The Competition Appellate Tribunal (Compat) recently dismissed the appeal challenging the Competition Authority of India’s approval of the Rs 2,060 crore Jet-Ethiadmerger, saying that the appellant does not have the “locus standi” to file the plea.
Former Air India executive director JitendraBhargava had filed the appeal, arguing that the merger would lead to “permanently eliminate competition” from the relevant market or could lead to higher air fares on some routes. Pronouncing its ruling on the appeal, the Compat said the appellant lacked “locus standi” either in his capacity as an aviation expert or as a consumer of the aviation service. The Compat said it was not convinced that Bhargava is in any manner an aggrieved person by the approval of the deal.
When asked what his locus standi was in the matter, counsels for Bhargava argued that it emanated from his long association with Air India which had given him an above average understanding of the aviation industry. They claimed this gave him an understanding to predict that the merger would be detrimental to the aviation industry. Bhargava also claimed locus standi “by virtue of his being a consumer of aviation services”. However, the Tribunal noted that no expert can seek remedy in the nature of pro bono public in a statutory appeal under Section 53B of the Competition Act, more so when no such jurisdiction has been vested in the Compat itself.
The Tribunal also dismissed Bhargava’s second argument, stating that it was a premature question and his remedy may lay in Section 3 and 4, read with Section 19 of the Competition Act, when such anticompetitive practices are adopted by the merged entities in future and not at present.
It is in the dismissal of the second argument that one may ask if the Competition Act gives no right to the consumers under Sections 5 and 6, read along with Section 20, to challenge a proposed merger. One wonders if the age-old proposition — A right without a remedy is no right? – is actually relevant in this regard. The proposition has its origins in Holt CJ’s dissenting note in Ashby v. White (1703) 1Sm LC (13th Edn 253, 273-74) which was later upheld by the House of Lords: “If the plaintiff has a right he must of necessityhave a means to vindicate and maintain it, and a remedy if he is injured in the exercise or enjoyment of it , and indeed it is a vain thing to imagine a right without a remedy; for want of right and want of remedy are reciprocal…”.
Prima facie, so far as combination regulation/merger control situation in India is concerned, it is akin to a situation where one has a gift but not the permission to use it. One look at the scheme of the Act reveals that the interest of the consumers has been given due recognition. The Act’s preamble is sufficient to establish that apart from other economic objectives, protection of the consumers’ interests is also one of the concerns which the Act seeks to address. The preamble to the Act reads: “An Act 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 intent of the Legislature as to the protection of the interests of the Consumers becomes even clearer if one reads section 18 which provides the duties of the Commission as it reads: “Subject to the provisions of this Act, it shall be 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 carried on by other participants, in markets in India: Provided that the Commission may, for the purpose of discharging its duties or performing its functions under this Act, enter into any memorandum or arrangement with the prior approval of the Central Government, with any agency of any foreign country.”
But the absence of mention of consumers in Sections 5, 6 and 20 of the Act leads one to conclude that the legislature intended that the consumers have no role in combination regulation. If that is there at all, then their role remains limited to being an “informant” under Section 20 of the Act.
Across the world, rights of the consumers to challenge mergers are recognized. In theUnited States, private enforcement rights are recognized while in the European Union, the rights are recognized albeit with a “direct and individual concern” test. In this regard “DG Competition Best Practices on the conduct of EC merger proceedings” with regard to competition law may also be referred to.
The fundamental equation from where the competition law derives its raison d’être may be restated here as has been put forth by Christopher R. Leslie, Professor of Law, University of California, Irvine School of Law in his recent paper titled “Antitrust Law as Public Interest Law”. According to Leslie, “competition in the marketplace generally improves the lives of consumers by expanding output and reducing the price of products and services, as well as by increasing quality and innovation.”
The arguments made in favour of private enforcement in case of competition law have been made by Roger Van den Bergh of Erasmus University Rotterdam in a paper titled “Private Enforcement of European Competition Law and the Persisting Collective Action Problem”. He argues in favour of an optimal mix of public and private enforcement of competition law and suggests some remedies to overcome the associated problems which emerge in the quest of such optimal mix of remedies.
Van den Bergh argues that “several economic criteria may help policy makers in choosing between public and private enforcement of competition law. The welfare losses caused by infringements of the cartel prohibition may be better internalized by imposing fines rather than by bringing damages actions. Public agencies may possess information advantages and they may also be able to remedy the difference between the private and social motive to sue. Private enforcement may complement public enforcement by increasing deterrence and guaranteeing compensation. Both direct and indirect buyers should be given standing to bring damages actions. Given the reluctance to introduce US-style class actions, European policy-makers favour collective opt-in actions and representative actions brought by consumer associations. However the participation rate of opt-in collective actions may remain too low and actions by consumer associations are also vulnerable to principal-agent problems. Moreover, private enforcement of competition law by consumer associationswill remain suboptimal if the funding problem is not solved.”
Van den Bergh expresses the apprehensions associated with the American style of private enforcement as: “The dominant skepticism towards US-style class actions is due to alleged abuses and the prevailing image of an attorney acting as a private entrepreneur maximizing personal profits without sufficiently taking care of the interests of the members of the class. The aversion towards American class actions in Europe is so great that it has become politically incorrect to use this term. Instead, policy makers have proposed to rely on ‘collective actions’ and ‘representative actions’ brought by consumer associations.”
There is a growing consensus across the world over private enforcement in competition law despite different jurisdictional twists to it. This is primarily due to its utility. As expressed in Van den Bergh paper, private enforcement may complement public enforcement by increasing deterrence and guaranteeing compensation.
It would help greatly if India also comes up with its own version of private enforcement in merger control as it would act as a force multiplier for the Competition Commission. In this context, we may quote Mr. Samir Gandhi, from AZB Partners, a leading practitioner of the competition law in the country. The views are encouraging when he states that, “Unlike US, the Indian law does not provide for private enforcement actions. To a limited extent, parties aggrieved by the decision of the CCI, may approach the Competition Appellate Tribunal to seek compensation. In short, alternate mechanism such as arbitrations is not allowed. However, as the competition law enforcement, including merger review process becomes more sophisticated, there may arise a need to consider the inclusion of provisions on private enforcement.”
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