CCI introduces Leniency “Plus” regime in India- Will it suffice?
The Competition (Amendment) Bill, 2022, recently placed before Lok Sabha and referred to the Standing Committee on Finance on 17th August ,2022, attempts to promote the goal of ease of doing business while maintaining strong regulatory oversight on market discipline and competitive markets, the essential pillars of free market economy. The Bill also attempts to address the competition issues in the digital markets by the Big Tech companies.
The reference to the Standing Committee is a positive step to enable a thorough review of the Bill since the amendments in the competition law will affect businesses across all sectors of economy. The Bill, based upon the report of the Competition Law Review Committee (CLRC) of July 2019, submitted after a thorough review of the fair market watchdog, Competition Commission of India (CCI) ‘s over 10 years performance, covering both substantive and procedural issues of enforcement and regulation of market competition, flags important issues which need to be discussed and debated.
The foremost emphasis of the Standing Committee needs be towards anti-competitive practices in digital markets by Big Tech companies. The most critical issue in online platform driven digital markets, attempt to monopolise by indulging in predatory conduct even before acquiring a position of dominance, was highlighted in the CLRC report[1] but the Bill fails to make any suggestion. This was highlighted in my earlier article “Hear the Monopolyphony” published on 5th March 2020 in The Economic Times on the earlier Bill of 2020. Moreover, the emerging reality of algorithmic collusions, though flagged in CLRC Report[2] has not been addressed.
Let me evaluate some other key features of the Bill for consideration of the Standing Committee (SC) –
1 Regulation of combinations ( M&As) – (i) change in definition of “control” from “decisive influence” to ‘material influence’ is debatable and SC may consider the dissent notes of some members of the CLRC ;(ii) additional thresholds based on “transaction /deal value” exceeding INR 2000 crores for merger notification ( besides the existing assets /turnover based thresholds) , with mandatory requirement of having a” local nexus “ is a welcome step to include large transactions amongst Big Tech companies in digital markets ,which escaped scrutiny earlier due to not holding substantial assets or turnover in India .(iii) exemption from standstill obligation /suspensory regime for certain combinations involving “open offer” /acquisition of shares /securities etc on regulated stock exchange , provided the acquirer informs CCI prior to exercising any ownership or beneficial rights; (iv) Green channel – providing for deemed approval of certain benign combinations between parties not having any horizontal, vertical or complementary overlap and (v) reduction of time limit for approval of combinations from existing 210 to 150 days and for making a prima facie opinion whether to investigate proposed combination form 30 to 15 days etc. and to mandate the CCI to form such prima facie opinion within 20 days of receipt of the filing etc – welcome steps towards ease of doing business and regulatory certainty .
2. Broadening the scope of anti-competitive agreements to include “hub and spoke cartels” under the “vertical” agreements and to include “active participants “even when they may not be direct competitors under “horizontal” agreements, another welcome step to include all kinds of possible anti-competitive arrangements.
3. Prescribing time limit for filing Information before CCI- the proposed three years’ time limit for filing information against any anti-competitive conduct, though, in sync with the common law on limitation, may discourage whistle blowers within the organisation. Moreover, unlike most civil wrongs, market distortions, such as cartels and /or unilateral market conducts by dominant enterprises creating entry barriers for new entrants etc. are conceived in secrecy and are dynamic in nature and it may be difficult to pinpoint the “date on which cause of action has arisen” on pattern of common law.
4. Introduction of “Settlements” and “Commitments” -in sync with similar provisions in most advanced jurisdictions. This provides accused parties a new window to either offer “settlement “ , after the receipt of the investigation report with payment of such amount an on such terms and subject to monitoring of the implementation of the settlement terms by CCI or offer “commitments” , before the receipt of the investigation report but soon after CCI directs such investigation ( on finding a prima facie case for violation of the law) on such terms and subject to monitoring of the implementation of the commitments terms by CCI. This is an important step towards ease of doing business as it allows the parties to avoid time and cost of facing a bull blown investigation by the Director General followed by inquiry by CCI and subsequent appeals filed by the opposite party. Noticeably, the orders passed by CCI accepting both Settlements and /or Commitments are not appealable. Moreover, these facilitating provisions do not apply in case of anti-competitive agreements between direct competitors or cartels, which could be debated by the SC. It is also not clear whether either order would also exempt the parties from liability for compensation claims by victims .
5. Relevant product market -to include supply side substitutability, a welcome change based on experience and international jurisprudence.
6. Broadening the definition of “enterprise” to include firms and departments of the Government and their units, divisions, subsidiaries who or which has been engaged in any economic activity …. Of course, excluding any activity of the Government relatable to the pre – defined four sovereign functions of atomic energy, currency, defence and space.
7. Defining a “party” before the CCI to include a consumer and an information provider, another welcome step based on the enforcement experience.
8. Introduction of a “leniency plus” regime to encourage members of cartels under investigation to disclose other cartels and obtain waiver of penalties for such cartels. Again, a change necessitated from experience. Further, it is also proposed to allow parties to withdraw their leniency applications, which right does not exist at present.
9.Appoitment of the director general by the CCI –This change, though intended to integrate the investigative wing with the adjudicatory function of CCI to enhance efficiency in enforcement, may dilute the functional autonomy of the DG office, which requires reconsideration as it has been opposed by many.
10. Enhancing investigative powers of DG – inter alia, by giving the DG powers to approach the CMM, Delhi to obtain search warrants for conducting the infamous “dawn raids’ to seize evidence of suspected cartelization and bid rigging etc. This is a welcome step as the provisions will now be codified in the main Competition Act, 2002 instead of drawing powers indirectly by reference from the Companies Act, 2013 as at present. However, to include “legal advisers “in the definition of “agent” under the Explanation to Section 41 and to empower the DG to direct such “legal advisors” to give evidence on oath during investigation is a controversial provision as it is not clear whether “legal adviser” will include external counsels and /or practicing lawyers and advocates or not. This category unless specifically exempted, will clash directly with the settled law on “professional communication” between lawyers /attorneys and their clients, which is protected from disclosure to even courts of law under Section 126 of the Evidence Act, 1872.
However, the bill omits to address is the issue of financial independence of CCI and appointment of judicial member in CCI though both were highlighted in the CLRC report with recommendations to make necessary provisions in the Bill. Particularly, the appointment of judicial member in the CCI is needed to comply with the directions issued by the Delhi High Court to this effect in the Mahindra case[3]. This omission may make the new Act and the orders to be passed by the CCI vulnerable to challenge in the High Court.
To conclude, the proposed amendment
Bill seeks to bring in the awaited changes in the existing law with a view to
enhance the ease of doing business and provide regulatory certainty for achieving
fair play and competition in markets, except for a few anomalies which
hopefully will be noticed and removed by the Standing Committee.
[1] Chapter 6, Para 2.9 of the CLRC Report.
[2] Chapter 8, Para 2.7 of CLRC Report.
[3] W.P.(C) 11467/2018-Delhi High Court order dated 10.04.2019
Note- An abridged version of this article was published by THE FINANCIAL EXPRESS on 10th September ,2022 and may be read here.
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