INDIAN COMPETITION REGIME AND THE NEED FOR SETTLEMENT AND COMMITMENT MECHANISM: AN ANALYSIS

[Aditya Trivedi and Mrigank Patel are final year students at National Law University and Judicial Academy, Assam & Hidayatullah National Law University, Raipur respectively}


Background

While CCI has been vigorously undertaking enforcement during the last 12 years and has kept on imposing heavy penalties on the parties in contravention of the Antitrust Law in India, the actual realization of such aforementioned penalties has been less than 0.6%.


In recent years, with a motive of better enforcement and implementation of Competition Law, many Antitrust Authorities or Regulators (Authorities) across the globe have been seen adopting newer sets of tools and practices such as critical loss analysis; upward pricing pressure; and the vertical arithmetic to deal with emerging new-age technologies.

To cope up with the rapidly changing business dynamics in India, Competition Law Review Committee (CLRC) was set up by the Ministry of Corporate Affairs (MCA) in 2018 to suggest some crucial changes to Competition Act, 2002 (Act). The CLRC delivered its report in July 2019, and amongst significant recommendations, the CLRC, in Chapter 2.4 of the report, vouched for the inclusion of “Settlement and Commitment Provisions” in the Act. The CLRC report stated that such Settlement and Commitment Provisions are an integral part of several Competition Law jurisdictions around the globe.

Understanding Settlements and Commitments in Antitrust Regimes

Generally, the proceedings under Antitrust follow a common approach wherein either the Authority finds sufficient evidence to hold a party for contravention, thereby issuing a cease-and-desist order and/or imposing a penalty or in case of lack of sufficient evidence, it closes the case since the contravention could not be established. However, there also exist other approaches, viz, Commitments and Settlements.

Commitments act as a tool to terminate an investigation early on by an Authority by accepting remedies or commitments voluntarily offered by parties involved in the investigation to eliminate initially highlighted Antitrust concerns. Consequently, if such commitments or remedies are accepted, they become binding on the parties who have proposed them. However, in numerous jurisdictions, parties are not eligible to opt for Commitments in every proceeding. For instance, the European Commission (EC) is of the opinion that if a proceeding calls for a fine, the investigation cannot be terminated by accepting Commitments. Thus, the EC does not follow the Commitments practice in cartels.

Similarly, Settlements act as a tool for termination of investigation at the early stages by the Authorities. Settlement refers to a system wherein the parties involved in an investigation by Authorities can acknowledge their violation of Antitrust Law and subsequent liability thereon in lieu of a reduction in fines for such violations. In this way, it can be understood that Settlement requires admission of guilt, while Commitments does not have any such requisite. Thus, in addition to Commitments, Settlements also comprise of other objectives such as a reward to the parties in the form of a reduced penalty for their cooperation in the investigation. Notably, the primary differences between Settlements and Commitments are as follows-

  • Settlements apply only to cartels in numerous jurisdictions;

  • In Settlements, Authorities are typically required to establish a Antitrust Law violation, which in turn requires a conclusion of an investigation, unlike in Commitments;

  • In Settlements, parties admit contravention of Antitrust Law, unlike in Commitments wherein investigation is terminated in the initial stages;

  • In Settlements, a fine is still imposed to a certain extent following a reduction, unlike in Commitments;

Settlements and Commitments in Antitrust Regimes across the world

In European Union (EU), Settlements are available only for cartels, whereas Commitments are permitted in all cases, except for the cartels. In the United Kingdom (UK) as well, a Settlements mechanism exists under Rule 9 of their Competition Act, 1998. Additionally, in Singapore too, the Consumer and Competition Commission of Singapore (CCCS) released a practice statement in 2016 outlining and emphasizing the procedure for their Settlements and Commitments scheme for the attainment of ultimate objectives.

EC adopted the first cartel Settlement in 2010 in DRAMS and Animal Feed Phosphates. Till now, the EC has adopted 59 prohibition decisions in cartel cases, of which 33 were Settlement decisions, whereas 6 were ‘hybrid’ Settlement decisions in which some parties chose not to settle. For instance, this process was used in Power Exchanges, wherein two parties settled and the EC imposed a total fine of €5.9 million, and in Trucks, where 6 parties settled, alongside the EC imposing the highest ever fine in any cartel decision to date (€2.9 billion). Furthermore, in the UK, the Cooper Tirecase involved a series of bilateral Settlements, whereas there was a group Settlement in the National Grid case.

Evolution of Settlements and Commitments Mechanism in Indian Antitrust Regime

The CLRC report noted that in the case of Tamil Nadu Film Exhibitors Association v. CCI (2015), Madras High Court held that the scheme of the Act allows a party to enter into compromise or Settlement and CCI has broad powers under Section 27. The Court also remarked that,

“The only question that the Competition Commission may perhaps be obliged to look into, in cases where the parties arrive at a settlement, is to see whether the compromise or settlement is a cover-up so as to prevent an investigation being made into the Anti-Competitive practices or abuse of dominant position.”

Analyzing the matter, the CLRC report noted that Section 27 of the Act does not expressly envisage a settlement or commitment process. Presently, CCI is empowered to provide leniency in penalties to cartels who submit leniency applications. The procedure is laid down in Section 46 of the Act and CCI Lesser Penalty Regulations, 2009. Reviewing the matter, the CLRC report recommended amendment in the Act to include the mechanism for Sections 3(4) and 4 of the Act as well since it would help hasten the Antitrust proceedings both in terms of time and resources.

Additionally, the proposed Competition (Amendment) Bill, 2020 (Competition Bill), provides provisions relating to Settlement and Commitment for alleged anti-competitive vertical agreements and abuse of dominance. More precisely, Section 48A of the Competition Bill would allow a party to offer a settlement which could be done post the service of a report by the Director-General (DG) of CCI but before the delivery of CCI’s final order. Similarly, under Section 48B of the Competition Bill, a scheme of Commitment has been proposed to be incorporated wherein parties can voluntarily offer Commitment to CCI post a Section 26(1) order has been passed by the CCI. The Competition Bill further explains that CCI may decide detailed rules and guidelines on the usage of this mechanism.

Analogy and Way Forward

Antitrust jurisprudence aims to provide a level playing field in the market, to ensure optimum utilisation of resources to both the producers and consumers. Once, Settlement mechanism is adopted by the CCI, it will save its investigative resources in antitrust proceedings. Enterprises will be benefitted as the cases will be decided within a shorter duration than before. Additionally, the end goal of the Antitrust Law is well served by this adoption, as it will not only focus on market corrections but also promote dynamic efficiency in the market. Furthermore, the MCA, which watches over CCI, has already furnished a mandate for Settlements Scheme for Company Law matters. The scheme was introduced in 2014 by MCA. The securities market regulator viz, Securities and Exchange Board of India (SEBI), has also brought forward the SEBI Settlement Scheme, 2020. Inclusive of settlement terms regarding monetary and non-monetary elements like suspension of business, lock-in of securities, etc. Alongside, the Income Tax Department of India has also launched the “Vivad se Vishwas Scheme” which is now governed by Direct Tax Vishwas se Vivad Act, 2020 and Income Tax Act, 1961, which sets out a settlement framework for tax-related matters.

In Antitrust matters, correction of market practices is more important than fines and penalties alone, which too is critical to act as a deterrent but also leads to protracted litigation, resulting in avoidable time and energy of CCI, which could otherwise be used in closely overlooking market practice.


There cannot be a “one-size-fits-all” approach, and a suitably structured mechanism will help CCI resolve Antitrust cases faster and save its scarce resources. CCI has been imposing penalties for years, but the realization has been paltry due to matters being stuck in litigations. For efficiency of enforcement and attainment of ultimate objectives, an enabling provision of settlement and commitment mechanism could be added to the Competition Act to enable CCI to achieve market corrections and ensure a level playing field, fulfilling the objectives of Antitrust Law. Alternatively, CCI can even consider providing an introduction of a suitable mechanism for Settlement and commitment even before passing of the Bill, as was done in the case of the Green Channel Route, which came into effect in 2019 itself, wherein certain mergers and acquisitions can be notified and deemed approved by the Commission. Green channel has been highly successful and globally acclaimed; CCI has reviewed more than 50 combinations under this route.

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