COMPETITION LAW OBSERVER

A blog by Centre for Competition law & Policy, NLU Jodhpur

THE RISE IN JUDICIAL INTERFERENCE AND ITS IMPACT ON THE WORKING OF INDIAN ANTITRUST REGULATOR

THE RISE IN JUDICIAL INTERFERENCE AND ITS IMPACT ON THE WORKING OF INDIAN ANTITRUST REGULATOR

Ankit Singh Rajput

INTRODUCTION

Indian competition law enforcement reveals a strong, yet healthy, tension. Ever since the inception of the Competition Act, 2002 [“the Act”], the CCI has initiated investigations in various sectors, for instance, auto components, digital sectors, pharma, e-commerce, digital components among other sectors. On one hand, we can see the Competition Commission of India [“CCI”] proactively initiating investigations in all these sectors. However, on the other hand, we can see parties rushing to the different high courts with an intent to condone these investigations or restrict the CCI from proceeding forward. Judiciary while accepting these appeals has continuously ignored the very objective of the legislature in enacting Section 53-A  the Act. Section 53-A  of the Act clearly states that there shall not be an appeal against the order passed under Sections 26(1) of the Act. The CCI initiates an investigation under Section 26(1) of the Act, wherein post the existence of a prima facie case of anti-competitive practice under Section 3 of the Act, or abuse of dominance under Section 4 of the Act, the CCI invites the Director-General [“DG”] to cause an investigation into the matter and submit the report within the stipulated time as directed by the CCI.  In this article, the author explores the tussle between judiciary and competition authorities against the order issued under Section 26(1) of the Act. Further, the author will suggest when this interference by the judiciary may not create a hindrance to the function of the CCI.

JUDICIAL INTERFERENCE IN SECTION 26(1) ORDERS

The issue of interference with the Section 26(1) order of the CCI was settled by the Hon’ble Apex Court in CCI v. SAIL wherein it was observed that the direction issued under Section 26(1) after the formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter and such a direction and it does not effectively determine any right or obligation of the parties. Further, the court observed Section 53A of the Act depict that the legislature never desired the direction issued under Section 26(1) of the Act should be made appealable.   

Three years later, this issue was again raised in the case of JCB v. CCI, wherein the parties approached the Delhi High Court [“DHC”] to quash the CCI order passed under Section 26(1) of the Act on the ground that the DG is not authorized to conduct the search and seizure for the investigation. The learned single judge of the DHC accepted the contention of the parties and restrained the DG from conducting an investigation. Accordingly, the CCI appealed this order to the division bench of the DHC wherein the bench vacated the blanket restraint that branched out from the single bench order and observed that the DG has the power to conduct search & seizure. Also, the bench directed the High Courts to be more circumspect before restraining an investigation under the statutory authority of the DG.

There have been numerous similar cases wherein the ruling of the Apex Court in the CCI v. SAIL was ignored and the High courts have egregiously allowed the appeal against the Section 26(1) orders of the CCI. For instance, recently, the Karnataka High Court [“KHC”] in 2020 in the Amazon & Flipkart case, had granted an interim stay on the CCI’s Section 26(1) order stating that CCI had failed to apply its mind before directing the investigation. Further, the single bench of the DHC in Grasim Industries Ltd. v. Competition Commission of India (impugned order) allowed the appeal against the Section 26(1) order and held that the Act does not empower the DG to investigate beyond the directions issued by the CCI. However, later the division bench vacated the ban imposed by the single bench order by observing the ruling in the CCI v. SAIL and pronounced that an order under Section 26(1) of the Act only “triggers” an investigation by the DG, and that the powers of the DG are not necessarily circumscribed to examine only the subject-matter of the original complaint.

In recent times it is observed that the parties are frequently approaching the High Courts against the directions issued by the CCI under Section 26(1) of the Act solely to condone the investigations. However, the Judiciary before accepting these frivolous petitions should keep in mind that the Act has provided the right to appeal only against the final orders pronounced by the CCI and not against the order under Section 26 (1) of the Act that is only a preliminary exercise to cause an investigation.

VALID INTERFERENCE AGAINST 26(1) ORDERS.

In light of the various precedents available pertaining to the commission’s Section 26(1) order, the interference of the courts can be said to be reasonable majorly on two grounds: (a) in case of absence of any reasoning by the CCI on which it formed prima facie view or (b) in case of clash in jurisdiction between the tribunals.

Absence of any reasoning based on forming prima facie view

The Supreme court in CCI v. SAIL observed that at the stage of forming a prima facie view, as required under Section 26(1) of the Act, the CCI may not record detailed reasons, but must express its mind in no uncertain terms that it is of the view that prima facie case exists, requiring the issuance of direction for the investigation to the DG. In the case of Vardayani Offset, the Gujarat High Court quashed and set aside the order of the CCI passed under Section 26(1) of the Act, only on the ground that the order does not record reasons for forming a prima facie opinion while directing the DG to cause investigation.

Clash of jurisdiction between tribunals

From the inception of the Competition Law, the issue of jurisdictions has often reached the courts for determination. As in the CCI v. Bharti Airtel [“Bharti Airtel case”] there was a tussle between the CCI and Telecom Regulatory Authority of India [“TRAI”]. Wherein, the Court invoked the need for use of Section 21A of the Act, which makes it mandatory for CCI to obtain the opinion of the sector regulator on sector-specific issues first. Therefore, the parties can plead for judicial intervention in case of contravention with any sectoral-specific regulators. However, the principles enumerated by the Supreme Court in the Bharti Airtel case must be borne in mind before allowing the appeals to branch out from the issue of the jurisdiction. The Supreme Court in Bharti Airtel case observed that while at the stage of inquiring into alleged contravention and while determining whether any agreements contravening to the Act the principles enumerated under sub-section (3) of Section 19 of the Act must be duly regarded.

LEARNING FROM EUROPEAN COMMISSION

The European court of justice perceives that the initiation of an antitrust investigation by the European Commission [“EC”] is a preliminary step in the formal procedure that is preparatory and provincial. It is only based on these preliminary investigations the EC derives itself to a conclusion. Therefore, these preliminary investigations are the procedural steps that cannot be challenged in any court of justice in Europe. Even if the procedural steps are adopted or carried out improperly, the only course of action available to the undertaking concerned is to challenge the validity of the decision and not the preliminary procedure. This view was confirmed by the European Court of Justice in IBM v. Commission. Thus, it is submitted that under the European Competition Law the appeal during the preliminary investigation is unlikely to succeed. Contrary, In India the parties have been provided with the right to appeal the preliminary investigations through judicial decisions. However, In Europe, any right to appeal can only be exercised once the final order is pronounced by the EC because the Courts of Justice in Europe have continuously observed that if these appeals are allowed then it would obstruct the normal procedure of the EC as there will be judicial review at every stage. The Court of Justice in Europe strictly restricts itself from accepting the appeals arising against the administrative order of the EC. Therefore, observing the resemblance between European Competition Law and the Indian Competition Act it is suggested that the right to appeal should only be available against the final orders of the CCI and not against any preliminary order of the CCI.

WAY FORWARD &CONCLUSION

In this proactive era of antitrust scrutiny in India, parties can be seen running pillar to post to delay the investigations initiated by the antitrust watchdogs. Therefore, it is suggested seeing the dramatic fluctuations in the market generally, and the digital market especially that the antitrust agencies should have sufficient powers to timely conduct the investigations before the market may be tipped off in the favour of the alleged parties that might help them to miss through the eyes of the antitrust watchdogs. Further, delayed investigations have the potential to paralyze the market that can have a negative effect on the welfare of consumers & competition. Therefore, it is suggested that efforts should be made by the Judiciary in harmonizing the independence of the Indian Antitrust watchdog in order to ensure that the functioning is robust, subservient to none, and accountable to the need to render justice in the context of specialised adjudication created by the Act.

The author is a fourth-year student at the Faculty of Law, Jamia Millia Islamia.

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