCI and CAT.
Thus, the Appellate Tribunal, after giving an opportunity of being heard to the parties, has the authority to confirm, modify or set aside the direction or order of the CCI. An appeal against an order of Tribunal lies in the Supreme Court and in that sense, the Act is a complete code in itself. The appeal provisions also seek to ensure that the orders/directions conform to the law. It will be benign scenario if the regulator commands confidence of the appellate bodies. A coherent approach is the key to develop sound jurisprudence in competition regulation over a period of time.

F. Civil Courts:

In the event of CAT’s inability to execute its order, the Appellate Court may transmit any of its order to the civil court within whose local limits, the delinquent resides or carries on business or personally works for gain. While the order of CAT is to be treated as decree of a court to which it has been transmitted but enforcement and execution proceedings are initiated by the Executing Court on the application of the decree holder. The CAT will be adjudicating claims for compensation and the awardees will be seeking execution of the decree in the concerned civil courts and for him it will be beginning of another round of tiresome visits to civil courts for execution proceedings. The complicated ritual is enshrined in Order XXI of the Civil Procedure Code, 1908.

Since timely and effective execution of an order of CAT is key in the implementation of law, the need is to sensitize the judiciary at the district level to appreciate the need for and usefulness of having free and fair competition in markets and the extent of harm caused as a result of infringement of law and/or order of the Tribunal. The advocacy will be a step in building a climate of compliance and in its absence it will be case of ‘defeat in victory’ for a decree holder.

G. Central/State Governments/Statutory Authority:

The Central Government is vested with power to (i) exempt a class of enterprises from the applicability of the law, (ii) to issue directions to the CCI and (iii) to supersede the CCI. While the law prescribes certain pre-requisites before invoking these provisions, the invocation of such powers is expected to be exception and not a rule. The grants of funds and the manpower strength - both in the CCI and the CAT - are at the command of the Central Government.

While the law does give the privilege to the Central Government/ State Governments/ Statutory Authorities to make a reference to the CCI for institution of an inquiry when an infringement is suspected but empirical evidence shows that ‘number of such references’ have been miniscule before the MRTPC. In a journey of almost four decades, the MRTPC received less than score of references from the Central Government and only one reference from a State Government for institution of an enquiry. While the CCI can initiate an inquiry on its motion but the absence of an aggrieved person is often a handicap in proving the infringement and the extent of harm caused.

The need is that in the new dispensation, the Governments /Statutory Authorities will assume responsibility and bring to the notice of the CCI more cases of alleged infringements of the Act and the Governments, both federal and state, will make use of Section 49 (1) so as to eradicate anti competitive practices emanating from its statues, laws, policies and procedures. The law thus provides for comprehensive administrative and enforcement set up for its successful and effective implementation, but CCI is to bank upon heavily on several satellite institutions. However, it is imperative that all of them work in tandem and in harmony so as to make India a zero anti competitive zone.

G.R. BHATIA is the former Additional Director General, Competition Commission of India (CCI)/ Monopolies and Restrictive Trade Practices Commission (MRTPC), New Delhi and is presently Partner, Competition Law Practice, Luthra & Luthra Law Offices, New Delhi. The views expressed are personal and the author can be reached at gbhatia@luthra.com
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