Competition law and its significance to the consumer (Part 2) - Understanding the role of the Competition Commission of India

In the previous edition of this blog, we discussed the basics of competition law. We also touched on the Competition Commission of India (CCI) and their role as the  regulator of competition. In this part we will discuss the objectives, roles and powers of the CCI.

Competition Act, 2002, (from here on referred to as Act),  provides for a Competition Commission, but  the CCI was established only in 2007. This was due to a Writ Petition filed in the Supreme Court which sought that the appointment to the CCI must be done by judicial members and not the Central Government. The Supreme Court held that the Competition Commission of India (Selection of Chairperson and Other Members of the Commission) Rules 2003 fell within the purview of the Amendments to the Act, proposed by the Union Government, and did not pass any orders.  The Amendments to the Act were approved in 2007 and that is when the CCI became operational. CCI is the body constituted to fulfil the objectives of the Act.  

Objectives

Under Sec. 18, objectives of the CCI also double as the duties of CCI. The primary objectives of CCI as enshrined in the preamble of the Act are:

1. Eliminating practices that can affect competition
   1. Anti-competitive practices are prevented and regulated by way of enquiry and investigation into acts that can have an appreciable adverse effect on competition.
2. Promoting competition in the market
   1. Advocacy initiatives and publishing of the  Journal on Competition Law and Policy, among other projects which are taken up by the CCI to raise awareness on competition. 
3. Consumer interest
   1. The CCI even takes up suo moto matters in order to protect consumers. The consumer’s best interest is kept in mind during the course of investigation and passing of orders.
4. Uphold freedom of trade
   1. One of the vital objectives of CCI is to ensure freedom of trade carried on by all participants in markets; this is achieved through investigation of anti-competitive practices. Under Sec. 27 CCI also has the power to order penalties against offenders (which is not more than ten percent of the average of the turnover for the last three preceding financial years). This acts as a deterrent from infringing on other participants’ freedom to trade.
5. Related matters
   1. CCI also has the power to implement new schemes for matters connected with the above or resulting from these.

Composition of CCI

Sec. 8 provides that the CCI should have one Chairperson and a minimum of two to a maximum of six Members, appointed by the Central Government.  This used to be a maximum of ten Members but it was amended to facilitate speedy approval. All the Members, including the Chairperson, are full-time Members.

Eligibility:

According to Sec. 8  the Chairperson and every other Member in CCI shall be a person of ability, integrity, and who:

1. has been or has the qualifications to be a judge of a High Court, or, 
2. has special knowledge and professional experience, of at least fifteen years in international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, administration or in any other area as prescribed by the Central Government, that is pertinent to their role in the CCI.

Ways in which investigation is launched by the CCI:

There are three different ways in which the CCI will launch an enquiry into an act alleged to be anti-competitive. These are given under Sec. 19 of the Act:

• Suo moto ( on its own motion)
  
  If the CCI comes across any anti-competitive act, it can take up the matter on its own accord and  inquire into the same.
• Any person, consumer or their association or trade association
  
  The CCI will launch an inquiry on the receipt of any information from any person, consumer or any registered association or trade association submitted through the process and fees as explained in the next subsection. 
• Referenced by Government
  
  Inquiry can be done by relying on a reference made to CCI by the Central Government or a State Government or other statutory authority.

Procedure for filing information with CCI:

In case a consumer has any information regarding an act that can be anti-competitive, they can file this information with the CCI in person/ by registered post or courier service/ by fax, addressed to the Secretary or the authorised officer.

The information should have the following details:

• The legal names, postal  addresses, telephone numbers and email id’s of the person filing the information as well as the party alleged to be indulging in anti-competitive practices.
•  A statement of facts, encompassing details of the alleged contraventions of the Act
• A list of all documents, affidavits and evidence, in support of each of the alleged contraventions 
•  A brief narrative in support of the alleged contraventions that would assist the CCI in understanding the submission
•  The relief sought in the case must also be produced to the CCI.
• Signature of the person sending it, or the sole proprietor of a proprietorship, or the Karta in an Hindu undivided family (HUF), or the Managing Director in the case of a company, etc.
• The lawyer, if engaged  may also add his or her signature

Fees payable:

Investigation procedure:

The process of investigation is described under Sec. 26. The first step in the procedure is analysing if there is a prima facie (existence on first reading) case provided under Clause 17 of Competition Commission of India (General) Regulations 2009. In case CCI thinks it is necessary to meet to decide if there is a prima facie case it can call for a preliminary discussion (referred to as conference in the Regulations). There are no formal rules of procedure and the information provider or any other person can be called for this discussion. 

The Supreme Court in the case of CCI v. Steel Authority of India held that being called to the preliminary hearing is based on the discretion of the CCI and it is not a matter of right.  Once information is received under Sec. 19 as discussed above, the CCI shall decide if there is a prima facie case:

1. If there is no existence of a prima facie case, the matter is closed by passing an order as deemed fit. This order is sent to the informer and all concerned parties
2. If there is a prima facie case, the Director General (DG)  is directed to investigate the same. 

The DG is appointed under Sec.16 to help CCI to conduct inquiries into any violations under this Act and functions as a specialised investigating wing. The DG must be an experienced investigator with knowledge in accountancy, management, law or other qualifications as given under Sec.16(4).

3. According to Regulation 20(2), the DG is required to submit a report within 60 days from the date when the matter is referred for investigation. The report shall contain:
   1. The DG’s finding on every allegation received through the reference/ information
   2. All evidence or documents or statements or analyses collected for the investigation
   3. The DG can choose to split the report into two parts, if there is any information that has to be kept confidential. One part shall be accessible to all parties and the other can have partial/total restriction. This will include information confidential in nature and commercially sensitive documents.
4. If the DG’s report recommends that there is no violation of the Act, the CCI invites suggestions or objections from the parties concerned in the case (including the Central or State government, statutory body as applicable).
5. Upon considering the suggestions/objections filed, if the CCI is of the opinion that there is no violation  as stated in the DG’s report, then under Sec. 26 it will close the matter. The CCI passes orders closing the matter and sending the same to the parties concerned in the case (including the Central or State government, statutory body as applicable).
6. In case, upon considering the suggestions/objections filed, the CCI is of the opinion that there is a need to investigate further, then it will do  the same. The CCI can direct the DG to further investigate or can itself proceed with further inquiries into the case.
7. If the DG’s report recommends that there is a violation of the Act and the CCI is of the opinion that further inquiry is called for, it shall inquire into the same. 

Powers of the CCI to for conducting inquiry:

The powers of the CCI to discharge its functions under the Act are given under Sec. 36:

1. The CCI has the power to regulate its own procedure, subject to the principles of natural justice, the Act and any rules made by the Central Government. The two fundamental principles of natural justice as declared by the Supreme Court are:
   1. The deciding authority must be independent and impartial (nemo judex in cause sua)
   2. The parties concerned must be given the time and opportunity to be heard (audi alteram partem)

The Competition Appellate Tribunal (now merged with the National Company Law Appellate Tribunal) in Coal India v. CCI (appeal numbers 01, 44-47, 49, 70/2014 and 52/2015) held that the CCI is bound to comply with these principles.

2.  For executing its duties under this Act, the CCI  is given the same powers as a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908). While deciding a claim, vested powers are, namely:- 
   1. Summoning and mandating attendance of any person and along with conducting examination on oath; 
   2. The CCI can request the discovery and production of documents required to decide the claim; 
   3. the CCI can receive evidence on affidavits;
   4. It also has the power to direct the witness or submission of a document for  examination;
   5. The CCI can also seek any public record or document or copy of such record or document from any office.
3. For assisting in conducting an inquiry, the CCI may call upon such experts, from the fields of economics, commerce, accountancy, international trade or from any other discipline as it deems necessary.  
4.  The CCI may direct any person: 
   1. to produce records like books or documents relating to any trade, which have to be examined for the purposes of this Act, before the DG or an officer authorised by it; 
   2. to provide any other information in their control, relating to the trade carried on by such person, as required for the purposes of this Act, before the DG or an officer authorised by it.

The CCI has expansive powers and duties under the Act. In the next blog we will explore how an inquiry is conducted along with punishing power and appeal mechanisms under the Act. We will also discuss some of the landmark judgements in this field of law. Read the Part III of this blog here.