Dear Reader,
The 10th Edition of Spotlight looks at the Draft Competition (Amendment) Bill, 2020.
Revisiting India’s Competition Regime
The Draft Competition (Amendment) Bill, 2020
Concerns in the Draft Bill
Proposed Amendments and CUTS’ Viewpoint
1. Governing Board
The proposed amendments provide no justification for establishing a governing board over the commission. While the need to obtain external advice in making regulation on matters relating to competition is important, this objective could be met by more effective ways and reforming/ improving the regulation making process of the Commission.
Moreover, the risk of unnecessary government intervention through the governing board having supervisory powers over the commission cannot be ruled out.
2. Appointment of Director General (DG)
The Draft Bill provides for vesting the power of appointing the DG in the Competition Commission of India (CCI), changing it from the Central Government. If CCI is granted the power to appoint the DG, it would result in concentration of power within CCI. The investigative arm of competition regulators should be independent of the adjudicatory or rulemaking functions of the regulator.
3. National Competition Policy
Given that the suggestion to establish the Governing Board will need to be done away with, the Commission should take the initiative of seeking public comments on the Draft National Competition Policy, 2011 and an updated draft should be submitted to the Central Government.
4. Settlement and commitment
The Draft Bill provides for the parties under investigation an opportunity to apply for settlement of the case after submission of the DG’s Report and before the final Order or offer commitments.
Since the investigation is conducted confidentially, the parties under investigation are not aware of the nature. The provision on commitment requires the parties to offer commitment without knowing the nature of allegations, potential contravention and the evidence collected against them. Additionally, there is no clarity if a compensation claim can be made if a party has opted for such a mechanism.
CUTS’ Recommendations to Fill the Gaps
CUTS Recommendations to Fill the Gaps in Competition Law
1. Need to revive the COMPAT
The Draft Bill neither seeks to reinstate the Competition Appellate Tribunal nor does it follow the recommendation of the CLRC that a dedicated bench is established in the National Company Law Appellate Tribunal to hear appeals against the orders of CCI.
2. Collective abuse of dominance
Collective abuse of dominance takes place when two or more legally independent undertakings are linked in such a way that they adopt a common policy on the market (such as price parallelism) vis-à-vis other operators. CCI has noted several times in the past that Section 4 of the Competition Act, 2002 does not cover collective dominance (Delhi Vyapar Mahasangh vs Flipkart & Ors, most recently), even though several cases alleging collective abuse have been raised in the past.
A calibrated and/or qualified approach may be adopted for lack of jurisprudence, e.g. restricting it to concentrated markets with few players or where two firms together hold more than two-thirds of the market share. Most of the segments of platform markets are turning into a duopoly.
3. Need for a Judicial Member
Keeping in mind the decision of the Delhi High Court in Mahindra Electric Mobility Ltd. v. CCI last year, it was of utmost importance that the presence of a Judicial Member at the time of hearings and final decision be institutionalised by the Draft Bill. However, for some inexplicable reason, the Draft Bill ignored even this recommendation of the CLRC.
4. Need to adopt Cost and Benefit Analysis
Despite having wide powers under Sections 63 and 64, the Central Government and the Commission have not been mandated to ensure adequate transparency and accountability while issuing rules and regulations. There is no requirement to undertake a cost-benefit analysis (CBA). Consequently, the Act must mandate adopting scientific regulatory decision-making processes, in order to frame optimal rules, wherein the costs of regulations do not outweigh its intended benefits.
5. Need for mandatory consultations between CCI and sector regulators
The need for mandatory consultation between the commission and statutory agencies has been well recognised for long and has been getting stronger with the emergence of other statutory authorities (such as the proposed Data Protection Agency). Thus, statutory agencies and the commission must necessarily coordinate in areas of mutual interest, and provide reasons for their decision after considering the opinion of the other authority.