CCI (Competition Commission of India): Provisions, Working and Challenges – Explained, pointwise

Introduction

The Competition Commission of India (CCI) recently passed two separate orders against the tech giant Google. The two orders imposed penalty of INR 1337 crore and INR 937 crore (total INR 2237 crore) on Google for abuse of dominant market position. CCI also issued list of corrective measures for Google to comply with. Experts have hailed the order by the CCI as it took on Google. The CCI has been very proactive in addressing the anti-competitive practices of corporations and ensuring fair markets. However, the Commission faces several challenges which must be addressed to enhance its efficacy.

What is the Legal and Institutional Framework regarding the CCI?

Legal Framework

Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India. These Articles are a part of the Directive Principles of State Policy. Among other things, Article 38 calls for elimination of inequalities in opportunities for people engaged in different vocations (professions). Article 39 calls for ensuring that operation of economic system does not result in concentration of wealth. Based on the Directive Principles, The Monopolies and Restrictive Trade Practices Act (MRTP Act) was passed in 1969. It was India’s first Competition Law.

MRTP Act was repealed and replaced by The Competition Act. The Competition Act was passed in 2002, on the recommendations of Raghavan Committee. In October 2003, the Competition Commission of India (CCI), was established under the provisions of the Competition Act, 2002. It became fully functional when the provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position were notified in May 2009.

Competition Appellate Tribunal (COMPAT) was also established based on the Competition (Amendment) Act, 2007. However, the Government has replaced the Competition Appellate Tribunal with the National Company Law Appellate Tribunal (NCLAT) in 2017.

Composition of CCI

According to the Competition Act, the CCI has a Chairperson and not more than 6 members. The Chairperson and the members are appointed by the Union Government.

The Commission is a quasi-judicial body . It also provides advice to the statutory bodies.

Eligibility of members

According the Competition Act, 2002, the Chairperson and every other member shall be: (a) A person of ability, integrity and standing; (b) Who has been, or is qualified to be, a judge of a High Court, or (c) Who has special knowledge of, and professional experience of not less than 15 years in international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, administration or in any other matter which, in the opinion of the Central Government, may be useful to the Commission.

CCI’s jurisdiction does not include matters protected by Intellectual Property Rights.

What are the functions of CCI?

First, It is the statutory duty of the Commission to (a) Eliminate practices having adverse effect on competition; (b) Promote and sustain competition; (c) Protect the interests of consumers; (d) Ensure freedom of trade carried on by other participants, in markets in India.

Second, Make the markets work for the benefit and welfare of consumers.

Third, Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and development of economy.

Fourth, Implement competition policies with an aim to effectuate the most efficient utilization of economic resources.

Fifth, Develop and nurture effective relations and interactions with sectorial regulators to ensure smooth alignment of sectorial regulatory laws in tandem with the Competition Law.

Sixth, Effectively carry out competition advocacy and spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in the Indian economy.

Seventh, It may act on a complaint filed by an informant pertaining to an anti-trust activity or may take action suo motu.

Eighth, The Commission is also mandated to give its opinion on competition issues to government or statutory authority and to undertake competition advocacy for creating awareness of competition

What are some major orders passed by CCI?

First, In October 2022, The CCI imposed penalties of INR 936.44 crore and INR 1337.76 crore against Google for abusing its dominant position with respect to its Play Store Policies and Android mobile device ecosystem respectively.

Second, In October,2022, CCI imposed a fine of about INR 223 crore on travel portal MakeMyTrip for entering into preferential pacts with hotel partners.

Third, In December 2021, CCI had imposed a penalty of INR 200 Crore upon Amazon due to their failure to notify combination in terms of the obligation cast under 6(2) of the Competition Act. Section 6(2) deals with provision of prior information to the Commission in case of impending merger.

Fourth, In 2015, CCI imposed a fine of INR 258 crores on three airlines (Jet Airways, IndiGo and SpiceJet), for cartelisation in determining the fuel surcharge on air cargo.

Fifth, CCI had also ordered probe into the functioning of the Cellular Operators Association of India (COAI) in response to the complaint filed by Reliance Jio against the cartelization by its rivals – Bharati Airtel, Vodafone India and Idea.

Sixth, In 2013, CCI imposed a penalty on the Board of Control for Cricket in India (BCCI) for misusing its dominant position. It was found that the IPL ownership agreements were unfair and discriminatory. The terms of IPL franchise agreements were one-sided and highly in favour of BCCI and the franchises had no say in the agreement.

Seventh, The automotive sector has also been subject to investigations across a wide-spectrum of competition law concerns. Maruti Suzuki, for instance, is being investigated for allegedly imposing resale prices on its dealers. Similarly, Honda is being investigated for its conduct pertaining to vertical restraints by allegedly imposing discount control mechanisms, exclusive supply agreements, tie-in arrangements, and abuse of dominance.

What has been the benefits of CCI?

First, It act as a competition regulator, and an antitrust watchdog for smaller organizations that are unable to defend themselves against large corporations. Thus its actions have been effective in ensuring competition which ultimately benefits the consumer and the economy.

Second, CCI has played both administrative and quasi-judicial roles to eliminate practices having adverse effects on competition, promote and sustain competition, protect the interests of end consumers and ensure freedom of trade in Indian markets.

Third, The Commission has also come up with several innovations like the ‘green channel’ provision for automated approval on combinations which do not have appreciable adverse effect on competition, and cleared more than 50 of such transactions. Thus, the Commission while ensuring fairness, does support mergers which make economic sense.

Fourth, CCI has conducted several market studies helping dynamics of market/

What are the challenges before CCI?

First, CCI has been called a ‘Toothless regulator’ by critics. Most of the orders of the CCI are under appeal before the National Company Law Appellate Tribunal (NCLAT) or under challenge in the high courts or the Supreme Court. The CCI has collectively fined companies about INR 13,000 crore between 2011-12 and 2018-19. But it has collected less than 1% of it so far.

Source: Mint. The above graph indicates percentage of CCI’s anti-trust orders which end up in appeals. The proportion was 56% in 2017-18 and 51% in 2018-19.

Second, Even though the Competition Act, 2022 represents an improvement from its extremely restrictive predecessor (the MRTP ACT) it remains riddled with loopholes and ambiguities. This creates unnecessary legal uncertainty, which favours lawyers and law firms. For instance, the law allows the CCI to leave some leeway for ‘relative advantage, by way of contribution to the economic development’. This may allow large firms to justify their anti-competitive practices in the name of development.

Third, In spheres such as telecom, internet and big-technology, CCI’s functions also overlap with other regulatory bodies such as the Telecom Regulatory Authority of India (TRAI). Moreover, to assess and ensure competition in these spheres, CCI will require staff with specialized knowledge in technology as well as an understanding of modern industrial economics.

Fourth, there is a need for new market definition for digital technologies. Since, there are no boundaries in the digital space, defining relevant market has been a tough task for regulators around the world. With the advent of Web 3.0, AI, IoT, Blockchain and other technological developments, and emergence of issues like data protection and privacy, search bias, platform neutrality, deep discounting, hostile takeovers, confidentiality, etc, the need for a robust competition law, geared to meet the needs of present day techno-legal world becomes vital.

Conclusion

CCI has been proactive in its approach to check anti-competitive practices in the markets. The Commission has taken a bold stand against the practices of global tech giants, where only European Commission had been active till now. However, the Commission must be provided more powers to ensure that it is able to collect penalties imposed. The Judiciary can also refrain from entertaining every appeal against CCI’s orders. Such steps can further enhance the efficacy of the Commission in its roles.

Syllabus: GS II, Statutory, regulatory and various quasi-judicial bodies; GS III, Indian Economy and issues related to Growth.

Source: Mint, Mint, Financial Express, Money Control, PIB, CCI