Introduction
The recently enacted Competition (Amendment) Act, 2023, marks a significant development in India’s competition law landscape by introducing two novel mechanisms, namely settlements and commitments. Designed to reduce litigation and streamline dispute resolution, these frameworks offer enterprises an opportunity to resolve alleged contraventions proactively, thus enhancing efficiency and promoting a culture of compliance.
Challenges before the CCI
The Competition Commission of India (CCI) faces several enforcement challenges currently. One significant issue is the difficulty in realizing monetary penalties imposed on violators. The CCI’s Annual Report for 2018-19 revealed that out of a total penalty of Rs. 13,881 crore, only Rs. 60 crore could be collected, representing less than 0.5% of the total amount. Another challenge is the increasing number of appeals filed against the CCI’s orders. On average, about 35% of cases are appealed against. This is partly due to confusion surrounding the regulator’s quasi-judicial nature, the window for challenging prima facie orders under writ jurisdiction, and the perceived arm’s length relationship between the investigative arm (DG office) and the CCI. Moreover, the resolution of jurisprudential points often takes many years, leading to delays in settling crucial matters. For instance, the ‘relevant turnover’ issue, raised in 2011, was only resolved in 2017. Out of the 530 cases appealed, 217 were allowed, and 133 were remanded back to the Commission for reconsideration. Additionally, the leniency mechanism of the CCI has not been as effective as desired, with only about ten decisions being made under it. The lackluster response to the leniency mechanism might be attributed to insufficient incentives or penalties not being strong enough to encourage companies to participate in the program.
Settlement Framework (Section 48A):
Under section 48A, an enterprise accused of contravening the provisions of section 3(4) or section 4 of the Act can voluntarily submit a written application to the CCI for settlement. This can be done at any point after receiving the Director General’s report, but before the CCI passes an order under section 27 or section 28 of the Act, as per specified regulations. The CCI evaluates the gravity and impact of the contraventions before deciding whether to accept the settlement proposal. If the settlement application is deemed appropriate, the enterprise will be required to pay a specified amount or comply with alternative terms and implementation mechanisms as per regulations. Crucially, the CCI provides an opportunity for all relevant parties to submit their objections and suggestions during the evaluation process.
However, if the CCI deems the settlement unsuitable or if an agreement cannot be reached within the specified time, the application will be rejected, and the CCI will proceed with its inquiry under section 26 of the Act. Notably, the order passed by the CCI in such cases will not be appealable under section 53B of the Act. But they will still be appealable to the Supreme Court. Furthermore, all settlement amounts received will be credited to the Consolidated Fund of India.
Commitment Framework (Section 48B):
Section 48B introduces the commitment framework, where an enterprise can make a written application to the CCI after the initiation of proceedings under section 26(1) of the Act for contraventions of section 3(4) or section 4. The offer for commitments must be submitted after the CCI passes an order under section 26(1) but before the party receives the Director General’s report, as per regulations. Similar to the settlement framework, the CCI considers the gravity and impact of the alleged contraventions and evaluates the effectiveness of the proposed commitments. If the commitments are deemed appropriate, the CCI accepts them, specifying the terms, implementation, and monitoring procedures in accordance with regulations. On the other hand, if the CCI finds the commitments unsatisfactory or if an agreement cannot be reached, the commitment application will be rejected, and the CCI will proceed with the inquiry under section 26 of the Act. As with the settlement framework, orders passed under section 48B are also non-appealable under section 53B of the Act.
Conclusion:
With the Indian economy experiencing remarkable growth, the Competition Commission of India (CCI) faces the imperative of addressing procedural shortcomings in a timely manner. Consensual discussions between the commission officials and enterprises involved in antitrust conflicts require utmost transparency in the process. Delays in addressing these issues are no longer affordable. The Competition (Amendment) Act of 2023 takes a significant step forward by introducing settlement and commitment frameworks as effective mechanisms to promote dispute resolution and reduce litigation in competition cases. This offers enterprises the opportunity to proactively address alleged violations, fostering a culture of compliance and cooperation with the CCI. Embracing these provisions signifies a move towards a more streamlined and impactful competition law enforcement system in India.
[1] https://www.cci.gov.in/images/legalframeworkact/en/the-competition-amendment-act-20231681363446.pdf
[1] https://www.barandbench.com/columns/settlement-and-commitments-effectiveness-competition-law-india
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