The Competition Commission of India: Understanding the Uncertainty

J. Sai Deepak | April 2015

WHAT IS THE NATURE OF DECISIONS OF THE COMPETITION COMMISSION?

The Competition Act, 2002 came into force in January 2003 and the Competition Commission of India (CCI) has been fairly active since the 2007 amendment to the Act. Despite the Act having been in force for over 12 years and its application for the last eight years, the nature of the body and its decisions are yet to reveal themselves with a degree of certainty. Among the several questions that typically arise in this regard, one of them that merits attention is whether the orders/decisions of the CCI are judgments in rem, or are they restricted to the parties to a given case? This question is perhaps best addressed using the following illustrations:

If an agreement entered into by X with Y is adjudged as being anti-competitive or abusive under Section 3 or 4 respectively by the CCI, can the finding be extended to an identical/similar agreement entered into subsequently by X and Z? Also, would the finding apply to an identical agreement entered into by X and P prior to the finding of the CCI?
Would the finding apply to identical/similar agreements entered into by two different parties, namely A and B either before or after the finding of the CCI in the case involving X and Y? In order to address these situations, it is important to understand that the mandate of the CCI under Section 3 of the Act which deals with anti-competitive agreements, or Section 4 which deals with abuse of dominant position, or Section 6 which deals with regulation of combinations, is to proscribe/forbid certain types of behaviour which have an adverse bearing on competition in the market. Stated otherwise, the emphasis is on the behaviour of market players, as opposed to the players themselves. Consequently, it could be argued that if a certain clause or transaction or practice is held to be anticompetitive or abusive, such a finding could apply to third party enterprises indulging in identical/similar practices, even if such parties were not party to the earlier proceeding. Therefore, it could be postulated that the CCI is laying down the law on legally acceptable behaviour in the market.

However, practically, does it follow that the CCI can do away with investigation and proceed to declare as anti-competitive or abusive the agreements between X and Z, or X and P, or A and B on the basis of the finding between X and Y? Sections 42A and 53N could help address these questions. Extracted below are the said provisions:

COMPENSATION IN CASE OF CONTRAVENTION OF ORDERS OF COMMISSION

42A.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 violating directions issued by the Commission or contravening, without any reasonable ground, any decision or order of the Commission issued under sections 27, 28, 31, 32 and 33 or any condition or restriction subject to which any approval, sanction, direction or exemption in relation to any matter has been accorded, given, made or granted under this Act or delaying in carrying out such orders or directions of the Commission.

AWARDING COMPENSATION

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 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 as a result of any contravention of the provisions of Chapter II, having been committed by enterprise.

very application made under subsection (1) shall be accompanied by the findings of the Commission, if any, and also be accompanied with such fees as may be prescribed.
The Appellate Tribunal may, after an inquiry made into the allegations mentioned in the application made under sub-section (1), 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 of Chapter II having been committed by such enterprise:

Provided that the Appellate Tribunal may obtain the recommendations of the Commission before passing an order of compensation.

Where any loss or damage referred to in sub-section (1) 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 under that sub-section 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.

Explanation. —For the removal of doubts, it is hereby declared that—

an application may be made for compensation before the Appellate Tribunal only after either the Commission or the Appellate Tribunal on appeal under clause (a) of sub-section(1) of section 53A of the Act, has determined in a proceeding before it that violation of the provisions of the Act has taken place, or if provisions of section 42A or sub-section(2) of section 53Q of the Act are attracted.
enquiry to be conducted under subsection( 3) shall be for the purpose of determining the eligibility and quantum of compensation due to a person applying for the same, and not for examining afresh the findings of the Commission or the Appellate Tribunal on whether any violation of the Act has taken place.

Based on a comparative reading of the two provisions, it appears that while Section 42A applies to violations of specific directions/orders issued against an enterprise by the CCI, Section 53N applies to situations covered by Section 42A as well as to subsequent violations of Chapter II of the Act (which contains Sections 3, 4 and 6) by the same enterprise. In other words, the scope of Section 53N is broader and in both instances, it is the COMPAT that has the power to entertain and decide an application for compensation. Further, while Section 42A may be invoked by “any person” who is affected by violation of specific orders of the CCI, Sections 53N may invoked by the Central Government or a State Government or a local authority or any enterprise or any person who has suffered as a result of any contravention of the provisions of Chapter II by the impugned enterprise.

Critically, Section 53N(1) read with the Explanation (a) to it answers the queries raised by the author. An application for compensation against an enterprise such as X may be moved only after its conduct has been found violative of the Act either by the CCI or COMPAT. Such an application can be moved by the Central Government or a State Government or a local authority or any enterprise or any person who has suffered damage or loss as a result of the conduct. Further, as Explanation (b) clarifies, the nature of enquiry under Section 53N is limited to the determination of eligibility and quantum of compensation alone and does not extend to a de novo examination of the finding of violation by the CCI or COMPAT. Therefore, if X’s conduct with Y has been held as anticompetitive or abusive, unless the agreements entered into with the other parties P and Z are identically worded and are therefore within the ambit of the earlier finding of contravention of the Act, it may not be possible for P and Z to apply for compensation under Section 53N without a separate determination by the CCI or the COMPAT that the agreements are violative of the Act. This proposition applies even more to the agreement between A and B who are two distinct parties and who were never part of the original proceedings against X.

Simply put, if a certain conduct of a party has been found violative of the Act, the CCI need not revisit the illegality of the party’s conduct over and over again in order to award compensation to parties affected by an identical conduct of the same party. However, if a stranger to the earlier proceedings indulges in identical/similar conduct, it needs to be investigated and a fresh finding must be arrived at.

The other important caveat is that if a party’s conduct involves abuse of dominance under Section 4 of the Act, it may not be possible to extend the findings arrived at in one case to past or future conduct since it would need to be ascertained if the party was in a position of dominance in each of the impugned transactions. This is because under Section 4, only the conduct of dominant parties may be investigated. Therefore, if a party was not or is no more dominant at the time of the earlier or subsequent transaction, the finding of abuse of dominance in one instance may not be extended to past or future transactions, which means a fresh inquiry is necessary to arrive at the finding of abuse of dominance.

About Author

J. Sai Deepak

J. Sai Deepak is an engineerturned- arguing counsel who appears primarily before the High Court of Delhi and the Supreme Court of India. Sai has been a litigator since July 2009 and was an Associate Partner (litigation) at Saikrishna & Associates until June 2016. In June 2016, Sai founded Law Chambers of J. Sai Deepak and set up practice as an arguing counsel. Sai runs the blawg “The Demanding Mistress” and is @jsaideepak on Twitter. Sai may be reached at jsaideepak@lawchambersofjsaide epak.com.