[By Ashutosh Rajput]
The author is a student at the Hidayatullah National Law University, Raipur.
The Draft Competition Amendment Bill, 2020 (Draft Amendment) proposes the insertion of clause (2A) to Section 26 of the Competition Act, 2002 (Act). The proposed amendment reads “The Commission may not inquire into agreements referred to in section 3 or into conduct of an enterprise or group under section 4, if the same or substantially the same facts and issues raised in the information or reference from Central Government or a State Government or a statutory authority has already been decided by the Commission in previous orders”. In a nutshell, this proposed amendment allows the Competition Commission of India (CCI/Commission) to do away with the inquiry into agreements pursuant to Section 19(3) of the Act and into the conduct of an enterprise or group pursuant to Section 19(4) of the Act, which talks about inquiry into certain agreement and dominant position of enterprise, respectively. The author argues that with the changing period, the market conditions also change. Therefore, it would not be prudent if, on the same or substantially same facts and issues, the Commission chooses not to inquire into the contravention.
Commission’s power to inquire under the Act: A primer
Pursuant to Section 19(1) of the Act, the Commission can inquire into any contravention relating to Section 3(1) or Section 4(1) of the Act either on its own motion or on receipt of any information or on a reference made to it by the Central or State Government. Further, Section 26 of the Act lays down the procedure for carrying out such an inquiry. While carrying out an inquiry into contravention of Section 3(1) of the Act, the Commission has to give due regard to the factors such as the creation of barriers to new entrants, foreclosure of competition, and so forth. Similarly, while carrying out such an inquiry for the contravention of Section 4(1), the market share, economic power, entry barriers, market structure, and size of the enterprise has to be taken into consideration. In addition, factors such as regulatory trade barriers, national procurement policies, and consumer preferences, end-use of the product will also have to be considered while delineating the relevant market. These all factors are bound to change with the changing circumstances. It is interesting to note that the proposed amendment does not in toto vitiate the Commission’s power to vacate the inquiry, rather discretion has been imposed on the Commission in accordance with the term ‘may’ appearing in Section 26(2A) of the Draft Amendment. However, Commission cannot vitiate inquiry even at its discretion if the case is being inquired suo moto which is nonetheless, a step in the right direction.
Changing market dynamics in competition law analysis
The Organization for Economic Co-operation and Development (OECD), in its research paper titled “Using Market Studies to Tackle Emerging Competition Issues” has rightly observed that the market structure changes due to public policy interventions, technological innovations and so forth. Moreover, the change in market circumstances can very well be ascertained from the case of Indian National Shipowners’ Association (INSA) v. Oil and Natural Gas Corporation Limited (ONGC). In this case, INSA levied allegations of abuse of dominant position against ONGC for unilaterally terminating the contract. The Director General (DG) noted that since there was a fall in crude price, the Opposite Party (OP) was justified in terminating the contract. The commission, by supporting DG’s report, noted that “It is unambiguously established by the evidence on record that the conduct of ONGC was driven solely in response to an exceptional change in market conditions.”
The change in market dynamics can also be ascertained in circumstances where the same party is again being tried before the Commission. It would allow comparative analysis for the assessment of market dynamics. One such instance is the case of Amit Mittal v. DLF Limited and Another (DLF Case), wherein the Commission found DLF Limited, the opposite party, not to be dominant in the relevant market. The Commission took note of the fact that in Belaire Owner’s Association v. DLF Limited, the Commission had found DLF Limited to be dominant in the relevant market, however, due to the changing market dynamics the market structure has been changed. It further noted that the primary distinguishing factor is the period of assessment. In the present case, the allegation of abuse was booked in the year 2011-12 whereas in the previous case, such allegation was booked in the year 2006-2009. By considering the time period of contravention to be the essence of assessing market dynamics, the Commission concluded that DLF Limited is not dominant in the relevant market.
Another such instance is the case of Mr. Ajit Mishra v. Supertech Limited, wherein there was a substantial increase in the construction price, which resulted in depriving the original allottees of the flats for claiming the allotments in the agreed price, rather they were made to pay more price than the agreed price. The Commission made out a case of abuse of dominant position against Supertech Limited by noting that the facts and circumstances of the case are more or less similar to the case of Shivangi Agrawal & Anr. v. Supertech Ltd. Noida. Interestingly, unlike the DLF Case, the contravention in the present case occurred in the same year. Hence, undisputedly this case supports the ratio decidendi laid down in the DLF Case that the time period of contravention is the essence of assessing market dynamics. Furthermore, in Rajiv Kumar Chauhan v. M/s BPTP Ltd., the Commission by relying on the case of M/s BPTP Ltd & Ors., noted that since there is no change in circumstances, BPTP Ltd., the opposite party, cannot be said to be in a dominant position. This was again reiterated by the Commission in the case of Mr. Ravinder Pal Singh v. BPTP Ltd & Ors. A comparative reading of BPTP cases as mentioned above, illustrates that the contravention took place in the year 2009-10, which led the Commission to assert that there was no change in the circumstances even if the allegations were levied in a later year.
Way Forward
The above analysis strongly asserts that even if the same or substantially the same facts and issues are raised in the information that has already been decided by the Commission, then it is not necessary that the market structure will remain the same. The market structure changes with changes in circumstances. In DLF Case, the opposite party was found dominant in the relevant market but with the passage of time and change in circumstances, it was not ascertained to be dominant in the relevant market, as a result, the DG was directed to carry out an investigation into the market structure once again. While the Commission has the discretion to scrutinize the market structure, if need be, on substantially the same facts of the case, the Commission must look into the time period on which such a market structure was assessed. The amendment nowhere mentions that the Commission can do away with the inquiry where the contravention has taken place in a particular period of time. To cover the void, the proposed amendment must insert the requirement of a timeline for a succinct market analysis while adjudicating information of contravention which is similar or substantially similar to the matter already decided by the Commission.