The Competition Commission of India (CCI) — India’s competition regulator — turned a decade old two months back. It has busted cartels across sectors, including entertainment, pharmaceuticals, public procurement, transport, and construction. The CCI has also held individuals i.e., both current and former employees, to be liable for their conduct.
As part of its successful advocacy rollout, the CCI has passed nine leniency orders. The leniency regime (where a cartel member points out or owns up to irregularities and gets away with a smaller penalty) as a whistleblower’s tool has given a boost to the CCI’s cartel enforcement, particularly post the recent amendments in 2017 which removed the cap on the number of leniency applicants.
The CCI in the eight years of the Indian merger control regime allayed industry concerns of M&A timelines being impacted, by expeditiously clearing over 650 merger notifications with an average disposal time of 23 days in 2018.
The CCI has not blocked a single transaction to date and has conducted eight in-depth phase-II reviews of transactions involving high market shares, of which seven have led to conditional approvals subject to divestitures. However, the recent acquisition of L&T’s E&A business by Schneider and MacRitchie was approved by the CCI subject to a set of novel behavioural remedies.
The acceptance of purely behavioural remedies is a laudable step for the development of the merger control regime in India.
Challenges for the future
However, there are several challenges ahead for the regulator in tackling the antitrust issues involving new age economy and evolving ways in which business is done globally.
Antitrust regulators around the world are grappling with tools of analysis to examine issues involving the digital economy — be it algorithm pricing, big data, or mergers where data and not turnover are of real relevance. These tools include hiring data scientists to work with competition regulators as well as moving away from traditional barometers of market share only to parameters which include access to data, network effects, and multi-sided markets.
The US appears to be moving towards an EU type competition model where new age economy companies will be scrutinised for market power and abuse of dominance, as recently, the US House Judiciary Committee initiated an investigation to assess the effectiveness of current antitrust laws in regulating technology companies. The Government of India has also set up the Competition Law Review Committee, which includes a working group on ‘new age markets and big data’ to examine the issues relating to the digital economy.
Way forward
The CCI has the ability to levy the highest economic penalties in India and is statutorily mandated to prevent practices that have adverse effect on competition, promote and sustain competition, protect consumer interests, and ensure freedom of trade in light of the economic development of India.
However, this wide mandate exercised by the CCI emphasises the need for the formulation of penalty guidelines by the regulator which will serve as a barometer to guide industry.
The past decade has also witnessed the CCI successfully overcoming its initial hurdles in relation to its orders being reversed by the appellate tribunal on account of violation of the principles of natural justice. Now, a new quandary before the CCI is in relation to its composition, which was right-sized by the Central Government in April 2018 to three members from six members (excluding the Chairperson) and is again under discussion owing to the recent directions of the Delhi High Court.
The Delhi High Court in its judgment in Mahindra & Mahindra v. CCI, directed that final hearings should be heard by a substantial number of seven or at least five members, with the mandatory presence of the judicial member.
Given the CCI’s nationwide remit and the fact that a majority of the CCI’s matters originate in Mumbai, the Central Government should consider setting up benches of the CCI to expeditiously decide competition cases. This is also imperative in the interest of facilitating wider access to justice and ease of doing business in India and in line with the model already implemented by SEBI, the securities market regulator.
Uberoi, Chawla and Parmar are in the competition practice at Trilegal