THE EXISTENTIAL CRISIS OF CCI’S JURISDICTIONAL REACH:BREAKDOWN OF CCI’S ECONOMIC FUNCTIONAL APPROACH
[Romit Nandan Sahai is a third-year law student at Vivekananda Institute of Professional Studies, GGSIPU]
The Indian regime owing to its 'Closed-Economy' roots, housed several sectorial regulators to safeguard the economic interests of its people, and in pursuance of the same, vested its regulators with independence from interference as-well as competition related regulatory powers in their area of concern. Essentially, the sectorial regulators enjoyed a status of regulatory monopoly in order to prevent monopolies within their markets. The idea behind it was to arm these sectorial watchdogs to prevent economic concentration as per the then economic wisdom of a closed & protected market.
Overtime, as India marched towards Globalization & LPG Policy, the liberalized trade & investment transformed the Indian economy into a competitive growing market, because of which these regulators who were earlier ‘intended-monopolies’ began losing relevance for their protection & powers. As their relevance diminished, the Competition Commission of India (“CCI”) established under the Competition Act 2002 (“Act”) started to gain relevance in contrast. In the anguish to promote & sustain competition, CCI was given broad powers. However, these same powers became aconflict point with the status & privilege these sectorial regulators used to enjoy as noted in the Report of the Competition Law Review Committee 2018. Today there is an overreaching amount of inconsistency in the determination of CCI’s jurisdiction.
Enumerating the Test of Enterprises
The Act’s definition of ‘enterprise’ includes within its meaning any person or entity, be it a government department or not, who is engaged in an activity directly or indirectly excluding its sovereign functions. In order to provide a more luminating interpretation, the apex court in CCI v. Co-Ordination Committee of Artists & Technicians observed that the definition of an enterprise is to be read and understood with the definitions of ‘Person’ and ‘Agreement’. When these provisions are construed together, it is seen that the expression 'Enterprise' is wide and refers to any entity regardless of its legal status or financing (when read with the definition of 'Person') but is intended to include them only in regards to an economic activity (when read with the definition of 'Agreement'). It concluded by stating that the legislature has attached a functional notion to the term enterprise by emphasizing its focus on the activity and not the entity itself, evident from the exclusion of entities when disposing of their sovereign functions.
In Rajat-Verma v. Haryana Public Works Department the Competition Appellate-Tribunal expanded the interpretation by detailing activities considered as economic. It observed that the width of understanding aneconomic activity boils down to whether the activity interfaces with the market or the buyers or sellers within it. It further affirmed the observation of CCI in Hemant Sharma v. All India Chess Federation that the defining feature of enterprise is its engagement in an economic activity and is not dependent upon if it is so with a profit motive or not. Absence of profit motive or charitable character of activity will not invalidate its status as an enterprise.
The construct of the test of who can be considered an enterprise rests upon the factum that an entity is engaged in any economic activity. The definition of economic activity is supplemented within the Act’s definition for enterprise and, as such, includes activities of production, supply, storage, distribution and corporate & investment services.
Conflicting Views on Regulators as Enterprises
The foremost impetus is to see whether the definition of enterprise covers regulators or public authorities so as to attract CCI’s jurisdiction. On a plain reading of the interpretations by the commission & courts in the aforementioned cases showcases that the term enterprise is given awide meaning and thus may even include public authorities. While the exclusion of public authorities as envisaged by the legislature is to be narrowly understood to exclude only sovereign functions and except activities related to atomic energy, currency, defence & space.
This issue was first dealt in detail in Surinder Singh Barmi v. The Board of Control for Cricket in India (Surinder Singh) where itwas clarified that the Act is meant tofocus on the functional status rather than the institutional character of the entity in question. It is the nature of activity carried by the entity that is the sole determinant of whether it is an enterprise or not. Relying onthese reasons, CCI observed that though the Board of Control for Cricket in India (BCCI) is a regulatory authority but since few of its activities are of economic nature like grant of media rights, sale of tickets etc., that generate revenue, they would be deemed enterprise. But this very same rule that was evolved was contradicted in a follow up case of United Breweries Ltd. V. Commissioner of Department of Excise wherein answering the question whether the Excise Department is an enterprise, CCI observed that its activities of regulation, sale, distribution & taxation of liquor is a sovereign function and hence not an enterprise. The aspect of revenue generation, which was the determinant factor that deemed BCCI to be performing an economic activity and, thus, an enterprise, was neglected here.
However, the biggest missteps of the established test was seen in the recent case of Thupli Raveendra v. Bar Council of India wherein the inconsistent jurisdictional reach of CCI was accentuated & brought out. In this matter, a complaint was levelled against Bar Council ofIndia (BCI); the sole regulator for legal education, alleging abuse of dominance through its rules that imposed age restrictions for legal education; thereby creating barriers to entry to practice law. In its deliberation the CCI observed that BCI does not perform any economic activity and thus fails the precondition of economic activity in the test of enterprise and so cannot be regarded to fall within the definition of enterprise.
It held so by relying on the case In Re. Dilip Modwil and Insurance Regulatory and Development Authority wherein it was the view that any entity can qualify within the definition of enterprise as long asit is engaged in any activity that is within the sphere of economic or commercial activity as specified within the section. Any regulatory function discharged by a body thus will not be amenable to CCI’s jurisdiction.
However, this very decision shows the inconsistency of the test as at an earlier instance CCI had deemed Institute ofChartered Accountants ofIndia (“ICAI”), another regulatory body similar to BCI as an enterprise in the case of Arun Anandagiri v. The Institute of Chartered Accountants of India. ICAI’s introduction ofthe requirement to meet an annual credits threshold for the continuance of professional membership was challenged as abuse of dominance. CCI noted that ICAI, in addition to its regulatory functions, also performs certain economic-activities like conducting Courses, Publication of Books etc. And to quote CCI, “It is because of its economic activities that are distinguishable and differentiated from its regulatory activities”ICAI was deemed to be an enterprise.
It is very apparent from the above decisions that for the attraction of CCI's jurisdiction, the Test of Enterprise, & the requirement of 'rendering any economic activity' is very erratic both in principle and in application. It is erratic due to its apparent inconsistency in giving CCI its jurisdiction; just because ICAI performs some economic functions and BCI doesn't, ICAI is amenable to CCI's jurisdiction while BCI gets off scot-free even though BCI’s actions were also anti-competitive in nature.
Critique and Conclusion
Because of India’s unique nature of previous Competition Law & Economic Policies that focused on protecting domestic markets rather than promoting competition, regulators were given special rule making powers that could alter the competitiveness of their domain / market. The present test of enterprise as envisaged by the legislature and evolved by courts & CCI is full of inconsistencies. The concept of economic activities test was originated in Capitalistic Markets like EU where regulatory watchdogs are far few and their interference far lesser. Because of India’s previous protectionist policies and regulators having wide powers, the extension of the same economic activities test in India is a massive oversight on the legislature’s part that has allowed regulators like BCI to be beyond the reach of CCI.
The test is inconsistent on two counts; firstly, in its application, the requirement of whether the entity performs any economic activity is very narrow and, most importantly, without nexus with the act or action alleged to be violating the Act. This requirement is there only because of legislature’s mistake of giving CCI a rigid and definite jurisdiction. Because of which an entity whose actions are diluting competition will still not be challengeable before CCI just because it does not perform any economic-activity.
Secondly, this test is problematic is because of the principal issue, Competition Act and through its extension, CCI was enacted to ensure consumers welfare, advocating healthy competition, and preventing appreciable adverse effects on competition. These very objects of the Act showcase that anti-consumer or anti-competitive practice must be given a wide meaning that should go beyond economic activities. Today anti-competitive behaviour is no longer restricted to the domain of economic activities and is present in regulatory actions as-well, as evident in the BCI case, but because of the test, CCI cannot intervene in such issues, even if on paper it is anti-competitive due to the sole-reason that it is not by an Entity performing economic activity.
This traditional approach of India’s competition law must be mitigated. When the European Court of Justice (ECJ) came across the exact same issue of anticompetitive qualification requirements in Wouters v. Algemene Raad van de Nederlandse Orde van Advocaten wherein it held that in so far as jurisdiction is concerned, a body with only regulatory powers shall also be subject to the jurisdiction of ECJ despite the European Competition Law not recognizing entities carrying only social or regulatory functions. It is an uncanny behaviour of CCI that even after remarking in (Surinder Singh) that practice and adoption of Competition Law should be consistent to that followed by mature regimes like the European Union (EU); it failed to do the same with BCI. These instances highlight the inconsistencies in economic or functional activity test, and a more expansive standard to determine an enterprise is needed. More importantly, this passive approach of CCI, submissive to the confinement of the Act, has to be let loose for a more active approach so that despite the confinements, anti-competitive behaviour of all manner falls within its jurisdiction.