The current phase of transformation of the Indian competition regime continued in 2010 with several critical developments in this field and the result is better awareness among stakeholders of the need and usefulness of having free and fair competition in markets. The Competition Commission of India (CCI) has taken to the enforcement of the provisions prohibiting ‘anti-competitive agreements’ (section 3) and ‘abuse of dominant position’ (section 4) under the Competition Act 2002 (the Act). The combination (merger control) provisions of the Act still remain to be notified. (Sections 3 and 4 of the Competition Act were brought into force with effect from 20 May 2009.)

The Act is the principal instrument through which the CCI is mandated to oversee the behaviour of market participants as well as structural changes in the market. The Act adopts the appreciable adverse effect on competition (AAEC) test as the substantive legal standard for assessing anti-competitive behaviour and structural changes. On matters falling within the domain of the Act, the jurisdiction of all other civil courts is expressly excluded. The CCI, post-enquiry and on finding infringement of section 3 or 4 of the Act, is vested with powers to (i) declare the agreement void and to carry out modifications; (ii) order discontinuance and non-recurrence; (iii) impose penalty on the delinquent enterprise; (iv) direct division or divestiture of dominant enterprise/group; and (v) any other order as deemed appropriate. Also, the CCI has the power to proceed against and punish a person responsible for the conduct of business of the company at the time of contravention.

During investigation, the CCI is assisted by the Office of the Director General, who is vested with the powers of a civil court, including the power of search and seizure. Failure to furnish information or wrong information also attracts penal provisions. Subject to certain conditions, the government has the power to (i) grant exemptions from the applicability of the Act; (ii) issue directions; and (iii) overrule the CCI. These powers, however, have not been invoked so far by the government. The Act also allows the CCI, with the approval of the government, to enter into memorandums of understanding (MOUs) with any foreign agency to facilitate investigation and enforcement of its orders against overseas enterprises having business operations in India. However, no such MOU has been entered into by the CCI.

The Competition Appellate Tribunal (CompAT) is empowered to, inter alia, hear appeals against orders passed by the CCI, to adjudicate on claims for compensation and to direct recovery thereof. The CompAT is a three-member body and appeals against orders/directions of the CompAT lie to the Supreme Court of India.

2010 - year in review
The CCI is known to be examining as many as 150 cases (including cases/inquiries which have spilled over from the erstwhile MRTP Commission). The enquiries currently pending before the CCI pertain to a myriad of industries and sectors such as pharmaceuticals, airlines, electricity, real estate, glass, tyres, finance, cement, stock exchanges and entertainment. The CCI is continuing with the process of recruiting more personnel with a view to increasing and enhancing its regulatory and enforcement capacity.

In 2010, the CCI passed its first final order clearing 16 banks of various charges, including those of abusive conduct and cartelisation. The CCI, in a 5-2 majority decision, held that the imposition of loan prepayment penalties by banks on customers who choose to close a loan account before the stipulated time does not amount to anti-competitive conduct. Two members of the CCI passed separate dissenting orders upholding the charges of anti-competitive conduct by the banks.

In a significant development, the Supreme Court of India, in September 2010, delivered a landmark judgment laying down the foundations of modern competition jurisprudence in India (Competition Commission of India v Steel Authority of India 2010 Comp LR 0061 (Supreme Court)). The Apex Court put to rest several controversial issues, in particular, questions surrounding the demarcation of powers between the CCI and the Competition Appellate Tribunal (CompAT); the test to be applied by the CCI prior to grant of interim reliefs; and the timelines to ensure prompt and expeditious disposal of enquiries pending before the CCI. Consequently, the CCI amended its general regulations setting out the timelines within which the Office of the Director General is expected to complete investigations and submit its reports (regulation 20(2)). Further, a new sub-regulation has been inserted where, in cases in which an interim order is passed, the final order becomes time-bound and needs to be passed within 90 days from the date of the interim order.

The CCI also sent out a strong message to India Inc in 2010 when it imposed a fine of 10 million rupees (the maximum possible fine) on one of India’s leading airlines for failing to furnish information/documents that were sought during an investigation into the carrier’s proposed strategic alliance with another private airline. (However, the CompAT has stayed this order of the CCI until a final decision is taken; the matter was due to come up before the CompAT on 17 February 2011.)

In order to guide compliance with the law, the CCI is contemplating the preparation and circulation of a booklet containing ‘do’s and don’ts for trade bodies’.

Luthra & Luthra Law Offices