Will CCI repeat the European Union’s mistakes? (GS Paper 2, International Organisation)
Why in news?
- Recently, the Indian Parliament empowered the Competition Commission of India (CCI) to settle cases of abuse of dominance and anti-competitive vertical restrictions.
- This power is in line with the power available to the European Commission to elicit ‘commitments’ from parties subject to investigation for the above violations under European Union (EU) law.
- Not only this, but the general Indian competition jurisprudence has remained heavily influenced by EU competition law.
Concerns:
- While being influenced by another jurisdiction’s legal provisions is not ideal in terms of being a thought leader, it does give the privilege of avoiding the pitfalls present in that other regime.
- Yet, it appears that the CCI may not really be benefiting from the privilege.
Dominance & Infringement:
- Under the EU’s commitments regime, undertakings subject to an investigation for abuse of dominance or anti-competitive vertical restraints can make legally binding commitments. These may take the form of structural or behavioural remedies.
- For instance, a commitment for an allegation of abuse of dominance may be that the enterprise will not engage in predatory pricing.
- If the Commission is satisfied with such commitments, it concludes the investigation with an order explaining its concerns from the parties, the commitments offered by them, and how the commitments satisfy the concern.
- If the Commission does not arrive at a finding of infringement, the parties offer legally binding commitments pursuant to “concerns expressed by the Commission”. The Commission, upon accepting the commitments, does not conclude that they were accepted due “to a finding of infringement against the parties”.
- Instead, they merely check that the infringements address the concerns, and thus, close the proceedings. This lack of a requirement for the Commission to record the finding of an infringement has incentivised the parties subject to the investigation to provide commitments and settle their cases.
Anti-competitive conduct:
- Under the EU Law, consumers or any other businesses affected due to the anti-competitive conduct can claim damages. To do so, one must prove that the party had engaged in anti-competitive conduct. As the Commission accepts commitments from the parties, the anti-competitive conduct of these parties is never ‘proven’.
- Specifically, as no infringement is established in accepting commitments, the consumers or affected businesses cannot rely on the commitments to claim damages. Instead, they have to engage in a lengthy legal dispute and incur heavy costs to establish a competition violation.
- This discourages parties from claiming damages at all, and the limited private claims for damages initiated are proven with increased difficulty.
Case in India:
- In India, consumers and businesses affected due to anti-competitive conduct are not allowed to claim damages in a standalone manner under the Competition Act 2002.
- Section 53N of the Competition Act 2002 provides that a claim for damages to consumers and businesses affected by anti-competitive conduct can only be made once an infringement has been established against them by the CCI, or in appeal by the NCLAT or the Supreme Court.
- Recognising this, the Parliament demarcated the Indian equivalent of the EU Commitments regime into two parts.
- First, if the parties accused voluntarily offer commitments before the CCI’s prosecutorial wing concludes its investigation, the parties can offer ‘commitments’ that address the CCI’s concerns. If the CCI finds them acceptable, the case will be closed and there will be no recording of a finding of infringement.
- Second, if the parties accused approach the CCI once its post the investigation, they can approach to ‘settle’ the case. Remarkably, to do so, they must not only provide the commitments but also state how they address the concerns highlighted in the investigation.
Proving infringement:
- Parliament appreciated that consumers or businesses affected by the anti-competitive conduct will not get any redressal due to the introduction of this regime. Under the Competition Act 2002, affected consumers and businesses are not allowed to claim damages in a standalone manner.
- Therefore, Parliament amended Section 53N of the Act to provide that in cases where the parties ‘settle’ their cases, proceedings for claiming damages will be allowed.
- Now, to claim damages, parties must prove that the damages arise as a result of an infringement established either through full proceedings or an order approving the settlement of a case. In the cases where the CCI allows for the parties to ‘settle’, there must be a finding of an infringement in such cases.
Challenges:
- Yet, the CCI, in its recent draft regulations, has prescribed that it doesn’t need to record a finding of infringement in the cases it chooses to settle. This is not only contrary to the explicit intention of Parliament, but also sets the CCI on the same path of failure as the EU’s commitments regime.
- If a finding of infringement will not be recorded in settlement orders, the affected parties will have unsurmountable difficulty in proving their claim to damages.
- Further, they will also face grim prospects in obtaining a successful claim due to the limited means at their end to establish an infringement.
Way Forward:
- Currently, the consultations for these draft regulations are ongoing and this issue must be adequately flagged to prevent the CCI from adapting these regulations in their current form.
