Enhanced Authority of the Director General: Competition (Amendment) Act, 2023

[By Mustafa Topiwala & Raima Singh]

The authors are students of Rajiv Gandhi National University of Law, Punjab.

 

Introduction

The Competition Act, 2002 (hereinafter, “principal act”), was enacted to regulate major anti-competitive market practices as laid down in the case of CCI v. Bharti Airtel Ltd.

On 11 April, 2023, the Competition (Amendment) Act, 2023 (hereinafter, “amendment”), was announced by the Competition Commission of India (hereinafter, “CCI”) in the Gazette of India. It has expanded the scope of anti-competitive agreements, introduced a Settlement and Commitment Framework for quick market connection, augmented the powers of the Director General (hereinafter, “DG”), etc.

While the forthcoming changes are poised to bolster procedural efficiency and functioning of the CCI, it is imperative to acknowledge the adverse ramifications of the same. This article aims to address certain negative aspects of the amendment, while focusing on one key area – the powers of the DG and their subsequent impact. Further, the authors strive to suggest reformative measures by analyzing similar provisions in well-established antitrust regimes such as the United States’ (US), and the European Union’s (EU) antitrust laws.

Amended Powers of the Director General

The powers of the DG have always been under the government’s recurring scrutiny. Even in 2012, the Competition (Amendment) Bill was introduced to allow the DG to conduct search and seizure operations after directly obtaining the requisite permissions from the CCI, contrary to the requirement of an approval from the magistrate of the relevant jurisdiction; akin to the powers of an Inspector under Sections 240 and 240-A of the Companies Act, 1956.

The 2023 amendment has entirely modified Section 41 of the principal act. The authority to appoint the DG, which was earlier vested with the Central Government, has now shifted to the CCI, which can select a DG through a search-cum-selection committee after obtaining prior approval of the Central Government.

Furthermore, prior to the amendment, the DG’s investigatory authority was invoked under Companies Act, as stipulated under Section 41(3) of the principal act. Section 240 of Companies Act allows an inspector to furnish information (books, papers, etc.) from a corporate body, after prior approval from the Central Government. Similarly, before the amendment, the DG could only commence investigation and furnish relevant information upon the direction of the CCI. Under the Section 41(3) of the amendment, during an investigation, the DG or any party authorized by him can furnish any information it considers relevant from the investigated party without prior approval from the CCI. This stands in contrast to the previous relation with Section 240 wherein the investigating officer could do the same only after being permitted by the Central Government, as highlighted in the case of CCI v. JCB (India) Ltd.

Additionally, the DG was mandated to obligatorily restrict their investigation solely to the allegation referred to them by the CCI. Efforts to delineate the scope of the DG by the judiciary were taken in the case of Excel Crop Care Ltd. v. CCI, wherein the Supreme Court had held that the paramount objective of the DG was to ensure fair and anti-competitive market, and thus allowed for the expansion of the DG’s power in that specific instance. The position was clarified later in cases such as CCI v. Grasim Industries Ltd.where the DG was allowed to investigate  newly discovered contraventions during the investigation and bring it to the notice of the CCI.

The amendment, after augmenting the investigatory capacity of the DG, certainly endeavors to ensure a fair market, giving more autonomy to the DG to furnish reports and uncover new contraventions autonomously. Although, considering the departure from Section 240 of the Companies Act and the amplification of the DG’s powers, it might pave the way for abuse of such power in the future. It is noteworthy that there has been no incorporation of buffer provisions to safeguard any overriding act by the DG. Furthermore, vesting the authority to appoint the DG with the CCI could foster corrupt activities by the CCI, which is exacerbated by the fact that it can already launch an investigation based on mere “opinion” (Section 21(1) of the principal act), now compounded with its preferred DG with their additional expanded powers.

US & EU Provisions

The Competition (Amendment) Act, 2023, aims to advance India’s antitrust laws towards the standards set by nations such as the US. Consequently, it becomes imperative to analyze whether the current shortfalls in the amendment, particularly the legislation pertaining to the powers of the DG, can be addressed by examining analogous laws of the US and the EU.

Position in USA

The structure of the antitrust laws in the US is characterized by bifurcation of enforcement responsibilities between two agencies: the Antitrust Division of the US Department of Justice, and the Federal Trade Commission (hereinafter, “FTC”). Notably, the implementation of the law does not only depend upon an individual or body, but it also incorporates the perspective of economists, lawyers and judges at various stages. The FTC, headed by commissioners elected by the president, takes pivotal decisions working collectively with these renowned professionals. This is vital, for it ensures expert perspective in decision-making processes, and also reduces any potential misuse of the autonomy by the commissioners. Applying a similar concept to the enhanced powers of theDG may optimize the utilization of the expanded authority

Position in EU

The Treaty on the Functioning of the European Union incorporates fundamental provisions of antitrust law (Articles 101 and 102). Within the EU, the powers vested with the Hearing Officer parallels those of the DG in India. Both the authorities have the right to conduct search-operations for important documents, books etc. when deemed necessary. The recent expansion of the powers of the DG could be made subject to supervision, akin to the role of the EU Ombudsman. The EU Ombudsman investigates administrative shortcomings of the EU institutions, which may be lodged by citizens or residents of EU countries or by EU-based organizations. Such a system upholds the non-arbitrariness of the hearing officer, and the power vested in them is not susceptible to misuse or corruption. Introduction of a similar mechanism to monitor the expanded powers of the DG will reinforce the integrity of competition laws in India.

Additionally, the role of National Competition Authorities (NCA) in upholding compliance of competition laws in the EU is significant. The power vested with the authorities resembles the powers given to the DG in India. Such autonomy granted to investigative authorities facilitates quick decision-making. This independent authority already rests with the DG as well. Under the amendment, the appointment of the DG can be made through a search-cum-selection committee by the CCI, although adherence to this provision is not binding. In contrast, antitrust laws of the EU mandate that the appointment of officials in the NCA or its management should be done through a transparent and just recruitment and selection process. Adopting a similar obligatory provision from the international legal framework will not only aid in safeguarding the powers of the DG from potential corruption, but also propel India towards developing internationally robust competition laws.

The Way Ahead

In pursuit of reforming the business environment in India, it is vital to ensure that the introduced amendment upholds principles of fair practice and justice. The introduced amendment incorporates several changes which are pertinent to harmonize Indian laws with the global business ecosystem. Amongst them, the Settlement and Commitment framework is one such amendment which offers chances of retribution in cases of non-compliance by companies. However, it is incumbent upon the government to acknowledge the potential drawbacks of the amendment. At this nascent stage, establishing the definitive impact of the amendment is premature. Nevertheless, without a system of check-and-balance provisions, the law formulated to curb anti-competitive practice could fall short of its intended objectives. Addressing the highlighted lacunas can pave the way forward for refinement of competition laws in India, fostering a corporate market which is safe and profitable for all entities.

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