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COMPETITION COMMISSION OF INDIA (CCI)
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- Introduction: Competition is the act of the sellers individually seeking to acquire the patronage of buyers in order to achieve profits or market share. In a healthy free market economy, without fair competition, no stakeholder benefits in the long run.
- 2002 Act: The Competition Act, 2002 was enacted by the Parliament of India and replaced The Monopolies and Restrictive Trade Practices Act, 1969. It is in effect to govern Indian competition law. After its enactment The Competition Act, 2002 has been amended twice, The Competition (Amendment) Act, 2007 and The Competition (Amendment) Act, 2009. A final amendment Bill arrived in 2020.
- Key aspects: Two of the main features of the Competition Act, 2002 include the framework it provides for the establishment of the Competition Commission, and the tools it provides to prevent anti-competitive practices and to promote positive competition in the Indian market.
- Objectives: The Act seeks to provide the legal framework and tools to ensure competition policies are met and to prevent anti-competition practices and provide for the penalisation of such acts. The Act protects the free and fair competition which protects the freedom of trade, which in turn protects the interest of the consumer. The Act seeks to prevent monopolies and also to prevent unnecessary intervention by the government. The main objectives of the Competition Act, 2002 are:
- to provide the framework for the establishment of the Competition Commission
- to prevent monopolies and to promote competition in the market
- to protect the freedom of trade for the participating individuals and entities in the market
- to protect the interest of the consumer
- Structure: In accordance with the provisions of the Amendment Act, the Competition Commission of India and the Competition Appellate Tribunal have been established. The Competition Commission of India is now fully functional with a Chairperson and six members. The provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position were notified on May 20, 2009.
- The CCI has since carried out many probes into alleged anti-competitive agreements and companies’ abuse of their dominant position, but it is still best known for the cement cartel case mainly because of the eye-popping fine. It is nearly half of the Rs 13,523 crore the CCI levied in 135 cases till March 2018, according to the latest data available with the regulator. Of its total fines, the CCI has collected a mere Rs 55 crore, or 0.4%.
- Compare this to the US Department of Justice (DoJ), which collected $172 million in criminal penalties in fiscal year 2018 (October-September), with the highest ever being $3.6 billion in fiscal year 2015. It has also sent several executives to prison.
- While the CCI cannot boast figures like DoJ, the very fact that it has the authority to severely penalise violators could be working to its advantage. Meanwhile, some of the recommendations made by the Competition Law Review Committee (CLRC) which submitted its report in 2018, could make CCI more nimble in the resolution of cases and take it a little closer to its counterparts in the EU, the UK and the US.
- Anti-Competitive agreements: In simple words, Anti-Competitive agreements are agreements that are made by two or more companies competing in the same market to fix prices or reduce stocks etc, so as to manipulate the market favourably for them. This has the effect of the companies reducing the competition in the market which adversely affects the end consumer. The Competition Act, 2002 defines anti-competitive agreements as such in section 3 where it states, “No enterprise or association of enterprises or individuals or association of individuals may enter into an agreement regarding production, supply, distribution, storage, acquisition or control of goods or provision of services which may adversely affect the competition in the Indian market”.
- The 2019 amendment Bill: After a long-drawn process which started in October 2018, the Ministry of Corporate Affairs (MCA) came out with the Competition (Amendment) Bill in 2019. It follows the report of the Competition Law Review Committee, which was set up in October 2018 to review of the Competition Act, 2002. The CLRC’s comprehensive report, which was submitted to the MCA in August 2019 suggested amendments to the Competition Act to make the competition framework more robust while dealing with the changing business landscape. That included a sort of revised blueprint for an improved version of the Competition Commission of India - CCI 2.0.
- Changes proposed: A System For Settlements Perhaps one of the most positive changes that the Bill proposes, is the introduction of a system for settlements and commitments. Companies faced with the burden of an ongoing investigation by the CCI often desire a way to get out, and the new provisions give them just that. With the proposed amendments, companies under investigation for anti-competitive vertical agreements (such as, those entered with distributors) and abuse of dominance, will now be able to offer settlements and commitments to the CCI – that is, a voluntary offer to conduct themselves in a manner that addresses the concerns of the CCI. If the CCI accepts the offer, the inquiry will end.
- Lacking: What is lacking is the power with the CCI to permit the complainant to withdraw the case. Approaching the CCI in the aftermath of a commercial dispute is not uncommon. Nor is it uncommon for the dispute to be amicably resolved after the CCI has been approached. Currently, approaching the CCI is like firing a shot – irretrievable, and so is the damage. Empowering the CCI to permit withdrawal of information in certain cases would have saved much of the investigated party’s and CCI’s resources.
- Cloud over independence: Despite all these laudable proposals, the Bill is still a mixed bag. The Bill changes the structure of the CCI, establishing an overarching governing board. The seven members of the CCI, Secretary of the Department of Economic Affairs and the MCA (or their nominees), and four part-time members to be appointed by the central government will constitute the Governing Board.
- Process transparency: While some attempts have been made to address the procedural gaps in the Act, the Bill still fails to achieve complete transparency in procedures applicable before the CCI.
- The CCI has since carried out many probes into alleged anti-competitive agreements and companies’ abuse of their dominant position, but it is still best known for the cement cartel case mainly because of the eye-popping fine. It is nearly half of the Rs 13,523 crore the CCI levied in 135 cases till March 2018, according to the latest data available with the regulator. Of its total fines, the CCI has collected a mere Rs 55 crore, or 0.4%.
- Compare this to the US Department of Justice (DoJ), which collected $172 million in criminal penalties in fiscal year 2018 (October-September), with the highest ever being $3.6 billion in fiscal year 2015. It has also sent several executives to prison.
- While the CCI cannot boast figures like DoJ, the very fact that it has the authority to severely penalise violators could be working to its advantage. Meanwhile, some of the recommendations made by the Competition Law Review Committee (CLRC) which submitted its report in 2018, could make CCI more nimble in the resolution of cases and take it a little closer to its counterparts in the EU, the UK and the US.
- It was in 2010, almost a decade ago, that the CCI, which had only become operational in May 2009, decided to probe its most high-profile case — to find out if 10 cement companies colluded through the Cement Manufacturers Association (CMA) to limit supplies and raise prices. The CCI said that after two of three CMA meetings at Mumbai’s Grand Hyatt and Hotel Orchid in early 2011, the companies hiked cement prices, which, the CCI said, “establishes that they co-ordinated their decisions and fixed prices after due consultations”. There were also questions over whether Ambuja Cement and ACC, which are part of the Swiss company LafargeHolcim, had attended two of these meetings despite no longer being members of the CMA.
- The companies and the CMA disputed the CCI’s findings and appealed the penalty. The case has made its way through the Competition Appellate Tribunal, the National Company Law Appellate Tribunal (NCLAT), which replaced the former in 2017, and is now pending before the Supreme Court, which asked the parties to deposit 10% of the penalty in 2018.
- Acting on information filed by Jaipur-based Consumer Unity & Trust Society and Matrimony.com, the CCI in 2018 fined Google Rs 136 crore for promoting its own specialised search — say, for flights — to the detriment of other websites. The order was stayed by NCLAT. Google is also being probed by the CCI for tying some of its apps to Android and limiting handset makers’ ability to sell devices with alternate versions. “Android has enabled millions of Indians to connect to the internet by making mobile devices more affordable. We look forward to working with the CCI to demonstrate how Android has led to more competition and innovation, not less,” says Google.
- Google’s dominance has been under scrutiny in the EU and the US as well. Since 2017, it has been fined a total of $9.3 billion by the EU in three different cases related to its abuse of dominance by favouring its advertising and shopping services over its competitors’ and for bundling some of its applications with Android. (Google has appealed all three orders.) It is also being investigated in the US and so are Facebook and, reportedly, Amazon. Other than in the EU, competition regulators are exercising caution (with tech companies) because consumers are benefiting from these companies.
- In addition to instances of cartelisation and abuse of dominance in the old-economy sectors, the CCI will have to increasingly deal with competition cases in businesses like ecommerce, ridehailing, food delivery and online travel aggregation (the CCI is currently investigating MakeMyTrip and Goibibo, which merged in 2017, and Oyo Rooms over allegations of predatory pricing, among others). The CCI has also made clear its intent to pursue cases on its own without a formal complaint.
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