Competition Act Case Essay Example for Free

Competition Act Case Essay In a telling judgement, the Supreme Court of India, on Sep. 9, 2010, has effectively and judiciously circumscribed the boundaries of exercise of power by both the Competition Commission of India (CCI/Commission) and the Competition Appellate Tribunal (â€Å"the Tribunal†) while delivering its verdict in the much awaited case Competition Commission of India v. Steel Authority of India Ltd. This Note captures the highlights of the decision for readers of this Blog! Background: The Court was hearing an appeal by the CCI against the order dated Feb. 15, 2010 of the Tribunal in Steel Authority of India Ltd. v. Jindal Steel Power Ltd. Jindal Steel had filed a complaint before CCI alleging anti-competitive practices and abusive behaviour by SAIL while it entered into an exclusive supply agreement with Indian Railways. Upon receipt of the complaint/information, CCI issued notice to SAIL to furnish certain information for within two weeks from the date of receipt of such notice. SAIL requested for an extension of time upto six weeks to file the required information. CCI in its meting deliberated on the request and decided not to grant any further extension. In the said meeting CCI also formed a prima facie opinion on the existence of the case and directed the Director General (DG) to inquire into the matter pursuant to its powers under Section 26(1) of the Competition Act, 2002 (â€Å"the Act†). SAIL challenged this direction before the Tribunal claiming that CCI could not have formed a prima facie opinion without hearing it first. SAIL also contended that CCI has not recorded any reasons while forming the prima facie opinion and that the time provided by CCI to file information was grossly inadequate. While filing the appeal before Tribunal, SAIL did not implead CCI as a party. CCI thus filed an application before Tribunal for impleading itself as a necessary and proper party and also assailed the very maintainability of appeal. The Tribunal, in its detailed order, holding that even the direction to inquire was appealable under Section 53A(1) of the Act noted that CCI could not have directed the DG to inquire into the complaint without having heard SAIL. It further noted that CCI was neither a necessary nor a proper party in appeals filed by an aggrieved party before the Tribunal. The Tribunal also noted that CCI did not record any reasons while declining to grant extension of time and hence it in violation of principles of natural justice. Appeal before the Supreme Court: Aggrieved by the order of the Tribunal, CCI approached the Supreme Court which framed six broad issues noting some of the allied issues raised by the parties: (i) Whether the direction passed by the Commission u/s. 26(1) of the Act while forming prima facie opinion would be appealable u/s/ 53A(1) of the Act? (ii) What is the scope of the power vested with Commision u/s. 26(10 of the Act and whether parties including the informant and other affected parties are entitled to notice at the stage of formation of prima facie opinion? (iii) Whether the Commission would be necessary or at least a proper part in proceedings before the Tribunal? (iv) At what stage and in what manner the Commission can exercise its powers u/s. 33 of the Act while passing interim orders? (v) Whether it is obligatory for the Commission to record reasons while forming prima facie opinion? (vi) What directions, if any, need to be issued by the Court for ensuring proper compliance of the procedural requirements while keeping in mind the scheme and object of the Act? The Verdict: Issue 1: The Court made an exhaustive study of the scheme and the provisions of the Act and rules of statutory interpretation, noted the distinction between â€Å"and† and â€Å"or†, referred to Indian, UK and European decisions to unearth settled principles of law and finally concluded that Section 53A(1) of the Act expressly provides for what decisions or orders or directions may be appealed before Tribunal. The Court noted that right to appeal is a substantive right which derives its legitimacy from the operation of law or statute. If the Statute does not provide for an appeal, the Court cannot presume such right. The direction to cause an investigation into a matter is passed under Section 26(1) of the Act does not determine any right or obligation of the parties to the lis. It does not find mention in Section 53A(1) of the Act and hence, the Court found that such orders would not be appealable under the Act. Issue 2 and 5: The Court noted that the exclusion of principles of natural justice (PNJ) is a well known concept and the legislature has the competence to enact such laws. Whether the exclusion of application of PNJ would vitiate the entire proceedings would depend upon the nature and facts of every case in the light of the Act or Rules and Regulation applicable to the case. The Court, then, read into various provisions of the Act and the Competition Commission of India (General) Regulations, 2009 in order to determine the nature of functions of the Commission under various provisions. The Court found that at the face of it, the exercise of power u/s. 26(1) of the Act while forming prima facie opinion is inquisitorial and regulatory. It held that while forming prima facie opinion, the Commission does not condemn anyone. This function is not adjudicatory in nature but merely administrative. This function is in the nature of preparatory measures in contrast to the decision making process and hence right of notice of hearing is not contemplated u/s. 26(1) of the Act. On the issue of reasons to be recorded at the stage of forming prima facie opinion, the Court held that the Commission must express its mind in no uncertain terms that it is of the view that prima facie case exists. Such opinion should be formed on the basis of the records, including the information furnished and reference made to the Commission. The reasons may not be in detail but there must be minimum reasons substantiating the view of the Commission. Issue 3: The Court reiterated the settled position of law relating necessary party and proper party. A necessary party is one without whom no order can be made effectively whereas a proper party is one in whose absence an effective order can be made but whose presence is necessary for a complete and final decision on the question involved in the proceeding. Applying the principle of dominus litus, the Court then noted that in cases where the Commission initiates a proceedings suo moto it shall be the proper party. In all other proceedings, it shall be a necessary party. Issue 4: On powers of the Commission u/s. 33, the Court noted in following terms: â€Å"During an inquiry and where the Commission is satisfied that the act is in contravention of the provisions stated in Section 33 of the Act, it may issue an order temporarily restraining the party from carrying on such act, until the conclusion of such inquiry or until further orders without giving notice to such party, where it deems it necessary. This power has to be exercised by the Commission sparingly and under compelling and exceptional circumstances. The Commission, while recording a reasoned order inter alia should : (a) record its satisfaction (which has to be of much higher degree than formation of a prima facie view under Section 26(1) of the Act) in clear terms that an act in contravention of the stated provisions has been committed and continues to be committed or is about to be committed; (b) It is necessary to issue order of restraint and (c) from the record before the Commission, it is apparent that there is every likelihood of the party to the lis, suffering irreparable and irretrievable damage or there is definite apprehension that it would have adverse effect on competition in the market.† Issue 6: One of the major outcomes of the case relates to the Court’s recognition and affirmation of the expeditious disposal of complaints filed before the Commission. The Court found this to be a fit case to issue certain guidelines in the larger interest of the justice administration. These directions weigh special worth in the light of the fact the Commission, even after more than one year of the enforcement of the operative provisions of the Act, has not issued its order in a single contentious case. The Court passed following guidelines: (a) Even though the time period for forming prima facie opinion by the Commission is provided in the Regulations (i.e. 60 days from the date of filing information) it is expected of the Commission to hold its meetings and record its opinion about existence or otherwise of a prima facie case within a period much shorter than the stated period. (b) All proceedings including investigation and inquiry by the Commission/DG must be completed expeditiously while securing the objectives of the Act. (c) Wherever during the course of inquiry the Commission exercises its jurisdiction to pass interim orders, it should pass a final order in that behalf as expeditiously as possible and in any case not later than 60 days. (d) The reports by the Director General u/s. 26(2) should be submitted within the time as directed by the Commission but in all cases not later than 45 days from the date of passing of directions in terms of Section 26(1) of the Act. (e) The Commission/DG shall maintain complete confidentiality as envisaged u/s. 57 of the Act and Regulation 35 of the Regulations. Wherever the ‘confidentiality’ is breached, the aggrieved party certainly has the right to approach the Commission for issuance of appropriate directions in terms of the provisions of the Act and the Regulations in force. Reading between the Lines: The verdict of the Apex Court bears immense significance given the timing of and issues involved in the judgement. It may be noted that both â€Å"competition law and policy† and the Commission are at a very nascent stage within the broad regulatory matrix of Indian economy. The judgement of the Supreme Court has rightly echoed the sentiments of proponents of free and fair market economy and it shall go in long way to effective sketch the competition law landscape in the country. At this point, I would like draw some conclusions which may not seem apparent at the face of it. They are as follows: (i) The Court, in its opening paragraphs, notes the importance of competition law and policy for any free market economy referring to three types of efficiencies: i.e. allocative, productive and dynamic. The Court observes that the main objective of competition law is to promote economic efficiency using competition as one of the means of assisting the creation of market responsive to consumer preferences. While it may be too early to conclude, but this certainly indicates that Indian Courts are going to lean towards Chicago School of Thought in the Chicago-Harvard dichotomy. It is the Chicago School of Economists which has brought the efficiency test as a dominant factor in last three decades in US Courts. (ii) While highlighting the aims of competition law, the Court makes a mention of the relevant laws of other jurisdictions including that of USA, UK and Australia. It would not be far-fetched to argue that the Court has indirectly hinted that in future, it shall definitely take into account the competition law jurisprudence developed in these jurisdictions while deciding contentious issues. That the Supreme Court is going to rely on EU and US Court decisions while explaining the substantive concepts involved in competition law is further strengthened by the fact that the Court referred to two decisions EU courts i.e. CFI and ECJ in its very first judgement related to the new Act even when there was no substantive concept of competition law as such involved. Remarks: (i) The Court has very effectively defined the ambit and scope of the powers of the Commission and the Tribunal at the stage of forming of prima facie opinion. No jurisdiction generally allows challenging the direction passed by the competition authorities to initiate investigation. However, there may be cases where the amount of information to be filed would be voluminous and the Commission in such cases must provide adequate time. It is doubtful whether a person would be able to challenge the denial of extension of time by the Commission in such cases. (ii) In larger interest of justice administration, the Court passed certain directions till the Commission formulates its own regulations in that regard. Though such a step by the Court is quite welcome, but the timelines provided by the Court are quite unreasonable and strict. For example, the Court has directed that the DG must submit its report within 45 days u/s. 26(2) of the Act. This seems quite onerous to be implemented in practice. The collection of evidence and ascertainment of facts would require the DG to issue notices to relevant parties. Such parties would have to prepare their responses which they intend to file before DG. All this may not be done within 45 days of time period. (iii)Though I fully agree with the Court’s reasoning as to why Commission needs to give notice to parties at the time of forming prima facie opinion; the analysis seems to be incomplete as the judgement has not even referred to provisions of Section 36 of the Act. The Court should have analyzed the provisions of Section 36 while discussing the issue of compliance or non-compliance of PNJ. (iv)Finally, the Court also states that â€Å"as far as American law is concerned, it is said that the Sherman Act, 1890, is the first codification of recognized common law principles of competition law.† I do not want to sound picky, but to my limited knowledge, Canada was the first country to enact its Competition Act which was one year prior to the Sherman Act i.e. in 1889.