Keeping up with Competition - November 2023

A monthly newsletter by Axiom5

Welcome to the second issue of Keeping up with Competition, our monthly newsletter. We recap the events in the world of Indian competition law and policy in the month of October 2023. 

Public consultation on draft Lesser Penalty Regulations

Continuing its efforts to operationalise new aspects of the Competition Act, 2002 (Act) that were introduced in April 2023 (see our blog post here on the amendments), the CCI issued draft regulations that would replace regulations for its existing leniency regime. The draft Competition Commission of India (Lesser Penalty) Regulations, 2023 (Lesser Penalty Regulations) shed light on how the proposed “lesser penalty plus” regime would work, and introduce a few tweaks to the existing rules - notably, allowing parties to withdraw leniency applications and introducing a provision that allows the CCI to direct parties to forfeit any benefits they receive for leniency applications in certain circumstances. 

Overall, the draft Lesser Penalty Regulations are likely to make the CCI’s leniency regime more effective and improve its track record in busting cartels in India. Our analysis of the draft Lesser Penalty Regulations and their implications are here. 

Penalty guidelines likely to be issued soon 

As part of the April 2023 amendments, the CCI was mandated to issue guidelines for the computation of penalties under the Act. While the CCI is required by statute to engage in stakeholder consultations before it finalises regulations, there does not appear to be a statutory mandate to hold public consultations for guidelines, under new Section 64B. 

The Ministry of Corporate Affairs, the nodal ministry that oversees the CCI issued two notifications on 26 October, which (a) operationalise Section 64B, empowering the CCI to issue guidelines in general and the penalty guidelines in particular; and (b) set out rules for the framing of these guidelines.  

Notably, the penalty guidelines are referenced in the CCI’s draft regulations on the new settlements regime; this likely means that those draft regulations are unlikely to come into force until the CCI finalises the penalty guidelines. 

Merger control - a snapshot

The CCI approved 11 transactions in the month of October, 4 of which were deemed approved under the Green Channel route - the CCI is yet to publish detailed orders in 5 instances.  A total of 15 new transactions were notified to the CCI in October. A more detailed summary of the CCI’s orders are available here.

Behavioural cases  

The CCI did not issue any behavioural orders in the last month, although there were some notable developments before various High Courts and the appellate body, the National Company Law Appellate Tribunal (NCLAT), arising from CCI investigations and orders. More detailed summaries of these orders are available here.

Writ challenges to CCI orders initiating investigations

The Madras High Court and Gauhati High Court both upheld the CCI’s power to direct the Office of the Director General (DG) to conduct investigations, in separate writ challenges. Both challenges appear to have stemmed from the fact that the parties under investigation only became aware of the investigations upon receiving a questionnaire or notice from the DG. 

In the writ petition before the Madras High Court, Agni Steels Pvt Limited, a steel company, challenged the CCI investigation initiated against it and 8 other companies on the basis of a complaint filed with the Central Bureau of Investigation (CBI), which was then forwarded to the CCI and the Office of the Director General (DG), the CCI’s fact finding body. The Madras High Court upheld the CCI’s power to investigate the complaint, noting that the CCI has the power to initiate investigations of its own accord as long as it determines on a preliminary basis that a case exists prior to directing the DG to investigate. The CCI need not issue notice to parties before coming to this preliminary decision, in line with the Supreme Court’s holding in CCI v. SAIL and Excel Crop Care v. CCI.

The Gauhati High Court also upheld the CCI’s investigation into alleged bid rigging in the procurement of oil well cement, based on a complaint brought to the CCI by the Oil and Natural Gas Corporation (ONGC). Dalmia Cement, one of the parties being investigated challenged the CCI’s direction to investigate in a writ petition before a single judge of the Gauhati High Court, which was not successful. Dalmia then filed an appeal before a 2-judge bench, which was also dismissed. The 2-judge bench noted that the DG’s notice, based on the CCI’s direction to investigate, was not a “fishing and roving inquiry” as alleged, but listed specific queries. 

NCLAT upholds challenge to CCI order based on principles of natural justice 

The NCLAT set aside the CCI’s order penalising 18 sugar mills and 2 trade associations in the ethanol cartel case, on procedural grounds. The NCLAT noted that while the matter was heard by 5 Members, the final order was signed only by 3. Of the 3, one Member was not present during at least 4 hearings and 2 had already demitted office by the time the final order was passed. The NCLAT noted that this was in violation of the principle that “one who hears the case must decide without influence” - a principle that was upheld in the Delhi High Court’s 2019 decision in the Autoparts writ challenges. The NCLAT also noted that 13 months lapsed between the CCI’s order being “reserved” (after final hearings are complete) and it being published, which breached the Supreme Court’s direction that orders can be reserved for not more than 6 months.