CHAPTER-1
INTRODUCTION
Rationale behind the formation of Competition commission and appellate tribunal
The past few years have been challenging for the economy and for businesses world over, making the task of policy makers even more daunting. India, in the pursuit of globalization responded by opening up its economy by removing controls and resorting to liberalization. In the light of this, the obvious need of the hour was that the Indian market be geared to face competition from within the country and outside. The financial crisis which gripped gripped world strengthened the need and highlighted the importance of a strong and effective competition policy, a policy which would encourage markets to work well for the benefit of business and consumers, thereby increasing increasing the country‘s economic fitness: markets characterized by effective competition makes firms innovate more, keep prices down for consumers and improved total factor productivity drives economic growth.
In the wake of economic liberalization and wide spread economic reforms introduced by India since 1991 and in conformity with the commitments made at the WTO, in October 1999, the Government of India appointed a High Level Committee (Raghavan Committee) on Competition Policy and Competition Law to advise a modern competition law for the country in line with international developments and to suggest a legislative framework, which may entail a new law or appropriate amendments to the MRTP Act. The Committee submitted its report to the Central government. The Central Government consulted all concerned including the trade and industry associations and the general public. The Central Government after considering the suggestions of the trade and industry and the general public decided to enact a law on Competition to replace the then existing competition law namely, the Monopolies and Restrictive Practices Act (1969) (the MRTP Act) which was primarily designed to restrict growth of monopolies in the market with a modern competition law in sync with the established competition law principles. As the first step towards this transformation, a new Competition Act, 2002 was enacted which received Presidential assent on January 13, 2003. 1
The Competition Act, 2002 (‗the Act‘)in Act‘)in its preamble, seeks to achieve the following objectives:
Prevent practices having adverse effect on comp etition.
Promote and sustain competition in the markets.
Protect the interests of consumers.
Ensure freedom of trade carried on by b y other participants in markets, in India
The Act regulates the following broad areas of competition law in India
Anti-competitive agreements: these could be both horizontal and vertical agreements
Abuse of dominant position: The Act prohibits abuse of such dominant position by an enterprise or a group. The Competition Commission of India ( the Commission) is empowered into such matters.
Combinations: It needs to be noted that the provisions relating to regulation of ―combinations‖ ( mergers, acquisitions & amalgamations) are still to be notified. The same are likely to be notified any time after the Commission finalizes the regulations for the same.
Competition advocacy: this is defined as the ability of the competition office office to provide advice, influence and participate in government economic and regulatory policies in order to
promote
more
competitive
industry
structure,
firm
behavior
and
market
performance.(World Bank).
The Competition (Amendment) Act, 2007 was approved by the Parliament in September 2007 th
and received Presidential assent on 24 September 2007. The amendment brought significant significant changes in the then existing ex isting regulatory infrastructure established under the Competition Act.
Under the Act, the Competition Commission of India (CCI) was set-up in 2003. but 2003. but it could not no t become fully operational as the Central Government refrained from notifying some important provisions of the Competition Act and appointing members of the Commission. In a significant move, the Central Government put into effect the Competition (Amendment) Act, 2007 which proposes, inter alia, to set up a Competition Appellate Tribunal for hearing appeals from the
2
The Competition Act, 2002 (‗the Act‘)in Act‘)in its preamble, seeks to achieve the following objectives:
Prevent practices having adverse effect on comp etition.
Promote and sustain competition in the markets.
Protect the interests of consumers.
Ensure freedom of trade carried on by b y other participants in markets, in India
The Act regulates the following broad areas of competition law in India
Anti-competitive agreements: these could be both horizontal and vertical agreements
Abuse of dominant position: The Act prohibits abuse of such dominant position by an enterprise or a group. The Competition Commission of India ( the Commission) is empowered into such matters.
Combinations: It needs to be noted that the provisions relating to regulation of ―combinations‖ ( mergers, acquisitions & amalgamations) are still to be notified. The same are likely to be notified any time after the Commission finalizes the regulations for the same.
Competition advocacy: this is defined as the ability of the competition office office to provide advice, influence and participate in government economic and regulatory policies in order to
promote
more
competitive
industry
structure,
firm
behavior
and
market
performance.(World Bank).
The Competition (Amendment) Act, 2007 was approved by the Parliament in September 2007 th
and received Presidential assent on 24 September 2007. The amendment brought significant significant changes in the then existing ex isting regulatory infrastructure established under the Competition Act.
Under the Act, the Competition Commission of India (CCI) was set-up in 2003. but 2003. but it could not no t become fully operational as the Central Government refrained from notifying some important provisions of the Competition Act and appointing members of the Commission. In a significant move, the Central Government put into effect the Competition (Amendment) Act, 2007 which proposes, inter alia, to set up a Competition Appellate Tribunal for hearing appeals from the
2
Competition Commission of India; to rationalize the scheme of penalties; to provide mechanism for mutual consultation between the competition regulators and sectoral regulators etc. The amendment made it clear that the CCI would act as an expert body to prevent and regulate anticompetitive practices, while the judicial functions would be undertaken by the proposed Competition Appellate Tribunal.
The Competition Act 2002, as amended through Competition (Amendment) Act 2007 is currently in force. The regulations for the provisions that have been notified have also been issued by the Commission. The Competition Commission of India and the Competition Appellate Tribunal have been fully constituted with the appointment of respective Chairpersons and Members.
3
CHAPTER-2
COMPETITION COMMISSION OF INDIA
Competition Act,2002 is to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. The objectives of Competition Law have been further highlighted in a recent judgment delivered by Hon'ble Supreme Court as: "The main objective of competition law is to promote economic efficiency using competition as one of the means of assisting the creation of market responsive to consumer preferences. The advantages of perfect competition are three-fold: allocative efficiency, which ensures the effective allocation of resources, productive efficiency, which ensures that costs of production 1
are kept at a minimum and dynamic efficiency, which promotes innovative practices."
To achieve its objectives, the Competition Commission of India which has been established by the Central Government with effect from 14th October 2003 consisting a Chairperson and 6 Members appointed by the Central Government, endeavors to do the following:
benefit and welfare of consumers. y for faster and inclusive growth and development of economy. ent utilization of economic resources. egulators to ensure smooth alignment of sectoral regulatory laws in tandem with the competition law.
1
Judgment in Civil Appeal No. 7999 of 2010 pronounced on 9th September, 2010 4
spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in Indian economy. It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India. The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.
5
CHAPTER-3
COMPETITION APPELLATE TRIBUNAL
The Competition Appellate Tribunal is a statutory organization established under the provisions of the Competition Act, 2002 to hear and dispose of appeals against any direction issued or decision made or order passed by the Competition Commission of India. The Appellate Tribunal shall also adjudicate on claim for compensation that may arise from the findings of the Competition Commission of India or the orders of the Appellate Tribunal in an appeal against any findings of the Competition Commission of India. th
The Central Government has set up the Appellate Tribunal on 15 May, 2009 having its Headquarter at New Delhi. Hon‘ble Dr. Justice Arijit Pasayat, former Judge of Supreme Court, has been appointed as the First Chairperson of the Appellate Tribunal. 3.1 Establishment of Appellate Tribunal (section53A ):
(1) The Central Government shall, by notification, establish an Appellate Tribunal to be known as Competition Appellate Tribunal – (a) to hear and dispose of appeals against any direction issued or decision made or order passed 2
by the Commission
(b) to adjudicate on claim for compensation that may arise from the findings of the Commission 3
or the orders of the Appellate Tribunal in an appeal against any finding of the Commission and 4
pass orders for the recovery of compensation
(2) The Headquarter of the Appellate Tribunal shall be at such place as the Central Government may, by notification, specify.
2
under sub-sections (2) and (6) of section 26, section 27, section 28, secti on 31, section 32, section 33, secti on 38, section 39, section 43, secti on 43A, section 44, section 45 or section 46 of the Act; 3
4
42A or under subsection( 2) of section 53Q of this Act, under section 53N of this Act.
6
3.2 Composition of Appellate Tribunal (section 53C):
The Appellate Tribunal shall consist of a Chairperson an d not more than two other members to be appointed by the Central Government.
Qualifications for appointment of Chairperson and Members of Appellate Tribunal (section 53D):
(1)The Chairperson of the Appellate Tribunal shall be a person, who is, or has been a Judge of the Supreme Court or the Chief Justice of a High Court. (2) A member of the Appellate Tribunal shall be a person of ability, integrity and standing having special knowledge of, and professional experience of not less than twenty five years in, competition matters including competition law and policy, international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, administration or in any other matter which in the opinion of the Central Government, may be useful to the Appellate Tribunal.
Selection Committee (section 53E):
(1)The Chairperson and members of the Appellate Tribunal shall be appointed by the Central Government from a panel of names recommended by a Selection Committee
The selection committee shall consist of: (a) the Chief Justice of India or his nominee ………. C hairperson; (b) the Secretary in the Ministry of Corporate Affairs………. Member; (c) the Secretary in the Ministry of Law and Justice ………. Member.
(2) The terms of the Selection Committee and the manner of selection of panel of names shall be such as may be prescribed.
Term of office of Chairperson and Members of Appellate Tribunal (section 53F ): 7
The Chairperson or a member of the Appellate Tribunal shall hold office as such for a term of five years from the date on which he enters upon his office, andshall be eligible for re appointment.
No Chairperson or other member of the Appellate Tribunal shall hold office as such after he has attained, (a) in the case of the Chairperson, the age of sixty-eight years; (b) in the case of any other member of the Appellate Tribunal, the age of sixty-five years.
Terms and conditions of service of chairperson and Members of Appellate Tribunal (section 53G):
(1)The salaries and allowances and other terms and conditions of service of the Chairperson and other members of the Appellate Tribunal shall be such as may be prescribed. (2) The salaries, allowances and other terms and conditions of service of the Chairperson and other members of the Appellate Tribunal shall not be varied to their disadvantage after their appointment.
Vacancies (section 53H):
If, for any reason other than temporary absence, any vacancy occurs in the office of the Chairperson or a member of the Appellate Tribunal, the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Appellate Tribunal from the stage at which the vacancy is filled.
Resignation of Chairperson and Members of Appellate Tribunal (section 53I):
The Chairperson or a member of the Appellate Tribunal may, by notice in writing under his hand addressed to the Central Government, resign his o ffice. 8
Provided that the Chairperson or a member of the Appellate Tribunal shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.
Member of Appellate Tribunal to act as its Chairperson in certain cases (section 53J):
(1)In the event of the occurrence of any vacancy in the office of the Chairperson of the Appellate Tribunal by reason of his death or resignation, the senior-most Member of the Appellate Tribunal shall act as the Chairperson of the Appellate Tribunal until the date on which a new Chairperson appointed in accordance with the provisions of this Act to fill such vacancy enters upon his office. (2) When the Chairperson of the Appellate Tribunal is unable to discharge his functions owing to
absence, illness or any other cause, the senior-most member or, as the case may be, such one of the Members of the Appellate Tribunal, as the Central Government may, by notification, authorize in this behalf, shall discharge the functions of the Chairperson until the date on which the Chairperson resumes his duties.
Removal and suspension of Chairperson and Members of Appellate Tribunal (Section 53K):
(1)The Central Government may, in consultation with the Chief Justice of India, remove from office the Chairperson or any other member of the Appellate Tribunal, who(a) has been adjudged an insolvent; or (b) has engaged at any time, during his terms of office, in any paid employment; or (c) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or (d) has become physically or mentally incapable of acting as such Chairperson or other Member of the Appellate Tribunal; or 9
(e) has acquired such financial or other interest as is likely to affect prejudicially his functions as such Chairperson or Member of the Appellate Tribunal; or (f) has so abused his position as to render his continuance in office prejudicial to the public interest.
Restriction on employment of Chairperson and other Members of Appellate Tribunal in certain cases (section 53L ):
The Chairperson and other members of the Appellate Tribunal shall not, for a period of two years from the date on which they cease to hold office, accept any employment in, or connected with the management or administration of, any enterprise which has been a party to a proceeding before the Appellate Tribunal under this Act.
Provided that nothing contained in this section shall apply to any employment under the Central Government or a State Government or local authority or in any statutory authority or any corporation established by or under any Central, State or Provincial Act or a Government Company as defined in section 617 of the Companies Act,1956 (1 of 1956).
Staff of Appellate Tribunal (section 53M):
(1)The Central Government shall provide the Appellate Tribunal with such officers and other employees as it may think fit. (2) The officers and other employees of the Appellate Tribunal shall discharge their functions under the general superintendence and control of the Chairperson of the Appellate Tribunal. (3) The salaries and allowances and other conditions of service of the officers and other employees of the Appellate Tribunal shall be suc h as may be prescribed.
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3.3 FUNCTIONS
Appeal to Appellate Tribunal (section 53B ):
(1)The Central Government or the State Government o r a local authority or enterprise or any person, aggrieved by any direction, decision or order referred to in clause (a) of section 53A may prefer an appeal to the Appellate Tribunal.
(2) Every appeal shall be filed within a period of sixty days from the date on which a copy of the direction or decision or order made by the Commission is received by the Central Government or the State Government or a local authority or enterprise or any person referred to in that subsection and it shall be in such form and be accompanied by such fee as may be prescribed.
Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of sixty days if it is satisfied that there was sufficient cause for not filing it within that period.
(3) On receipt of an appeal the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the direction, decision or order appe aled against.
Awarding compensation (section 53N):
(1)Without prejudice to any other provisions contained in this Act, the Central Government or a State Government or a local authority or any enterprise or any person may make an application to the Appellate Tribunal to adjudicate on claim for compensation that may arise from the findings of the Commission or the orders of the Appellate Tribunal in an appeal against any 5
6
findings of the Commission or under section 42A or under sub-section(2) of section 53Q of the Act, and to pass an order for the recovery of compensation from any enterprise for any loss or damage shown to have been suffered, by the Central Government or a State Government or a local authority or any enterprise or any person.
5 6
Contraventions of orders of commission Contraventions of orders of Appellate tribunal 11
(2) Every application made shall be accompanied by the findings of the Commission, if any, and also be accompanied with such fees as may be prescribed.
(3) The Appellate Tribunal may, after an inquiry made into the allegations mentioned in the application made , pass an order directing the enterprise to make payment to the applicant, of the amount determined by it as realisable from the enterprise as compensation for the loss or damage caused to the applicant as a result of any contravention of the provisions.
Provided that the Appellate Tribunal may obtain the recommendations of the Commission before passing an order of compensation.
(4) Where any loss or damage is caused to numerous persons having the same interest, one or more of such persons may, with the permission of the Appellate Tribunal, make an application for and on behalf of, or for the benefit of, the persons so interested, and thereupon, the provisions of rule 8 of Order 1 of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), shall apply subject to the modification that every reference therein to a suit or decree shall be construed as a reference to the application before the Appellate Tribunal and the order of the Appellate Tribunal thereon.
3.4 Procedures and powers of Appellate Tribunal (section 53O):
(1)The Appellate Tribunal shall not be bound by the procedure laid down in the Code of Civil 7
Procedure, 1908 , but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules made by the Central Government, the Appellate Tribunal shall have power to regulate its own procedure including the places at which they shall have their sittings.
(2) The Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely:7
5 of 1908 12
a) summoning and enforcing the attendance of any person and examining him on oath; b) requiring the discovery and production of documents; c) receiving evidence on affidavit; d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public record or document or copy of such record or document from any office; e) issuing commissions for the examination of witnesses or documents; f) reviewing its decisions; g) dismissing a representation for default or deciding it exparte; h) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; i) any other matter which may be prescribed.
(3) Every proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228, and for the purposes of section 196, of the Indian 8
Penal Code and the Appellate Tribunal shall be deemed to be a civil court for the purposes of 9
section 195 and Chapter XXVI of the Code or Criminal Procedure, 1973.
Execution of orders of Appellate Tribunal (section 53P):
(1)Every order made by the Appellate Tribunal shall be enforced by it in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the Appellate Tribunal to send, in case of its inability to execute such order, to the court within the local limits of whose jurisdiction,a) in the case of an order against a company, the registered office of the company is situated; or b) in the case of an order against any other person, place where the person concerned voluntarily resides or carries on business or personally works for gain, is situated.
8
9
(45 of 1860) (2 of 1974)
13
(2) the Appellate Tribunal may transmit any order made by it to a civil court having local jurisdiction and such civil court shall execute the order as if it were a decree made by that court.
Contravention of orders of Appellate Tribunal (section 53Q):
(1)Without prejudice to the provisions of this Act, if any person contravenes, without any reasonable ground, any order of the Appellate Tribunal, he shall be liable for a penalty of not exceeding rupees one crore or imprisonment for a term up to three years or with both as the Chief Metropolitan Magistrate, Delhi may deem fit:
Provided that the Chief Metropolitan Magistrate, Delhi shall not take cognizance of any offence punishable under this sub-section, save on a complaint made by an officer authorized by the Appellate Tribubnal.
(2) Without prejudice to the provisions of this Act, any person may make an application to the Appellate Tribunal for an order for the recovery of compensation from any enterprise for any loss or damage shown to have been suffered, by such person as a result of the said enterprise contravening, without any reasonable ground, any order of the Appellate Tribunal or delaying in carrying out such orders of the Appellate Tribunal.
Vacancy in Appellate Tribunal not to invalidate acts or proceedings (section 53R):
No act or proceeding of the Appellate Tribunal shall be questioned or shall be invalid merely on the ground of existence of any vacancy or defect in the constitution of the Appellate Tribunal.
Right to legal representation (section 53S):
(1)A person preferring an appeal to the Appellate Tribunal may either appear in person or authorize one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to present his or its case before the Appellate Tribunal.
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(2) The Central Government or a State Government or a local authority or any enterprise preferring an appeal to the Appellate Tribunal may authorize one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to act as presenting officers and every person so authorized may present the case with respect to any appeal before the Appellate Tribunal.
(3) The Commission may authorize one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to act as presenting officers and every person so authorized may present the case with respect to any appeal before the Appellate Tribunal.
Appeal to Supreme Court (section 53T):
The Central Government or any State Government or the Commission or any statutory authority or any local authority or any enterprise or any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to them;
Provided that the Supreme court may, if it is satisfied that the applicant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed after the expiry of the said period of sixty days.
Power to Punish for contempt (section 53U):
The Appellate Tribunal shall have, and exercise, the same jurisdiction, powers and authority in respect of contempt of itself as a High Court has and may exercise and, for this purpose, the 10
provisions of the Contempt of Courts Act, 1971
shall have effect subject to modifications that,-
(a) the reference therein to a High Court sh all be construed as including a reference to the Appellate Tribunal;
10
(70 of 1971) 15
(b) the references to the Advocate-General in section 15 of the said Act shall be construed as a reference to such Law Officer as the Central Go vernment may, by notification, specify in this behalf.
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CHAPTER-4
PROVISIONS APPLYING TO COMMISSION AND TRIBUNAL
Restriction on disclosure of information (section 57):
No information relating to any enterprise, being an information which has been obtained by or on behalf of the Commission or the Appellate Tribunal for the purposes of this Act, shall, without the previous permission in writing of the enterprise, be disclosed otherwise than in compliance with or for the purposes of this Act or any other law for the time being in force.
Chairperson, Members, Director General, Secretary, officers and other employees, etc., to be public servants (section 58):
The Chairperson and other Members and the Director General, Additional, Joint, Deputy or Assistant Directors General and Secretary and officers and other employees of the Commission and the Chairperson, Members, officers and other employees of the Appellate Tribunal shall be deemed, while acting or purporting to act in pursuance of any of the provisions of this Act, to be 11
public servants within the meaning of section 21 of the Indian Penal Code .
Protection of action taken in good faith (section 59):
No suit, prosecution or other legal proceedings shall lie against the Central Government or Commission or any officer of the Central Government or the Chairperson or any Member or the Director- General, Additional, Joint, Deputy or Assistant Directors General or the Secretary or officers or other employees of the Commission or the Chairperson, Members, officers and other employees of the Appellate Tribunal, for anything which is in good faith done or intended to be done under this Act or the rules or regulations made there under.
11
(45 of 1860) 17
Exclusion of jurisdiction of civil courts (section 61):
No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Commission or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.
Power to make rules (section 63):
(1) The Central Government may, by notification, make rules to carry out the provisions of this Act: the manner in which the monies transferred to the Competition Commission of India or the Appellate Tribunal shall be dealt with by the Commission or the Appellate Tribunal, as the case may be, under the fourth proviso to sub-section(2) of section 66.
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CHAPTER-5
COMPETITION COMMISSION vs. COMPETITION APPELLATE TRIBUNAL
―With Great Power, Comes Great Responsibility‖
The above words, although spoken by a fictional character in Hollywood movie, hold great significance when seen in light of the recent judgment of the Hon‘ble Supreme Court of India passed on September 09, 2010 in the case of ‗Competition Commission of India v. Steel 12
Authority of India Limited‘ . This can without a doubt be labeled as a landmark judgment in the field of competition law in India wherein the Hon‘ble Supreme Court has put forth in great detail the rationale behind the enforcement of this Indian Competition Act, 2002 (‗Act‘). Through this udgment, the Hon‘ble Court has put to rest various controversies regarding the interpretation of the provisions of the Act, in particular the demarcation of the powers of the Competition Appellate Tribunal (‗Tribunal‘) and the Competition Commission of India (‗Commission‘) and also strict directions for expeditious disposal of ex post enquiries.
Brief background:
SAIL Vs. Jindal Steel & Power Ltd,
13
In October 2009, Jindal Steel & Power Ltd. (‗JSPL‘) filed information under Section 19 read with Section 26(1) of the Act before the Commission alleging that M/s. Steel Authority of India Ltd. (‗SAIL‘) had, inter alia, entered into an exclusive supply agreement with Indian Railways for the supply of rails. SAIL was alleged to have abused its dominant position in the market (Section 4), deprived others of fair competition by entering into an anti-competitive agreement (Section 3) and therefore, acted in violation of this law. SAIL sought time to file the relevant information but the Commission (without considering any further information on record) opined that there, in fact exists a prima facie case which requires investigation by the Director General 12 13
2010CompLR61(Supreme court) 2010CompLR22(Compat) 19
(‗DG‘). SAIL questioned the legality of the Commission‘s order before the Tribunal and the Commission applied for impleadment in the matter. The crux of the Commission‘s argument was the maintainability of the appeal before the Tribunal since the order under appeal before the Tribunal amounted to a direction simpliciter to conduct investigation and that it did not fall within the purview of Section 53A of the Act.
The Tribunal in its order of February 15, 2010 dismissed the application of the Commission for impleadment.
The Supreme Court of India was seized of an appeal filed by the Competition Commission of India (CCI) on the question as to whether an appeal can be filed and entertained by the Appellate Tribunal against CCI‘s prima facie order of instituting an enquiry and referring the matter for investigation to the Director General, CCI (DG). The appeal arose from an order passed by the Competition Appellate Tribunal (CAT) whereby it held that: a. an appeal can be filed against the prima facie order by the CCI to institute an Inquiry into anti competitive agreements/abuse of dominance under section 26(1) of the Competition Act, 2002; b. the CCI is not entitled to be impleaded as a party and to be heard in such appeal before the CAT; and c.
the prima facie order has to be reasoned/speaking one.
The appeal was disposed of on 9th September, 2010. The SC, in its order emanating from the first appeal under the Competition Act, 2002, has ruled as under: a. an appeal shall lie only against such directions, decisions or orders passed by CCI before the CAT which have been specifically made appealable. The prima facie view and issuing direction to the DG would not be an order appealable under Section 53A of the Act; b. Neither any statutory duty is cast on the Commission to issue notice or grant hearing, nor
20
any party can claim as a matter of right, notice, and/or hearing at the stage of formation of opinion that a prima facie case exists for issuance of a direction to the DG to cause an investigation to be made into the matter. c. Commission being an expert body, its views would be of appropriate assistance to the Tribunal and ,therefore, in inquiries initiated suo moto, the Commission is necessary party and in all other cases, it will be a proper party in the proceedings before CAT; d. A temporary restraint order in terms of Section 33 of the Act can only be passed by the Commission when it has formed prima facie opinion and directed investigation to DG in terms of Section 26(1) of the Act. It may issue an order temporarily restraining the party from carrying on such, until the conclusion of such enquiry or until further orders without giving notice to the party, where it deems necessary. This power has to be exercised by the Commission sparingly and under compelling and exceptional circumstances. Wherever during the course of inquiry the Commission exercises its jurisdiction to pass interim orders, it should pass a final order in that behalf as expeditiously as possible and in any case not later than 60 days; e. The Commission, in consonance with the settled principles of administrative jurisprudence, is expected to record at least some reason even while forming a prima facie view. However, while passing directions and orders dealing with the rights of the parties in its adjudicatory and determinative capacity, it is required of the Commission to pass speaking orders, upon due application of mind, responding to all the contentions raised before it by the rival parties; and f.
that till framing of definite time frame for completion of investigation, inquiry and final disposal of the matters pending, the Commission shall form prima facie order in a period shorter than 60 days (as envisaged at present) and that the DG will submit investigation report within the time given and in all cases not later than 45 days from the date of passing of directions in terms of Section 26(1) of the Act.
Keeping in view the stringent timelines imposed by the Supreme Court and the difficulties highlighted above in abiding by the same, the Commission has amended its General Regulations as on October 20, 2010 stating that the DG would be granted a period of time not exceeding sixty days from the date of receipt of the directions of the Commission to submit his report. The
21
Commission may also grant a period not exceeding 45 days for the preparation of a supplementary report by the DG, if the case so desires. Further, a new sub-regulation 31 (3) has been inserted which states that “Where in a case an interim order under Section 33 of the Act has been passed, a final order, as far as possible, shall be passed by the Commission, within ninety days from the date of interim order .”
This verdict of the Supreme Court assumes importance and impacts the development of the urisprudence to a large extent keeping in mind the timing of the issues raised in the judgment. This judgment is the first step towards the building of competition jurisprudence in our country which is much needed at present. The Hon‘ble judges of the Supreme Court have rightly upheld the essence of the law and endorsed the intent of the Act which is protecting the interest of the consumer and ensuring freedom of trade. This shal l go a long way in formulating the competition law landscape in India.
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CHAPTER-6
CURRENT WORKING OF THE TRIBUNAL
MRTP Commission and transitory Provisions: MRTP Act was repealed w.e.f. 1-9-2009. and MRTP Commission was abolished on 14-102009.After 14-10-2009, cases pending in respect of Monopolistic Trade Practices or Restrictive Trade Practices have been transferred to Competition Appellate Tribunal constituted under Competition Act [section 66(3)].
The government also ordered it to hear cases that the MRTPC had failed to resolve when it was wound up. The government has expanded the mandate of a tribunal, which has been hearing pending cases of restrictive trade practices, to include cases of unfair trade practices and compensation from 18 January, 2010.
The tribunal has been hearing these cases on a first-come-first-served basis. While unfair trade practices relate to false promises or misleading advertisements, restrictive trade practices related to cartelization and dominance-related offences. Compensation cases can belong to either of these categories.
CAT to bell companies over misleading advertisements
CAT while being seized of an Unfair Trade Practice Enquiry instituted under Section 36A/36B of the repealed MRTP Act, 1969 observed that it would lay down the limits of acceptable advertising which in turn means that companies would find it hard to make tall claims about the products and services they can offer. This move came after it found FMCG group Emami guilty of disparaging competitor Johnson & Johnson by alleging that the chemicals used in its baby products are harmful to children. Recently, the Calcutta High Court restrained H industan Lever from telecasting Rin Vs. Tide TV commercial in which it is claimed ‗Tide se kahin behtar safedi de Rin (Rin gives better whiteness than Tide)‘. While the repealed MRTP Act did prohibit one company from falsely disparaging the goods or 23
services of another, the Competition Act, 2002 does not provide for such prohibition of misleading or false disparaging claims.
Competition appellate Tribunal stays kingfisher airlines: 14
Kingfisher Airlines Limited Vs. Competition Commission Of India & Ors.
Competition watchdog CCI has imposed a fine of Rs 1 crore on Kingfisher Airlines for not furnishing information it sought during the investigation into the carrier's proposed strategic agreement with another private player Jet Airways. the CCI ordered an investigation into the code-sharing alliance between Vijay Mallaya-led Kingfisher Airlines and Jet Airways on the grounds that it could be anti-competitive in nature. Following the CCI‘s decision, the director general (investigation) of the commission began a probe. However, Kingfisher refused to divulge key details imperative for carrying out the investigation. This prompted the commission to impose a fine of Rs 1 crore under section 44 (b) of the Competition Act 2002.
Kingfisher had approached the Bombay high court when CCI began the probe last year to examine whether the alliance was a case of cartelization. Kingfisher argued that the alliance predated the Competition Act. It also said CCI couldn‘t conduct an investigation as the previous anti-trust regulator, Monopolies and Restrictive Trade Practices Commission, had ruled that there was no cause for an inquiry.
The court clarified the powers, functions and jurisdiction of the newly established watchdog, and makes clear that CCI can investigate agreements that p re-date the Competition Act of 2009.
The Competition Appellate Tribunal (COMPAT or Tribunal) has imposed a stay order on the CCI‘s move to impose a fine of Rs 1 crore on Kingfisher Airlines .The Tribunal has directed the CCI not to recover the fine amount from the airline company until the matter comes up for hearing at Supreme court. Kingfisher had moved the apex court against a probe by CCI in May after losing an appeal in the
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Appeal No. 10 of 2010 24
Bombay high court by filing a petition with the Supreme court.
Following a landmark ruling on 9 September, in ‗Competition Commission of India v. Steel Authority of India Limited‘ in which the Supreme court held that entities being investigated don‘t have the right to be heard while CCI decides on the legitimacy of complaints involving them. The court also ruled that the appeals body, the Competition Appellate Tribunal, can only hear cases on which CCI has passed its orders.
Hence on September 25, 2010, Kingfisher Airlines Ltd withdrew a petition it had filed in the Supreme Court against a probe b y the Competition Commission of India (CCI).
In September, 2011 the Competition Commission of India (CCI) said that it has found no competition issue in the 2008 strategic alliance between private carriers Jet Airways and Kingfisher Airlines. It held that has said that "no violation of either Section 3 or Section 4 is found to have been established against Jet Airways and Kingfisher Airlines and matter deserves to be closed".
Competition Appellate Tribunal stays Rs 630 cr penalty on DLF: 15
DLF Limited Vs. Competition commission of India & others
The Competition Appellate Tribunal (Compat) stayed the Rs 630 crore penalty imposed by fair trade watchdog Competition Commission of India (CCI) on realty major DLF over alleged abuse of dominant market position.
A three-member bench stayed the operation of the CCI order imposing the penalty. However, the tribunal clarified in an interim order that if DLF loses its case, the company will have to deposit the entire amount along with 9 per cent interest.
It also asked the company to give an undertaking within a period of three months regarding its
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APPEAL NO. 20 OF 2011 25
liability to pay the penalty and interest if it loses the case. Meanwhile, the tribunal also directed DLF and the flat owners' association to submit a draft of the revised terms of their agreement, as directed by the CCI in its order, within a period of eight weeks.
The case pertains to the CCI's imposition of a hefty penalty of Rs 630 crore on DLF on August 12 for alleged abuse of its dominant position and the issuance of a 'cease and desist' order over unfair conditions imposed on the buyers of its flats.
COMPAT continues to decide the pending cases under the repealed MRTP Act. As per information received from the record keeping office of COMPAT, it had disposed of 939 till April, 2011 cases so far as per details below: 16
132
UTP cases
17
406
Compensation cases
401
RTP cases
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MTP cases
0
16
Restrictive trade practices Unfair trade practices 18 Monopolistic trade practices 17
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CHAPTER-7
COMPETITION APPELLATE AUTHORITIES- ABROAD
7.1 Competition Appeal Tribunal, U.K:
The United Kingdom Competition Appeal Tribunal is a specialist judicial body with crossdisciplinary expertise in law, economics, business and accountancy whose function is to hear and decide cases involving competition or economic regulatory issues.
The Competition Appeal Tribunal was created by Section 12 and Schedule 2 to the Enterprise Act 2002 which came into force on 1 April 2003.
The Competition Appeal Tribunal or, as it is sometimes known, the ―CAT‖, is an independent udicial body established to hear appeals against certain decisions of the UK competition and sectoral regulatory authorities made under the Competition Act 1998, the Enterprise Act 2002 and the Communications Act 2003.
In broad terms, the authorities whose decisions may be appealed to the Tribunal are:
-the Office of Fair Trading -the Competition Commission; -the Secretary of State (in connection with public interest interventions under the Enterprise Act 2002); -the Office of Communications; -the Northern Ireland Authority for Utility Regulation; -the Gas and Electricity Markets Authority; -Water Services Regulation Authority; -the Office of the Rail Regulator; and -the Civil Aviation Authority.
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The Tribunal can also hear certain actions for damages between private parties following on from a regulatory decision finding an infringement of competition law.
The current functions of the Tribunal are:
-To hear appeals on the merits in respect of decisions made under the Competition Act 1998 (as amended by the Competition Act 1998 and other enactments (Amendment) Regulations 2004) by the Office of Fair Trading ("OFT") and the regulators in the telecommunications, electricity, gas, water, railways and air traffic services sectors; -To hear actions for damages and other monetary claims under the Competition Act 1998; -To review decisions made by the Secretary of State, OFT and the Competition Commission in respect of merger and market references or possible references under the Enterprise Act 2002; -To hear appeals against certain decisions made by OFCOM and/or the Secretary of State under: 1. Part 2 (networks, services and the radio spectrum) and sections 290 to 294 and Schedule 11 (networking arrangements for Channel 3) of the Communications Act 2003; 2. The Mobile Roaming (European Communities) Regulations 2007
Cases are heard before a Tribunal consisting of three members: either the President or a member of the panel of chairmen and two ordinary members. The members of the panel of chairmen are udges of the Chancery Division of the High Court and other senior lawyers. The ordinary members have expertise in law, business, accounta ncy, economics and other related fields.
The Tribunal's jurisdiction extends to the whole of the United Kingdom.
Appeal to tribunal:
Under sections 46 and 47 of the Competition Act,1998 an appeal to the Tribunal may be made
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by: -Any party to an agreement in respect of which the OFT (or sectoral regulator) has made a decision -Any person in respect of whose conduct the OFT (or sectoral regulator) has made a decision -Any third party (or the representative of third parties) who the Tribunal considers has a sufficient interest (or is representative of persons having such an interest) in a decision made by the OFT (or sectoral regulator).
Powers of the tribunal:
The Tribunal has wide powers to determine most appeals under the Competition Act on their merits and may: -Confirm or set aside all or part of the decision; -Remit the matter to the OFT (or the sectoral regulator); -Impose, revoke or vary the amount of any penalty; -Give such directions, or take such other steps as the OFT (or sectoral regulator) could have given or taken, or -Make any other decision which the OFT (or sectoral regulator) could have made.
If the Tribunal confirms the decision which is the subject of the appeal it may nevertheless set aside any finding of fact on which the decision was based.
In respect of appeals concerning the acceptance, release, non-release or variation of commitments, the Tribunal has power to determine such appeals in accordance with judicial review principles and may:
-Dismiss the appeal or quash the whole or part of the decision to which it relates; and -Where it quashes the whole or part of that decision, remit the matter back to the OFT (or the sectoral regulator) with a direction to reconsider and make a new decision in accordance with the ruling of the Tribunal.
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Except in the case of an appeal against the imposition or the amount, of a penalty, the making o an appeal to the Tribunal does not suspend the effect of the decision to which the appeal relates, unless the Tribunal orders otherwise.
Further appeal:
A further appeal lies from the Tribunal to the ―appropriate court‖ only on a point of law or the amount of any penalty. This depends on which part of the United Kingdom the case concerns. The ―appropriate court‖ will be: -in the case of Tribunal proceedings in England and Wales, the Court of Appeal; -in the case of Tribunal proceedings in Scotland, the Inner House of the Court of Session; or -in the case of Tribunal proceedings in Northern Ireland, the Court of Appeal of Northern Ireland.
A further appeal requires the permission of the Tribunal or the appropriate appellate court.
7.2 Competition Tribunal, Canada:
The Competition Tribunal has jurisdiction to hear and dispose of all applications made under parts VII.1 and VIII of the Competition Act and any related matters. It also hears references filed pursuant to section 124.2 of the Competition Act . Part VII.1
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of the Competition Act deals with deceptive marketing practices. Part VIII
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deals
with restrictive trade practices including refusal to supply, price maintenance, exclusive dealing, tied selling, market restriction, abuse of dominant position, delivered pricing, foreign judgments and laws, foreign suppliers, specialization agreements, and mergers. The Competition Bureau, headed by the Commissioner of Competition, is responsible for the administration and enforcement of the Competition Act , and other acts. The Bureau investigates complaints and decides whether to proceed with the filing of an application to the Competition
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(sections 74.01 to 74.19) (sections 75 to 107) 30
Tribunal. The Competition Tribunal is a strictly adjudicative body with no function other than that associated with the hearing of applications made to it pursuant to the Competition Act and the issuance of orders. All proceedings before the Tribunal are dealt with as informally and expeditiously as the circumstances and considerations of fairness permit. The Tribunal is composed of up to six judicial members appointed from among the judges of the Federal Court and not more than eight lay members. The Commissioner of Competition, who is responsible for the enforcement of the Competition ct , can file an application with the Tribunal. Private parties must first obtain leave from the Tribunal before they can file an application. Such an application is only possible in certain circumstances. Private parties can file an application for 21
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leave to make an application under section 75 , section 76 or section 77 . An appeal of any decision of the Tribunal may be filed with the Federal Court of Appeal as per section 13 of the Competition Tribunal Act , R.S.C. 1985
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(refusal to deal) (price maintenance) (exclusive dealing, tied selling and market restriction).
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CHAPTER-8
CONCLUSION AND SUGGESTIONS
India‘s competition authority— the Competition Commission of India (CCI) — is in an incipient stage. While the legislation was passed way back in 2003, the competition watchdog came into existence only recently. CCI has an onerous responsibility ahead. It ought to make optimal choices as it focuses on its mandate of consumer welfare and seeks to earn legitimacy in the eyes of the market to ensure an efficient competition Act. Among other things, this would involve getting the commission‘s appellate structure r ight. Respect can only be commanded, not demanded. The Indian experience with other regulatory authorities demonstrates a direct correlation between the quality of functioning of the authorities and their impact. For instance, the Securities and Exchange Board of India (SEBI) that regulates capital markets earned widespread respect during the tenures of G.V. Ramakrishna and M. Damodaran. However, market participants stopped taking SEBI seriously during other phases, when, say, D.R. Mehta and G.N. Bajpai were in charge. Other regulators, such as the Insurance Regulatory and Development Authority, are still yearning to seek legitimacy in the eyes of stakeholders. The fundamental economic rationale behind the promotion of competition is the reality of the scarcity of resources. In order to carry out its mandate of enforcement, CCI faces competing demands upon its available resources. This is exacerbated owing to the lack of adequately trained staff. Accordingly, the need of the hour is to select those few cases that involve a substantial impact upon consumers, and then to concentrate the commission‘s energy on them. That means prioritizing cases. The legislation provides CCI with powers to facilitate such prioritization. It‘s worth noting that competition law is about protecting competition, not competitors. Businesses, however, have perverse incentives to utilize such a law to protect their entrenched interests. CCI needs to be cautious in order to ensure that it does not become a handmaiden for rent-seeking behaviour.
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But there are legal problems ahead. As per the legislative framework, CCI‘s orders would be subject to appeal at the Competition Appellate Tribunal (CAT) and ultimately at the Supreme Court. It is likely that CAT would employ the usual legal standards of judicial review for competition law cases. In spite of the emergence of a plethora of regulatory authorities after 1991, Indian courts have been reluctant to employ the US doctrine of deferential review. In this doctrine, courts give adequate value to the decision of expert bodies/tribunals such as CCI. Contrary to deferential review, Indian courts have in the past applied the standard of what is called ‗de novo‘ reviews — here, the appellate authority is willing to start hearing the case from scratch. This perhaps explains why a multitude of SEBI orders are often overturned by its appellate authority, the Securities Appellate Tribunal. The trouble is that such reversals lead to uncertainty and unpredictability, increasing transaction costs for stakeholders. CCI‘s endeavour to seek legitimacy and credibility in the eyes of consumers here would mean getting courts to adopt some kind of deferential review. Such legitimacy, if earned, will enhance certainty and predictability in CCI‘s decision-making process. As a result, businesses would have the opportunity to arrange their affairs in such a manner that they would be in a position to voluntarily comply with the law. Indeed, it is unfair to expect businesses to adhere to competition legislations if decision-making and jurisprudence at the competition authority suffer from fits of unpredictability. In order to achieve the twin laudable objectives of the legislation, i.e. to build strong competition culture and to eradicate the anti competitive conducts and structures, it requires pro-active and positive role of host of institutions, namely:
the Director General, an investigation arm of the CC I,
the Chief Metropolitan Magistrate, Delhi,
the Civil Courts,
the Tax Recovery Officer,
the Central Government, States Governments, Statutory Authorities, and
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the two apex bodies, namely the Competition Appellate Tribunal (CAT) and the Supreme Court.
Each one‘s role has been provided for to ensure the ‗check and balance‘ and further all have to act in tandem and in harmony to achieve ‗maximum consumer welfare through competitive process‘. That has been severely tested in the recent spat between CCI and the CAT. Hence, steps have to be taken to ensure harmony among all the bodies. CCI is currently at a critical juncture. Carefully calibrated steps have the potential of ensuring that it does not become yet another humdrum regulator. Like other developed economies, now India too has a comprehensive anti- trust regime. The law will continue to evolve with experience in order to meet with the needs of a dynamic market and the then prevailing market situation. A lot has to be learnt from the experience of countries like the United Kingdom and the United States in dealing with similar situations. It can perhaps be said that the advent of the new law has opened up new dimensions to commercial law, regulatory practice and corporate compliances.
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BIBLIOGRAPHY
1. http://www.clgindia.com/competition-law-anti-trust.html
2.http://lawquestinternational.com/competition-law-and-policy-brief-overview-indianperspective
3.http://taxguru.in/corporate-law/competition-appellate-tribunal-procedure-regulations2011-notification-9222010cs-dated-15072011.html
4.http://taxguru.in/income-tax/competition-appellate-tribunal-cat-to-hear-unfair-tradepractice-cases.html
5.http://economictimes.indiatimes.com/markets/real-estate/news-/compat-stays-rs-630crore-penalty-imposed-on-dlf-by-cci/articleshow/10673560.cms
6.http://www.globalcompetitionreview.com/handbooks/35/sections/123/chapters/1298/india/
7. http://www.indialawjournal.com/volume4/issue_2/article_by_vikram_kanika.html
8. http://compat.nic.in/upload/Compat%20Regulations.pdf
9. http://www.catribunal.org.uk/242/About-the-Tribunal.html#Appeal-under-CA98
10.http://indialawjournal.com/volume2/issue_4/article_by_bhatia.html
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