The times they are a-changing for Competition Commission of India

Fair market regulator is getting more powers as its new leadership settles in at work

In less than a month, Indian companies will get new rules on how to deal with the fair market regulator. The Competition Commission of India (CCI), in the past couple of years, has passed orders in several high profile cases involving Google, WhatsApp, Amazon and Reliance Industries.

As the CCI reads representations from the industry, advocacy groups and academia, it has a new leadership team. Ravneet Kaur joined the regulator as chairperson in May, making her just four months into the job. Of the three new members appointed last week, only Sweta Kakkad, a former interim chief compliance officer at WhatsApp, has experience appearing in cases at the CCI. The two other mebers are Anil Agrawal, a former Indian Police Service officer who has also worked at the union commerce ministry, and Deepak Anurag, a former Indian Audit and Accounts Service officer. Anurag is yet to formally join the regulator, according to CCI’s website.

In CCI’s 14-year history, it is the first time that its leaders have a combined experience of less than five months on the job. They are, however, more empowered after amendments to the Competition Commission Act. For instance, the CCI can now appoint a director general (investigation) who will investigate complaints made to the regulator.

As foreign and domestic companies expand in India, how CCI understands competition becomes significant. “Where the reliance on competition and innovation is relatively less, say less than 40 percent, the economy is in the first stage of development, typically yielding a per capita GNP (gross national product) of less than $2000, and where the reliance on competition and innovation is significant, say more than 80 per cent, the economy is in the fifth stage of development,” M S Sahoo, a former member of the commission, has said.

“In defining the parameters of welfare, several fresh challenges have emerged for competition as offshoots of the internet and of platform markets,” says Geeta Gouri, another former member of the commission. These are big demands on a commission mired in controversies like when Google claimed that the regulator had relied on “unreliable and uncorroborated” statements from Amazon to pass orders against the e-commerce firm for abusing its dominance in the Android market.

More powers

The CCI is in the midst of possibly the biggest pivot in its role, marked by new rules of engagement with the corporate sector. CCI proposes to bring in roughly the equivalent of insider trading rules used in the stock markets. The commitment and settlement rules allow companies a chance to meet fair market norms as the regulator understands them, but without the admission of guilt.

The new rules will make CCI’s environment look less like a court of inquiry and be in tune with global trends, where the regulator guides companies from infringing competition.

The draft 'Competition Commission of India (Commitment) Regulations, 2023' shall work as follows. Assume that the CCI has filed an investigation against a company alleging it abused its dominant position in a market. Or, the company has merged a competitor with itself, what in competition terms is known as an anticompetitive vertical agreement.

Companies vs CCI

In the usual course, the office of Director General (Investigation) will begin to examine the allegations but commitment rules offer an escape route. The company gets a chance to satisfy the regulator how it will ensure the market for the service or the product is not distorted. If the CCI is satisfied, the company gets away.

The other major change is 'Competition Commission of India (Settlement) Regulations, 2023'. This one takes the commitment environment forward. If a company sat back during investigations but now begins to feel the heat, it can approach the commission to settle charges within a time limit but without admitting guilt.

So even if the director general (Investigation) has found there was abuse of dominant position, or there is a merger that makes the market anticompetitive, the company could ask for the case to be settled, paying a fine between Rs 500,000 to Rs 50 lakh. It is a big deal as the alternative for companies against whom investigations are upheld have to pay penalties of 10 per cent of their annual turnover for the concerned years.

Both the settlement and commitment rules can become operative only if the company is able to satisfy the CCI it has made a fact-based disclosures, such as, “a full and true disclosure of material facts, past contraventions of the Act, and ongoing CCI proceedings, a settlement application” as a note written by Pranjal Prateek (Partner), at law firm Khaitan & Co shows.

Why would companies prefer it? "Typically, an enforcement proceeding before the CCI can take between 3-4 years on an average. Introduction of settlement and commitment mechanism is a forward-looking change and in line with global practice, which is intended to expedite disposal of cases, reduce prolonged litigation and ensure quicker market correction. The investigated parties in both abuse of dominance and vertical agreement proceedings would have the option to offer solutions to the CCI and close the proceedings at the early stage of investigation," said Bharat Budholia, partner at AZB & Partners, a law firm.

These two regulations have an interesting background. In April this year The Competition (Amendment) Act, 2023 became operational changing key provisions of the almost two decade old Competition Act, 2002. The changes in regulations will follow from this amendment. 

For both these regulations the time period for parties to send in their comments expired on September 13. It is now time for the new team of Ravneet Kaur to pore over them and offer their suggestions to the ministry of corporate affairs to issue the final regulations. As Budholia said: "The onus would be on the party offering settlement or commitment to show how the proposal would address the alleged contraventions."

A ticklish issue CCI will decide upon is what constitutes a merger that should be checked. Older laws had laid down a flat value of Rs 2,000 crore for the transaction to qualify for the check. The amendments give the regulator space to bring in other considerations like the provisions for relaxing the applications to transactions involving implementation of an open offer or purchase of securities on a regulated stock exchange, subject to certain conditions. “Or even to consider the gross merchandise value to decide if the deal should be assessed by us”, said a former member of the Commission.

Here too, the draft rules are on the notice board of the Commission and will have to be assessed by the members.

Very soon thereafter a torrent of cases involving antitrust issues will be on the tables of the members. The cases regarding Google and a host of e-commerce companies are already pending (only the interim orders have been issued)  and so are cases from several old economy sectors.

As on 31st March this year, CCI had an impressive disposal rate of 90 percent in this sector. For combination cases this was even better at 99 percent. But once the number of members dipped below the quorum, after the last chairman Ashok Kumar Gupta left and Dr Sangeeta Verma was left to officiate with just one more member, the numbers had begun to decline.