India: Competition Commission of India
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The Competition Act 2002 (the Act) established the new competition regime in India. Under the Act, the Competition Commission of India (CCI) was established in March 2009 as a statutory authority to enforce the provisions of the Act throughout India. The CCI is an expert body that acts as a regulator to eliminate practices having an adverse effect on competition; promote and sustain competition in markets; protect the interests of consumers; and ensure freedom of trade. To enable it to do so, it is armed with quasi-legislative, quasi-executive and quasi-judicial powers and other resources, matching its mandate and responsibilities with provisions for its autonomy and accountability.
The Act bestows on the CCI the responsibility to prohibit anticompetitive activities through the following measures:
- preventive measures (advocacy, advisory, awareness, training, etc);
- punitive measures (monetary penalties linked to turnover or profits, imprisonment, etc);
- remedial measures (cease and desist, division of enterprises, undoing and agreement or transaction);
- compensatory measures; and
- any other measures the CCI may deem fit under the circumstances.
Administration of the Act
The central government has framed a set of rules for the establishment of the CCI, the director-general (DG) and the Competition Appellate Tribunal (COMPAT). These rules provide for the manner of selection of the chairperson and other members of the CCI and the presiding officer and other members of COMPAT, and for their service conditions and compensation. These also provide for the number of employees to be appointed at various levels in the office of the DG and in the CCI, the qualifications, and other eligibility requirements for employees. These further provide reporting requirements of the CCI, such as the annual report, accounts and audit.
The CCI works mostly on four fronts to achieve its objective:
- the Act prohibits antitrust activities: all kinds of cartels and abuse of dominant position. Any person may file information before the CCI regarding an alleged anticompetitive activity. If the CCI is of the opinion that there exists a prima facie case, it directs the DG to investigate the matter. If there exists no prima facie case, the matter is closed. As at 30 November 2015, the CCI has received 666 cases related to anticompetitive agreements and abuse of dominant position since its inception. As at 30 November 2015, 370 cases have been closed at prima facie stage, 177 cases have been decided or disposed of after the report of the DG, 68 cases are still under consideration before the CCI and 51 cases are under still investigation before the DG;
- the Act prohibits any combination of enterprises involving a certain threshold of assets or turnover that causes, or is likely to cause, appreciable adverse effects on competition within the relevant market in India. A person proposing to enter into a combination is, therefore, required to give a notice of such a combination, along with the relevant details, to the CCI. Since the enforcement of merger control provisions of the Competition Act on 1 June 2011, the CCI has cleared 311 merger notifications;
- the Act enables the central and state governments, while formulating a policy, to make a reference to the CCI for its opinion on possible effects of the policy on Competition. As at 31 March 2015, the CCI had received two references from the central government for opinion. Similarly, the Act enables a sectoral regulator to make a reference to the CCI while determining an issue if such determination is likely to be contrary to provisions of the Act and vice versa. The CCI received one reference from statutory authorities and has made four references to them for their opinion; and
- the Act mandates the CCI to take measures for the promotion of competition advocacy, creating awareness and imparting training about competition issues. The CCI conducted 284 advocacy programmes during 2011–15.
A number of important cases were considered by the CCI this year. In the case of Crown Theatre v Kerala Film Exhibitors, the CCI found the regional film association to be indulging in anticompetitive activities by banning the screening of local language films by certain non-member theatre owners. For the first time, a penalty was imposed, and directives passed not only against the offending Association, but also on its office bearers found responsible for the anticompetitive conduct. The office bearers were directed to pay a penalty and barred from associating with the affairs of the Association in any manner, including administration, management and governance of the association, for a period of two years.
In a major case concerning collusive conduct by multinational pharmaceutical corporations, a fine of over 600 million rupees was imposed. In the case of Bio-Med Private Limited v Union of India & Others, GlaxoSmithKline Pharmaceutical Ltd and Sanofi were found to have colluded in the case of supply of the Quadrivalent Meningococcal Meningitis vaccines, procured by the government of India for Hajj pilgrims.
The CCI tackled the issue of ‘aftermarkets’ in the case of Shamsher Kataria v Honda Siel Cars India Ltd & Others. The CCI found 14 car companies to have entered into restrictive agreements with local original equipment suppliers, foreclosing the market for ‘aftermarket’ for supply of spare parts and other diagnostic tools’. The car companies, who were found to be dominant in the ‘aftermarkets’ for their respective brands, abused their dominant position, adversely affecting around 20 million car consumers. The car companies were also found to be indulging in practices resulting in denial of market access to independent repairers, as the latter were not provided access to branded spare parts and diagnostic tools, which hampered their ability to provide services in the ‘aftermarket’ for repair and maintenance of cars. A penalty of 2 per cent of the average turnover of the car companies was imposed, which amounted to 25.44 billion rupees in aggregate.
In the case of M/s Madhya Pradesh Power Generating Company Limited v M/s South Eastern Coalfields Ltd (SECL) and M/s Coal India Ltd (CIL), the CCI found that CIL, through its subsidiaries, operates independently of market forces and enjoys undisputed dominance in the relevant markets for supply of non-coking coal to the thermal power producers and sponge iron manufacturers in India. The CCI also held the opposite parties to be imposing unfair and discriminatory conditions and indulging in unfair and discriminatory conduct in the matter of supply of non-coking coal. The CCI directed the violators to cease and desist from indulging in the conduct that has been found to be in contravention of the provisions of the Act, and directed modifications in the fuel supply agreements. However, the CCI did not impose any penalty in this case, as penalty of 17.73 trillion rupees had already been imposed upon them in a previous case with substantially similar conduct.
Recent changes in regulations
In order to develop a robust system of combination (merger) regulation, on 1 July 2015 the CCI amended the regulations to make merger and acquisition filing requirements simpler and more transparent.
The latest amendments provide that parties to a combination shall give notice in Form I or Form II in accordance with the notes to forms published by the CCI. The publication of detailed notes (introductory as well as notes to Form I) is a landmark for competition jurisprudence in India, as it provides guidance on the information required by the CCI while assessing a combination. The main objective of the amendment is to enhance transparency in the review process and to facilitate stakeholders.
International cooperation is imperative in today’s globalised economy. It helps in exposure to best practices and provides support for capacity building as well as knowledge sharing. Over the years, the CCI has developed close linkages and networks with various multilateral agencies and competition jurisdictions for effective international cooperation, including capacity building, enforcement cooperation and experience sharing. The CCI formally and informally interacts with competition authorities of other jurisdictions on substantive issues, such as assessment of the combination, possible market definitions, common competition concerns and international remedies to mitigate competition issues.
The CCI continues its endeavours to regularly engage with the other competition authorities and multilateral institutions such as OECD, UNCTAD and ICN. As a co-chair of the ICN’s merger working group, the CCI hosted a merger workshop in New Delhi on 1–2 December 2014. The theme of the workshop was ‘International Cooperation and Remedies in Merger Review’. The CCI currently co-chairs the agency effectiveness working group of the ICN.
The CCI has entered into memoranda of understanding, after obtaining approval from the government of India, with five competition authorities: the Federal Trade Commission and Department of Justice, USA; the Directorate-General for Competition, European Union; the Federal Antimonopoly Service, Russia; the Australian Competition and Consumer Commission; and the Competition Bureau, Canada. The CCI is also in the process of finalising MOUs with Japan and BRICS countries.
Section 49 of the Competition Act 2002 mandates the CCI to undertake advocacy for promoting competition. Under the Act, the CCI is required to proactively undertake advocacy with government departments and ministries, media and all other stakeholders, such as chambers of industry, business associations, academics, consumer organisations and professional bodies, and foster conditions to create a more competitive policy regime, market structure and business behaviour.
The CCI has also formed a core advisory group called Eminent Persons Advisory Group (EPAG), consisting of persons of eminence from corporates, academia, regulators and civil society to advise the CCI in its efforts to make markets compliant with competition. In order to create wider awareness among various stakeholders in the economy, the CCI has commemorated its Annual Day, 20 May, with a lecture series. This brings together various stakeholders and creates a call for competition compliance in the economy. The CCI also publishes a quarterly newsletter, Fair Play, as an advocacy tool.
The CCI initiated a new advocacy initiative, the ‘CCI Annual Day Competition Research Award (CAD-CRA) Scheme’ in 2014. The scheme aims to encourage students in India to undertake in–depth research in competition law and economics at postgraduate, MPhil and PhD level.
The way forward
During the first six years of its functioning, the CCI has evolved its processes based on international best practices and adhered to the principle of competitive neutrality, establishing itself as an impartial competition regulator enforcing the law on private and state-owned entities equally. The orders of the CCI reflect the robustness of the system and determination to curb the anticompetitive practices in Indian markets. In relation to issues arising from merger control, the CCI intend to continuously review procedures for assessing combinations and other ancillary issues that arise during the investigation of a combination. The CCI aims at streamlining its procedures and simplifying processes to enhance transparency and efficiency. The CCI has also introduced e-filing of information in antitrust cases and applications for combination.
The CCI’s priority is to enforce preventive measures to strengthen a culture of compliance in India. To achieve this objective, the CCI will adopt various advocacy initiatives, such as:
- analysing and assessing economic legislations and bills from the competition perspective and placing the findings to the respective standing committees, if any;
- holding focused group discussions with various stakeholders, to share the objectives and functions of the CCI;
- creating a pool of resource persons to spread awareness of competition law among the various stakeholders;
- establishing and expanding sustainable relationships with key stakeholders with an interest or role in promoting competition;
- delivering speeches on competition issues at conferences, presentations to business representative bodies and educational institutions making an effective contribution at a domestic and international level; and
- giving training to industries on developing competition compliance programmes.
The initiatives taken by the CCI on the way forward will see the commission proactive in its efforts to promote and sustain competition in markets, and strong in its enforcement to deter future aberrant anticompetitive behaviour.