The competition law is an inherent subject matter of the Constitution and premised on the concept of social and economic justice which is crystallised in Article 38 and 39 of the Constitution. Competition law is also a global subject matter: developed countries enacted laws governing it much before India caught up. One of the earliest codified competition law was enacted in USA, in the form of the Sherman Act, 1890.
The first Indian legislation addressing the issues of competition in the market was the Monopolies Trade Practices Act, 1969 (MRTP Act). The definitions of the restrictive trade practices and monopolies trade practice were so ill-drafted that the aim of regulating such practices could not be achieved. Further, anti-competitive practices such as abuse of dominance, cartels, collusion, price fixing, boycotts and predatory pricing were outside the scope of the MRTP Act, and hence, unchecked. To strengthen the country’s competition policy, the Competition Act, 2002 (‘the Act’) was enacted, which received the President’s assent on January 13, 2003.
In exercise of the power conferred upon it under the Act, the Central Government established the Competition Commission of India (CCI) with its principal office in the New Delhi which became fully operational in 2009. The CCI has inquisitorial, investigative, regulatory, adjudicatory and, to a limited extent, advisory jurisdiction. It is important to determine the nature of the Commission to understand the boundaries of its power and the effectiveness of its orders.
Breaking CCI down to its components
Before breaking down the components of CCI to understand its nature, it’s important to understand the concepts themselves –
- A judicial body is generally the ordinary court of law which follows the strict rules of evidence and procedure. E.g. Regular courts like District Courts, High Courts and Supreme Court.
- An administrative body is such where all three functions of the executive, legislative and judicial, traditionally vested in the three different organs of the government, are telescoped into one single authority. E.g. National Green Tribunal can formulate the rules, adjudicate cases and execute their judgments.
- A quasi-judicial body is an administrative body which discharges judicial functions.
Based on the various attributes of CCI, here is an analysis of its nature –
The CCI consist of a Chairperson and 2-6 members who are appointed by the Central Government and are required to possess qualifications required to make them an expert panel such as knowledge of the subject and the industry and at least 15 years of experience in international trade, law, economics, industry and public affairs. It is interesting to note that the Act does not mandate the appointment of a judicial member such as a current or retired Judge as the Chairperson.
- Powers and functions
The CCI’s advisory powers extend to been actively involved in the formulation of the country’s economic policies, advising the government on competition policy, creating awareness and imparting training about competition issues and taking suitable measures for the promotion of competition advocacy.
It also has vast powers to deal with the complaints pertaining to the anti-competitive activities and abuse of dominant position. The Commission has also been vested with the power to check the combinations (mergers, acquisitions, takeovers, etc.) which cause adverse effects on the market and review combinations which trigger the threshold. Therefore, the CCI has advisory, adjudicatory and inquisitorial powers and a wide discretion to apply them.
Further, CCI is a corporate body, having perpetual succession and common seal with power to acquire, hold and dispose of both movable and immovable property. The Commission is financed by the Central Government and is required to be bound by the directions issued by the Central Government in order to discharge its functions.
- Procedure followed
Any person – a consumer, their association or a trade association can file information about an alleged violation and the CCI, either on its own motion or on a reference made by the Central or a State Government or the complainant, can inquire into the alleged violation. If the Commission reaches an opinion that a prima facie case exists, it can direct the Director General (DG) to conduct an investigation. If the report of the DG concludes that contravention of the Act has taken place, the Commission can order further inquiry or conduct its own inquiry, if necessary.
In order to discharge its functions, the Commission can issue any interim order where it has reason to believe the existence or threat of existence or any continued impact of existence of anti-competitive activity or abuse of dominant position. The Commission can also impose penalties. The power, function and decision of CCI is required to be subject to judicial review as they discharge the wide discretionary adjudicative function.
Determining the Nature of CCI
The CCI hears the disputes between parties and inquires into the facts of the case by directing the Director General to submit a report. It also considers the evidence and expert reports while determining the dispute among the parties. Therefore, CCI primarily sounds to be a quasi-judicial agency which is still struggling for its real identity.
Responding to the question of the true nature of CCI, the Parliamentary Standing Committee on Home Affairs in its 93rd Report, 2001, was of the opinion that it is a judicial body. The rationale for this argument was that the CCI has a specific adjudicatory function in relation to abuse of dominance, anti-competitive practices and on combinations. Accordingly, the Committee desired that the Chairperson of the CCI should be a person from the Judiciary. The Act, however, does not conform with the Parliamentary Standing Committee Report.
On October 14, 2003, the Central Government appointed the first Chairperson and Member of the CCI. Before the Chairperson could take charge, however, this appointment was challenged vide a Public Interest Litigation, Brahm Dutt v. Union of India, (2005) 2 SCC 431 on the ground that the Chairman had to be a person connected with the Judiciary, picked for the job by the head of the Judiciary and not a bureaucrat or other person appointed by the Executive without reference to the head of the Judiciary. One of the Government’s responses was that the Competition Commission is an expert body and since the main functions of the expert body were regulatory in nature, there was no merit in the challenge raised in the Writ Petition.
The court, when referring to a similar case filed against the National Company Law Tribunal, observed in para 120 that, “The constitution of the National Company Law Tribunal and the Appellate Tribunal in the manner now provided, when considered along with the provisions concerning the Competition Commission under the Competition Act 2002, seems to indicate a pattern of an aggressive executive seeking to take over gradually the judicial power traditionally exercised by the Courts under safeguards which ensure the competence, independence and impartiality of the Judges, and replacing them by persons who have neither a judicial background nor specialised knowledge of the subject for which the Tribunal is created, and by persons now serving the executive who will continue to retain their lien and loyalty to the executive branch, and be amenable to the influence of executive superiors and their political masters.”
However, during the pendency of the Writ Petition, certain amendments were proposed to the Act by the government. Accordingly, the Supreme Court closed the Writ Petition leaving open all questions regarding the validity of the enactment. While disposing of the petition, the Supreme Court observed that –
“If an expert body is to be created as submitted on behalf of the Union of India consistent with what is said to be the international practice, it might be appropriate for the respondents to consider the creation of two separate bodies, one with expertise that is advisory and regulatory and the other adjudicatory. This followed up by an appellate body as contemplated by the proposed amendment, which can go a long way in meeting the challenge sought to be raised in this Writ Petition based on the doctrine of separation of powers recognised by the Constitution.”
Taking into account the recommendations of the Supreme Court and the Standing Committee, the Competition (Amendment) Bill, 2007 was introduced. The Competition (Amendment) Bill, 2007 inter alia provided for the following –
- The CCI shall be an expert body which would function as a market regulator for preventing and regulating anti-competitive practices in the country in accordance with the Act and it would also have advisory and advocacy functions in its role as a regulator.
- Establishment of the Competition Appellate Tribunal (CompAT) which shall be a three member quasi-judicial body headed by a person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court to hear and dispose of appeals against any direction issued or decision made or order passed by the CCI.
Therefore, the amendment of 2007 has not changed the position of CCI which still discharges regulatory, advisory and adjudicatory function. Though an Appellate body called CompAT now NCLAT have established which decides the appeal cases against the adjudicated verdict of CCI. The entire amendment of 2007 seems to be an eyewash and contradicts with the observation of Supreme Court in the Brahm Dutt case.
The significance of the nature of CCI
The nature of the Commission will determine the constitutional validity of the Commission and its decision and enables the litigants to decide their litigating strategy. E.g. If the Commission is a purely regulatory body discharging executive power, their decision and action can be easily brought down under the judicial review by virtue of the Article 226 and 32 of the Constitution of India. If the Commission is a quasi-judicial body or pure judicial body then the higher court will be reluctant in exercising their power of judicial review by citing excuse of the availability of the alternative remedy.
In 2014, when the CCI fined automobiles manufacturing companies to the tune of Rs. 2545 crores for an alleged anti-competitive agreement, the party resorted to challenging the basis of the order of the Commission before the Delhi High Court by way of Writ Petition stating that the order was contrary to the principles of natural justice and separation of power. In addition thereto they have also questioned the constitutional validity of the CCI and provisions of the Act.
The Central Government attempted to distance the CCI from being subject to the standards applicable to judicial tribunals, under the guise of following the Supreme Court’s decision in Brahm Dutt case. But, the fact remains that since the powers vested in the CCI remained primarily judicial in nature, the decisions rendered by the CCI would be necessarily subject to scrutiny as a decision given by a court of equivalent stature.
The nature of the CCI also determines the manner of the disposal and the effects of the decision of the Commission lead to the conclusion that a duty to act judicially is casted on the Commission when it adjudicates the violation of competition law and imposed penalties. This duty to act judicially requires that a judicial mind needs to be applied and proper appreciation of evidence and appraisal of facts takes place to ensure a just, fair and reasonable opportunity to parties. Further, CCI is required to follow the principles of natural justice while deciding the cases before them.
Understanding the nature of CCI is therefore vital to determine the scope of judicial review, application of writ jurisdiction, application of the principle of natural justice and to ensure the independence of the Commission.
DISCLAIMER: The information provided in this article is for educational purpose only. The same cannot be construed as legal advice.