Composition of CCI in light of the Mahindra judgement

The Competition Commission of India has been established to enforce the Competition Act, 2002. Over the past two decades, the Competition Law in India looked across many challenges that came in its way. Various provisions under the Competition Act, 2002 were challenged on their validity. One of the aforesaid challenges was put forth before the Delhi Court in the case where 12 writ petitions were clubbed.

The Court passed a landmark judgment, wherein some of the major issues, on the provisions of Competition Law debated for a long time, were addressed. Issues include the non-inclusion of a judicial person during the Competition Commission’s pronouncing in any matter, choice of voting twice in case of a tie, etc.

This article deals with the subject of the Competition Commission of India’s role in the case of Mahindra Electric Mobility Ltd. v. CCI[i].

The present challenge emerged from the, what Competition Commission call it as Spare parts decision in which it had imposed a penalty of Rs 2544 crore on a few eminent car companies. Though there were many writ petitions that challenged the constitutionality of provisions under the Competition Act, 2002, yet this was for the first time in which one of the sections under the Act was held void.

Introduction

An informant named Shamsher Kataria filed information, before the Competition Commission of India (CCI), against three prominent car companies namely Volkswagen, Honda, and Fiat. The informant alleged that these companies restricted the free availability of Spare parts in the market, and levy high prices on the Spare parts which denied the market access to independent repairers, leading to anti-competition practices. He further alleged that these practices went against the provisions of the Competition Act, 2002. He argued that the companies contravened Section 3(4) and Section 4 of the Act.

The Section 3(4) of the Act establishes that the agreements which, inflict conditions on the purchase or sale of goods, restrict the manner of purchase or sale, which set price on the resale of goods purchased by the purchaser, by which they are likely to cause anti-competition in India, contravenes the Act.

According to Section 4 of the Act, the enterprises with dominant position should not abuse their position to cause anti-competition in the market.

Based on the information filed by the informant the Director-General had ordered to call for an investigation. Under the investigation, the DG found that 11 other car manufacturers were also following similar conduct. Based on the investigation, the CCI held that the conduct of the 14 above-mentioned car manufacturers was against the Section 3(4) and Section 4 of the Competition Act, 2002. The Commission imposed a fine of Rs 2544 crore which was 2% of total turnover in India on each of the car manufacturers.

COMPAT’s Order

The decision given by the CCI was challenged before the erstwhile COMPAT (Competition Appellate Tribunal) which now merged into NCLAT. The COMPAT upheld the decision of the CCI regarding the contravention of the provisions of the Competition Act, 2002. Whereas, it modified the assessment method for imposing the penalty. It said the imposition of the penalty would be based on the Average Relevant Turnover instead of the Average Annual Turnover.

Appeal to High Court

Unsatisfied with the order given by the COMPAT, the matter was then appealed to the High Court of Delhi. The writ petitions were filed challenging the penalty imposed on the companies and the constitutionality of the composition of the CCI’s powers, along with Sections 22(3), 27(b), 53A-53F, and 61.

The Delhi High Court considered the challenges in Section 22(3) and Section 53(E) and dismissed all the other challenges against the Act. The Court determined the decision by looking into four major issues. They are as follows:

  1. Whether CCI is a Tribunal exercising judicial functions?
  2. Whether Section 22(3) of the Act, is unconstitutional based on the petitioners’ reasons?
  3. Whether the revolving door practice vitiates any of the provisions of the Act?
  4. Whether an expansion in the scope of inquiry by the CCI’s in the investigation is illegal?

Adjudicatory Functions of CCI

The first issue that was raised by the Petitioners was about the nature of functions and the provisions of the Act, that make the CCI a judicial body. It was put into question because the process of appointment of judicial members in the CCI is not similar, to that of it goes with the other Tribunals.

Under this issue, the High Court held that there are many functions the CCI performs. The CCI does not merely perform the adjudicatory functions, its role involves in acting as an advisory authority whenever required, do the administrative functions, and act as a quasi-judicial body when it is required for it to deliver the orders, directions and impose penalties. As it is not only exercising its powers as an adjudicatory body, it cannot be called as a Tribunal.

The Court relied upon the case of CCI v. SAIL[ii] and held that the stage where the commission calls for an investigation, prima facie into the matter, it is exercising its administrative functions but not the adjudication. The whole process of inquiry comes under the role of the administration. Adjudication only comes into light when the inquiry is done, and the process of proceedings is initiated.

Relying upon the case of State of Gujarat v. Utility Users Welfare Association[iii], the Court passed directions to the CCI stating to ensure the presence of a judicial member in all the final hearings under the Commission.

Considering the nature of functions that the CCI performs, there is a wide difference in the issues that CCI deals with and so do the other tribunals. The inquires that are taken up the CCI is not operated by any controversy between two parties. It aims at driving out the anti-competitive practices that take place in the country, rather than getting driven by the grievance of the other party and dealing with a case of such sort.

In the case of Tribunals, their roles do not converge as in the case of CCI. There are various roles that the CCI takes up, such as administrative, quasi-judicial, regulatory, and advisory roles which converge, as it is approved under the Act itself, which makes it different from the role of Tribunals.

Section 22(3) Declared Void

According to Section 22(3) of the Competition Act, 2002, “All questions which come up before any meeting of the Commission shall be decided by a majority of the Members present and voting, and in the event of an equality of votes, the Chairperson or in his absence, the Member presiding, shall have a second or/casting vote”

The provision made under this Section is that the quorum for such meetings should be of three members.

This Section says that in case of a tie during the process of voting, the Chairperson of the Commission is given the chance of casting vote (an extra vote given by the chairperson in case of a tie. The Court declared this provision of casting vote as void. It stated that the concept of casting votes while performing the judicial functions is against the Rule of Law.

It was said that the casting vote is applicable only while performing the administrative functions and not during the process of adjudication. In case of casting vote, the Chairperson might abuse the voting power and ask for an investigation into the matter, where on the other side the rest of the members disagree. This is a clear contradiction of a fair judgment.

The Court while declaring the Section as void, upheld the validity of the proviso provided under the Section, which says that the while deciding a case quorum shall consist of three members including the Chairperson.

Revolving Door Policy

The phrase “Revolving Door Policy” refers to, enabling a person to participate in one or the other proceedings and giving a chance to choose to refrain himself from the participation in the other, on his will. Concerning the subject of the Revolving Door Policy, the High Court stressed the principle that says, “who hears must decide”.

The Court said that the decision held by the Commission, in which the members who were present at the time of entire hearings of the case and was not able to be present at the time of writing the order, which is why another person who replaces the unattended person decides the case, is void. It is upon the parties to prove that there was a prejudice caused on their part, to declare the order void.

Yet, in such cases where the members on the account of their retirement service would not be able to attend the further proceedings in a case, the concept of Revolving Door Policy would not vitiate the final ordering of the commission.

The Court laid down a few directions to limit the possibility of diversion in cases due to the Revolving Door Policy. They are as follows:

  1. The membership shall not vary once the final hearing of a complaint begins.
  2. The Central Government should take steps to look after and ensure that the full membership is maintained while the proceedings go on.

CCI’s Scope of Inquiry

The Supreme Court has already clarified regarding the Commission’s scope of inquiry previously in the case of Excel Crop Care India v Competition Commission of India[iv]. In this case, the question that was raised was, whether the CCI had the power to expand its scope of the investigation to include other companies or persons that are not identified in the information that was originally filed by the informant under Section-19 of the Competition Act,2002.

The Delhi High Court in the instant case to address the issue of CCI’s scope of the inquiry, relied upon the Supreme Court’s judgment in the aforesaid case i.e., Excel Crop Care India v. CCI. The Court held that the Director-General can expand the scope to inquire about the issues that are associated with the original issue.

Therefore, in the present case the contentions of the car manufacturers, have no reasonable basis for challenging the scope of inquiry.

Conclusion

The Competition Commission of India does not have the sole duty of exercising adjudicatory powers but it also performs regulatory, advisory functions, which is why in the present case it has been made clear by the High Court of Delhi, that it is not a Tribunal. The Court also considered the issue of judicial member’s absence during the proceedings in the commission. It also declared the casting vote under the Competition Act, 2002 as unconstitutional. These changes under the Act would lead to fair enforcement of Law by the CCI. After a long await the Court has eased the process of tackling the anti-competitive practices while making relevant transformations into the Act.

[i]2019 SCC OnLine Del 8032.W.P.(C) 11467/2018

[ii](2010) 10 SCC 744

[iii]2018 (6) SCC 21

[iv]2017 (8) SCC 47

Questions

Q.1. What does CCI do?

The Competition Commission of India is responsible for enforcement of the Competition Act, 2002. The Commission takes precautions to ensure that no anti-competitive practices would prevail in the market. It performs various functions which include administrative, advisory, regulatory, and adjudicatory tasks. It aims at the fair and healthy market competition in the Country with the objective to ensure economic development in the Country.

Q.2 Is CCI a judicial body?

The CCI does not only performing adjudicatory functions, but its role also involves in acting as an advisory authority whenever required, do the administrative functions, and act as a quasi-judicial body when it is required for it to deliver the orders, directions and impose penalties. As it is not only exercising its powers as an adjudicatory body, it cannot be called as a Judicial body.

Q.3 What is COMPAT?

The expansion of the term COMPAT is “Competition Appellate Tribunal”. This Tribunal was established to entertain the appeals made by the aggrieved party when he was not satisfied with the order or decision is given by the CCI. Now, there is no tribunal with the name COMPAT, as it is now merged into NCLAT (National Company Law Appellate Tribunal).

Q.4. What do Spare parts mean?

The literal meaning of the phrase “Spare parts” is, it is a service part which in the present case used as a replacement of the failed units of an automobile while repairing. In this article, the subject of Spare parts was discussed as it was alleged by the informant while filing information before the CCI, that the car manufacturers(respondents) were imposing restrictions on sale and purchase of the same.

Q.5. What is the Revolving Door Policy?

The phrase “Revolving Door Policy” refers to, enabling a person to participate in one or the other proceedings and giving a chance to choose to refrain himself from the participation in the other, on his will. This means while a case is being decided, the members who participate in hearings of the case and the members who would decide the case, changes as per their will.

References

  1. https://www.lexology.com/library/detail.aspx
  2. https://www.casemine.com/judgement/in/5caf6d189eff430a7aaa7b95
  3. https://cuts-ccier.org/pdf/Edition-13-Analysis_of_Competition_Cases_in_India.pdf
  4. https://indiankanoon.org/doc/22690435/
  5. https://www.scconline.com/blog/post/2019/06/06/landmark-decision-by-delhi-high-court-on-constitutional-validity-of-certain-provisions-of-the-competition-act/

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