Competition Commission of India under Competition Act. 2002: Composition, Powers, Functions and Procedures

COMPETITION COMMISSION OF INDIA (CCI): ESTABLISHMENT AND COMPOSITION

Legal Basis for Establishment
The Competition Commission of India (CCI) was established under the Competition Act 2002. Section 7 of the Act provides for the establishment of the CCI as a body corporate having perpetual succession and a common seal. The CCI came into existence on 14th October 2003 but became fully functional in May 2009.

Composition
As per Section 8 of the Competition Act, the CCI consists of:

  • A Chairperson
  • Not less than 2 and not more than 6 other Members

The Chairperson and Members are appointed by the Central Government. They must be persons of ability, integrity, and standing with special knowledge and professional experience of at least 15 years in areas like international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, or competition matters.

Selection Process
Section 9 provides for the selection of CCI members:

  • A Selection Committee recommends names to the Central Government.
  • The Selection Committee is headed by the Chief Justice of India or his nominee.
  • It includes Secretaries from the Ministry of Corporate Affairs and Law & Justice.
  • Two experts in relevant fields are also part of the Selection Committee.

Term of Office
As per Section 10, the Chairperson and Members hold office for a term of 5 years and are eligible for reappointment. However, they cannot hold office after attaining the age of 65 years. The Central Government can remove a member on grounds like insolvency, abuse of position, adjudged of unsound mind, etc.

Headquarters
The headquarters of CCI is in New Delhi. The Commission may establish offices at other places in India as well.

POWERS AND FUNCTIONS OF CCI

Statutory Powers
The Competition Act 2002 vests the CCI with wide-ranging powers to:

  1. Inquire into anti-competitive agreements and abuse of dominant position either on its own motion or on receipt of information from any person, consumer, or their association, or reference made by Central/State Government or statutory authority (Section 19).
  2. Inquire whether a combination has caused or is likely to cause an appreciable adverse effect on competition in India (Section 20).
  3. Direct division of an enterprise enjoying dominant position to ensure it does not abuse such position (Section 28).
  4. Issue interim orders to temporarily restrain any party from carrying on acts which are subject matter of inquiry (Section 33).
  5. Impose penalties for contravention of its orders, non-furnishing of information, etc. (Section 43).
  6. Impose lesser penalty on parties to a cartel who make vital disclosures (Section 46).
  7. Award compensation on findings of contravention (Section 53N).

Key Functions
The major functions of CCI as outlined in Section 18 of the Act include:

  1. Eliminate practices having adverse effect on competition.
  2. Promote and sustain competition in markets.
  3. Protect interests of consumers.
  4. Ensure freedom of trade carried on by other market participants.
  5. Give opinion on competition issues on reference from a statutory authority established under any law (Section 21).
  6. Undertake competition advocacy, create public awareness, and impart training on competition issues (Section 49).

Inquiry Process
The CCI follows a detailed inquiry process as per Chapter IV of the Act:

  1. Forms prima facie opinion on receipt of information/reference (Section 26(1)).
  2. Directs Director General to investigate if prima facie case exists (Section 26(1)).
  3. Invites objections or suggestions from Central/State Government, statutory authority, parties, or public (Section 29(1)).
  4. Conducts inquiry and passes final order after considering DG report, objections, evidence, etc. (Section 27).
  5. Can impose penalties, issue cease and desist orders, modify agreements, etc. (Section 27).

POWERS REGARDING COMBINATIONS
For regulation of combinations, CCI has powers to:

  1. Inquire into combinations which have caused or are likely to cause an appreciable adverse effect on competition (Section 20).
  2. Direct that a combination shall not take effect (Section 31).
  3. Propose modifications to the combination (Section 31).
  4. Approve combinations which do not cause adverse effect on competition (Section 31).

COMPETITION ADVOCACY
As per Section 49, the CCI has a mandate to:

  • Promote competition advocacy
  • Create awareness about competition issues
  • Train stakeholders on competition matters

For this, CCI can:

  • Take measures for promotion of competition advocacy.
  • Make recommendations to Central/State Governments on pro-competitive policies.
  • Invite comments from public on competition law/policy.

DIRECTOR GENERAL AND OTHER OFFICIALS

Appointment of Director General
Section 16 of the Competition Act provides for appointment of a Director General by the Central Government to assist the CCI in conducting inquiry into contravention of provisions of the Act.

Powers and Functions of Director General
The Director General, when directed by the CCI, has powers to:

  1. Investigate into any alleged contravention of the provisions of the Act (Section 41).
  2. Summon and enforce attendance of any person and examine them on oath (Section 41(2)).
  3. Require discovery and production of documents (Section 41(2)).
  4. Receive evidence on affidavit (Section 41(2)).
  5. Issue commissions for examination of witnesses or documents (Section 41(2)).
  6. Requisition any public record from any office (Section 41(2)).
  7. Enter and search premises and seize documents (Section 41(3)).

The DG submits investigation reports to the CCI as per timelines specified (Section 26(3)).

Appointment of Other Officials
The Central Government can appoint:

  • Additional, Joint, Deputy, or Assistant Directors General (Section 16(1)).
  • Such other advisers, consultants, and officers as it deems fit (Section 16(2)).

These officials assist the Director General in discharge of functions subject to general control, supervision, and direction of the DG (Section 16(3)).

Assistance to Commission
The Director General, when directed by the Commission, assists the Commission in investigating contravention of any provisions of the Act (Section 41(1)).

KEY CASES ON POWERS OF CCI AND DG

  1. Excel Crop Care Ltd. v. CCI (2017): Supreme Court upheld CCI’s power to impose penalties based on ‘relevant turnover’ instead of ‘total turnover’.
  2. CCI v. SAIL (2010): Supreme Court clarified CCI’s powers to pass interim orders and held that CCI is not required to give notice before forming prima facie opinion.
  3. Neeraj Malhotra v. DDCA (2010): Delhi High Court held that CCI has power to inquire into anticompetitive practices of even statutory bodies and sports associations.
  4. Kingfisher Airlines v. CCI (2010): Bombay High Court upheld CCI’s power to inquire into combinations even if they have obtained RBI approval.
  5. Cadila Healthcare v. CCI (2018): Supreme Court held that CCI and DG have power to examine agreements between foreign entities if they have appreciable adverse effect on competition in India.

PROCEDURES AND REGULATIONS

INQUIRY PROCEDURE FOR ANTI-COMPETITIVE AGREEMENTS AND ABUSE OF DOMINANCE

The key steps in the inquiry procedure are:

  1. Receipt of information or suo moto cognizance by CCI
  2. Formation of prima facie opinion by CCI within 60 days
  3. Direction to Director General (DG) to investigate if prima facie case exists
  4. Investigation by DG and submission of report to CCI
  5. Consideration of DG report by CCI and inviting objections/suggestions from parties
  6. Hearing of parties by CCI
  7. Passing of final order by CCI

The CCI may close the case at the prima facie stage itself if no case is made out. The DG is required to submit the investigation report within the time specified by CCI, which may be extended. The CCI is required to pass the final order within 21 days of receipt of DG report.

PROCEDURE FOR REGULATION OF COMBINATIONS

The key aspects of the procedure for regulation of combinations are:

  • Mandatory pre-combination notification to CCI for combinations exceeding specified asset/turnover thresholds.
  • Notice to be given within 30 days of approval of merger proposal by Board or execution of agreement for acquisition.
  • CCI to form prima facie opinion within 30 days of receipt of notice.
  • If CCI is of opinion that combination is likely to cause appreciable adverse effect on competition, it shall issue show cause notice to parties.
  • Parties to respond within 30 days of receipt of notice.
  • CCI to pass final order within 210 days of notice, failing which combination deemed approved.
  • CCI may approve, prohibit, or suggest modifications to the proposed combination.

POWERS OF INVESTIGATION

The CCI and Director General have wide powers of investigation, including:

  • Summoning and enforcing attendance of any person and examining them on oath.
  • Requiring discovery and production of documents.
  • Receiving evidence on affidavit.
  • Issuing commissions for examination of witnesses or documents.
  • Requisitioning any public record from any office.
  • Conducting ‘dawn raids’ to search and seize documents and records.

LENIENCY REGULATIONS

The CCI (Lesser Penalty) Regulations 2009 provide for:

  • Reduction in penalty for cartel members who provide vital disclosure about cartel to CCI.
  • First applicant eligible for up to 100% reduction, second up to 50%, and third up to 30% reduction.
  • Applicant required to cease participation in cartel and provide full cooperation to CCI.
  • Identity of applicant and information provided kept confidential by CCI.

CONFIDENTIALITY REGULATIONS

The CCI (General) Regulations 2009 provide for:

  • Parties may request confidentiality for documents submitted to CCI.
  • CCI to decide requests for confidentiality within 15 days.
  • Grounds for claiming confidentiality include trade secrets, commercial confidence, etc.
  • CCI may disclose confidential information if disclosure is necessary in public interest.

COMPETITION ADVOCACY ROLE

Competition advocacy refers to activities conducted by the competition authority related to promoting a competitive environment through non-enforcement mechanisms, mainly through its relationships with other governmental entities and by increasing public awareness of the benefits of competition.

Key aspects of CCI’s competition advocacy role include:

  • Promoting competition culture through engagement with stakeholders.
  • Creating public awareness about competition issues.
  • Providing opinions to government on competition issues.
  • Conducting market studies to understand competition dynamics.
  • Organizing seminars, workshops, training programs, etc., on competition issues.
  • Publishing newsletters, reports, guidelines, etc., to spread awareness.

LEGAL BASIS

Section 49 of the Competition Act provides the legal basis for CCI’s advocacy role:

  • CCI may undertake competition advocacy to create awareness and impart training about competition issues.
  • Central/State Governments may make reference to CCI for its opinion on the possible effect of policy on competition.
  • CCI to give its opinion within 60 days of receiving reference.

KEY ADVOCACY INITIATIVES

Some key advocacy initiatives undertaken by CCI include:

  • Advocacy booklets on various aspects of competition law.
  • Compliance manuals for trade associations and enterprises.
  • Market studies in sectors like telecom, pharmaceuticals, film distribution, etc.
  • National Competition Policy advocating pro-competitive reforms across sectors.
  • Competition Assessment of legislations and policies.
  • Workshops for government officials, judges, and other stakeholders.
  • Engagement with sector regulators through Memorandums of Understanding.

BENEFITS OF ADVOCACY

The benefits of competition advocacy include:

  • Creating a culture of competition in the economy.
  • Complementing and reinforcing competition enforcement.
  • Promoting regulatory/policy changes to enhance competition.
  • Increasing stakeholder awareness and voluntary compliance.
  • Building CCI’s credibility as a knowledge-based institution.

COMPETITION APPELLATE TRIBUNAL (COMPAT)

Establishment and Composition

The Competition Appellate Tribunal (COMPAT) was established in 2009 under the Competition (Amendment) Act 2007. Key features:

  • Consisted of a Chairperson and up to two other members.
  • Chairperson to be or have been a Judge of the Supreme Court or Chief Justice of a High Court.
  • Members to have special knowledge and experience in competition law, economics, international trade, commerce, accountancy, management, industry, public affairs, or administration.
  • Chairperson and members appointed by Central Government on recommendation of Selection Committee headed by Chief Justice of India or his nominee.
  • Term of office of 5 years or till attaining age of 68 years (Chairperson) or 65 years (Members), whichever is earlier.

Functions and Powers

The key functions and powers of COMPAT included:

  • Hear and dispose of appeals against orders of CCI under sections 26(2), 26(6), 27, 28, 31, 32, 33, 38, 39, 43, 43A, 44, 45, and 46 of the Competition Act.
  • Adjudicate on claims for compensation arising from findings of CCI or orders of COMPAT.
  • Call for records of proceedings before CCI for examining legality, propriety, or correctness of CCI orders.
  • Pass orders confirming, modifying, or setting aside orders of CCI.
  • Rectify any mistake apparent from record.
  • Review its own orders.
  • Punish for contempt.

Appeal Procedure

Key aspects of the appeal procedure before COMPAT:

  • Appeal to be filed within 60 days of receipt of CCI order.
  • COMPAT may condone delay in filing appeal for sufficient cause.
  • Appeal to be disposed of within 6 months from date of receipt.
  • COMPAT may grant interim relief during pendency of appeal.
  • Order of COMPAT executable as decree of civil court.
  • Further appeal against COMPAT order lies to Supreme Court within 60 days.

Merger with NCLAT

In 2017, the COMPAT was merged with the National Company Law Appellate Tribunal (NCLAT). Key changes:

  • NCLAT now hears appeals against orders of CCI.
  • NCLAT consists of Chairperson and Judicial and Technical Members.
  • Appeals to be disposed of within 6 months.
  • Further appeal against NCLAT order lies to Supreme Court.

The merger aimed to achieve better synergies between competition and corporate laws. However, some experts have argued it may dilute the specialized nature of competition law adjudication.

Share this :
Facebook
Twitter
LinkedIn
WhatsApp
Author picture