Amendment will empower competition law, but glitches remain

The Competition (Amendment) Act, 2023 seeks to improve the CCI’s effectiveness by incentivising compliance and strengthening deterrence through a series of measures

On April 12, the Competition (Amendment) Act, 2023 (Act) received presidential assent and became law. The Act is a result of over four years of discussions on empowering the Competition Commission of India (CCI) to effectively eliminate anti-competitive practices in India.

Roadblocks To Regulation

The CCI has enforced the competition law for the last 13 years, and has successfully intervened in various markets. It has imposed penalties and remedies on companies that were found to have violated competition law. However, several of its decisions have been appealed, and the CCI has been unable to recover a vast majority of the penalties, and has not enforced its remedial orders because of a prolonged appellate process. The CCI’s annual reports reveal that from 2017-2022, the CCI recovered less than 4 percent of the total penalties levied. The Act seeks to improve the CCI’s effectiveness by incentivising compliance and strengthening deterrence through a series of measures.

Settlements And Commitments

The Act permits the CCI to swiftly address market malpractices and avoid lengthy appeals processes by introducing settlements and commitments. This allows companies under investigation to propose resolutions to potential competition concerns by committing to change their business practices or offering to settle proceedings. Such mutually agreed settlements or commitments would halt ongoing investigations, correct market imperfections, and would be final and non-appealable. It’s a win-win for the regulator and the regulated since it will conserve institutional resources, reduce uncertainty in outcomes and ensure swift market correction.

Encouraging Whistleblowing

Another step to incentivise compliance is a strengthened ‘leniency plus’ mechanism. India’s competition law already incentivises companies by rewarding those that admit to participation in cartels with reduced penalties. The Act provides an additional ‘carrot’ by incentivising whistle-blowers to offer information on other cartels of which they are a part. This enhances the CCI’s ability to avoid lengthy litigation and swift enforcement by bringing evidence of infringements directly to their doorstep.

Making Appeals Expensive

Companies are also discouraged from resorting to time-consuming appellate litigation without basis by making the appeal process itself more expensive. Companies who decide to appeal CCI infringement decisions to the National Company Law Appellate Tribunal (NCLAT) will now need to deposit 25 per cent of the penalties imposed by the CCI as a pre-condition to file an appeal at the NCLAT. This will reduce frivolous appeals and ensure timely enforcement.

Streamlining Caseload

The CCI was earlier required to undertake lengthy and time-consuming consideration of every case that was brought before it. This led to a tremendous caseload, and longer disposal times. The Act now requires informants to file complaints within three years of the illegal conduct taking place, and allows the CCI to reject complaints that are based on the same or similar facts/issues that have been addressed previously. This will free up agency resources, and facilitate timely disposal of cases.

Missed Opportunities

While the Act greatly enhances the CCI’s effectiveness, some of the amendments could potentially undermine this objective. For example, settlements do not extend to cartels, despite a majority of the CCI’s penalties having been imposed for cartel infringements. Many cartel decisions are pending judicial review, and without the ability to enter cartel settlements, the CCI will be unable to either remedy the market or to recover the penalties it has imposed.

Further, third parties can file claims for compensation before the NCLAT based on settlement orders. This will make companies think twice before considering settlements, since compensation claims are in addition to the settlement fee, and will significantly increase their compliance cost.

The CCI plays a significant role in ensuring that the Indian market stays competitive. The efficiencies introduced in the Competition (Amendment) Act, 2023 will reduce prolonged litigation and ensure swift compliance. The focus will now move to ensuring the effective implementation of the sweeping changes.

(Samir R Gandhi is visiting faculty, NLSIU, Bangalore, and Partner, Axiom5 Law Chambers, and Shivanghi Sukumar is Counsel, Axiom5 Law Chambers.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.