The Competition Commission of India mainly aims at promoting competition by also regulating the anti-competitive practices. The CCI is mainly a quasi-judicial body which mainly delivers its concerns to the administrative bodies for effective implementation. It is also authorised to give directions and opinions on the competition issues which arise in the market. The consumer welfare was the major aim of the competition commission during the pandemic times and to ensure that there were implementations of effective competition policies. This paper mainly deals with the role of CCI witnessed during the COVID-19 pandemic.
The Competition Commission of India’s (“CCI”) regular functioning continues to face suspended amid the COVID-19 pandemic since March 2020. The Indian antitrust regulator however was quick to adapt to the changed circumstances and adopted a routine which allowed for parties to submit merger notifications also as responses in on-going investigations and new information online. In the last five months the CCI have cleared an outsized number of combinations and has also eliminated several information and pronounce final orders.
CCI’S Performance During The COVID-19 Pandemic
Two of the ultimate orders recently pronounced by the CCI finding parties in violation of the cartel and bid-rigging provisions of the Competition Act, 2002 (“Act”) have come as a surprise to several. While the CCI found clinching evidence regarding the existence of an agreement to cartelize and rig bids, for the primary time during a case of cartelization, the CCI avoided imposing penalties and instead solely issued ‘cease and refrain orders.
In the case of In Re: Cartelisation in Industrial and Automotive Bearings (Case no. 05 of 2017) by way of a whistle-blower application , the CCI found four industrial and automotive bearings manufacturers to possess an agreement in reference to price revisions and minimum percentage of increase to be quoted to automotive and industrial original equipment manufacturers (“OEMs”). This fact was established by way of e-mail communication between the cartelists also as minutes of meetings attended by the representatives of the varied companies where such price-related discussions happened.
The bearings makers argued that there was no considerable adverse impact on competition (“AAEC”) as a result of the discussions amongst them. Firstly, the price-related information discussed was never implemented, and secondly the OEMs themselves exert significant countervailing buyer power which might not leave any such agreement to subsist amongst the bearing manufacturers. The CCI however, was of the view that the above arguments don’t rebut the presumption of AAEC in fact, the very factum that the parties met with one another to make a decision the worth revisions to be quoted to the OEMs, compromised their independence. It enabled them to quote price revisions to the OEMs, different than what they might have otherwise quoted independently.
While the CCI command that the bearings makers were operational throughout a syndicate, it set against imposing a penalty and ascertained that, “ends of justice would be met if the parties stop such syndicate behaviour and abstain from indulgence in it in future”.
Recently, the CCI continued this approach within the case of In Re: Chief Materials Manager, South Eastern Railway v. Hindustan Composites Limited & Ors. (Reference Case no. 03 of 2016) the knowledge during this case was filed by the chief managers of the varied divisions of the Indian railways against ten manufacturers and suppliers of brake blocks for alleged bid-rigging within the tenders floated by the Indian railways. it had been alleged that the businesses quoted identical prices and subsequently identical reductions within the course of the negotiations within the railway tenders. Further, even the rates quoted within the tenders issued by different divisions were same despite differences within the geographic locations.
Legality Of The Filings Under Section 3 And Section 4 Of The Competition Act, 2002
Sections 3 and 4 of the Competition Act, 2002 (‘Act’) affect anti-competitive agreements and abuse of dominance, respectively. Per the Notice dated 23rd March 2020, all filings associated with Section 3 and Section 4 of the Act was suspended. Further, vide Notice dated 30th March 2020, all filings or compliances due on or before 14th April 2020 in respect of pending cases were suspended till 14th April, 2020.
The Notice dated 13th April 2020 allowed for the filing of data with reference to the provisions of Section 3 and Section 4 of the Competition Act, 2002 electronically. Further, the Notice issued on 20th April 2020, provide for the issue of fresh dates for all other compliances up to 02nd May 2020.
The Director General (“DG”) through WhatsApp communications and SMS have found the indispensable proof of merging amongst the companies for the years 2007-2019 and the detailed records of the personnel of the companies were recorded additionally as matters of investigation and admissions by the company representative. The prices quoted and the quantity which is to be allocated was decided only through the investigation process simultaneously by bidding within the tenders.
The companies argued that the alleged bid-rigging didn’t end in an AAEC given the monopsony market condition wherein the Indian railways is that the sole purchaser whereas there are an outsized number of suppliers of the given product and thus the businesses aren’t during a position to impact prices. The CCI remained unimpressed with these arguments and given the evidence of cartelization, held that there’s nothing which might be more incriminating to conclude the guilt of the businesses.
For a second time during a row, the CCI avoided imposing any penalty upon cartel participants and directed the businesses to right away discontinue and desist from engaging during this conduct again. The CCI during this case considered mitigating factors like cooperation by the businesses, admission of anti-competitive agreement and therefore the role played by the business entities like the middle, small and medium enterprises (MSMEs) with small annual turnover as the economic was downturn on account of COVID-19 and also to not impose financial penalties.
Given the results and impact of cartelization, within the past the CCI has always imposed monetary penalties for this conduct. The CCI under the Act has the facility to impose a number of the very best financial penalties in India. The Act prescribes a penalty of up to 3 times the profit for the duration of the agreement to cartelize. The penal provisions of this act guarantee that this particular statute perceives cartels to be the foremost essentialities of antimonopoly offences and consequently punishes them with exemplary penalties alike the international antimonopoly legislations.
Another facet of the cartel investigation which is vital to spotlight is that the Act being a civil legislation does not require a really high threshold for the quality of proof for such cases. The CCI appreciates that it is near impossible to urge evidence of a cartel unless the knowledge is brought forth by a whistle-blower and thus does not require evidence which proves the amount of violation caused without reasonable doubt. This is accepted as the stand of proof adopted in criminal cases. As long because the indirect evidence satisfies the CCI that the conduct of the parties cannot be explained within the absence of an agreement to cartelize, a violation is presumed. At this stage, the burden of proof shifts to the parties who will currently rebut the presumption of guilt, unless the presumption is rebutted the violation stands well-tried.
Considering the penalty powers of the CCI and therefore the quite evidence required in cartel cases it is astounding that the CCI decided to not impose any penalty in two bid-rigging cases where evidence was available. While within the brake blocks case, the CCI mentions the economic strain on industries during the pandemic together of the factors for not penalizing them, it does raise the question whether this new approach sets an honest precedent. During this regard, it’s important to notice that (i) within the brake blocks case the cartel operated for nearly 8 years; (ii) both the cases were initiated way before the pandemic and (iii) the anti-competitive conduct had no correlation with the pandemic. It remains to be seen whether this is often a COVID-19 specific concession being granted by the CCI or whether the CCI goes to get greater emphasis on demanding an amendment in business practices and not simply impose high penalties. It might even be interesting to ascertain whether parties are getting to be equally invested in appealing cases where the CCI has rendered a finding on violation with no penalty consequences.
1. Whether CCI Was In A Position To Pass A Decree During The Pandemic?
The CCI always has a demanding position in the field of corporate and hence this kind of situation only enhances more activity of the CCI.
2. Whether CCI Takes Into Consideration The Economic Status Of The Organization For Penalising Them?
The CCI also looks into the economic position and stability of the organization in the situations of economic recession.