Settlements in Antitrust in India: The Right Road Ahead?

[Yash Bajpai is a 5th year B.B.A., LL.B. (Hons.) student at Symbiosis Law School in Hyderabad]

Introduction

The concept of settlements is not something new to the global anti-trust regime. It is a regulatory mechanism used worldwide for disposing off anti-trust matters; however, this still seems to be a far fetched dream in the Indian competition regime. Several jurisdictions across the world, like the European Union, USA, Australia and South Africa have a well-established regime for the purpose of settlements alone.

The position in India is rather different and carries a great deal of ambiguity in this respect. To substantiate this, it is fair to say that the Competition Act, 2002 vests wide powers on the regulator. An example of this is section 27(g) of the Act, which provides for a residuary power for the Competition Commission of India (CCI), giving it the power to pass orders necessary to meet the ends of justice. The Supreme Court reaffirmed this in Competition Commission of India vs. SAIL [2010 (10) SCC 744], wherein it held that the powers conferred upon the CCI are of wide magnitude and carry significant ramifications. The powers of the CCI include that to issue such directions as would achieve the object of the Act and ensure its proper implementation. This being said, we need to consider two questions: firstly, whether the wide powers under section 27(g) of the Act allows the CCI to send matters in for settlement and, secondly, whether such a settlement puts to an end anti-trust concerns for the consumers.

The answer to the first proposition readily lies in the decision of Tamil Nadu Film Exhibitors Association v. CCI & Ors. (W.A. No. 1806 and 1807 of 2013) wherein the Madras High Court held that the Act has the power under section 27(g) to pass an order for settlement. It was further held that an order for settlement essentially means that in any case where a party has been found guilty of anti-competitive conduct, and agrees to discontinue such conduct and file an undertaking with the CCI regarding the same, such an undertaking cannot be held to be outside the scheme of the Act.

To the second proposition, it is fair to say that any undertaking given to the CCI stating that the parties shall cease to continue such anti-competitive conduct, along with a fine, will result in bringing an end to such an anti-trust concern. However, it is necessary to understand that this does not mean that the parties to the case can withdraw the case filed and agree for a settlement amongst them, just like a civil suit. The reasoning to that is simple: the Competition Act is set up to regulate the markets in such a way that it is fair to all and to preserve the long-term interest of the consumers. Therefore, any parties to a case opting out from the proceedings to settle the case amongst themselves is not recognizable to the scheme of the Act, whereas a settlement with the CCI for a reduced fine and an undertaking filed stating to cease any anti-competitive conduct should be allowed.

Settlement Jurisprudence in India

Although the provision for settlement does not expressly exist in the Competition Act, 2002, it is pertinent to note that the jurisprudence on settlements is not something that is being introduced now; there are some legislation we can use as examples to show that such a mechanism does exist in India. On 14 August 2018, the Securities and Exchange Board of India (SEBI) published a report on settlement mechanisms seeking public comments, which indicates that different regulators are headed into a more settlement-friendly regime. Along with this, we have a settlement commission under the section 245B of the Income Tax Act, which provides for entertaining applications for settlement, on its own discretion. Similarly, the Central Excise Act, 1944 also provides for a settlement mechanism under section 32E, which requires a complete disclosure to the Settlement Commission. In CIT v. Bhattacharjee (118 ITR 461), the Supreme Court held that purpose of settlement is not to provide a rescue shelter for big tax-dodgers who indulge in criminal activities by approaching the Settlement Commission. Therefore the settlement mechanism does not let the big players slide by in their wrongful conduct.

International Regime on Settlement and Commitment Decisions

Settlement procedures in anti-trust is not something new to the global anti-trust regime. It is to be noted that the most oldest and established anti-trust regimes such as the EU and USA practice settlement decisions and in fact have detailed guidelines on the same. It is worth looking at some of these examples.

  1. European Union (EU) – The EU has a very elaborate system for settlements. Regulation 1/2003 was implemented on 16 December 2002, and these rules are an extensive document providing for the procedure for settlement of cartel cases. The first settlement case was in the year 2010, famously known as the DRAMs case. These rules are very elaborate in terms of procedure, penalties, and powers of the commission in addressing settlement decisions. Regulation 1/2003 also has a very interesting feature, which is the power of the commission to enter into ‘commitment decisions’ with the parties. Commitments are different from settlements in the sense of admission of liability. In case of settlements, the parties agree to the breach of anti-trust rules and actively support the investigation for an exchange of a reduced fine, whereas in commitments the behavioral and structural conduct of the accused party merely raises an anti-trust concern but there is no admission of liability. The scope for the settlements is restricted to merely cartels; however, that has changed in pursuance to 2016 decision of the Commission in the case of Alstoff Recycling Austria (ARA), wherein the EC waived 30% of the fine imposed for cooperation.
  2. USA – The Federal Trade Commission and the Department of Justice have the discretion to enter into consent decrees. The Tunney Act recognizes the concept of anti-trust settlements and such consent decrees must be filed before a district court for approval. Along with the decree, a competitive impact statement also needs to be filed which is published in the federal register for any third-party comments. It is essential that such a consent decree does not hamper public impact or else it shall be revoked. The practice of consent decrees is common and is considered a more efficient alternative than to get into prolonged antitrust adjudication.

USA and EU are key examples; many other countries such as Australia, Canada, South Africa and Brazil have the practice of passing settlement orders globally.

Analysis

Settlement decrees or settlement decisions have so far been barely ever seen in the Indian antitrust regime other than in the Madras High Court judgment discussed above which states that settlements are possible to order under the Competition Act, 2002. However, we are yet to substantially see a settlement decision altogether. Settlements have their own good benefits, from a company perspective. A settlement allows for a substantial waiver in the penalty imposed. From the CCI’s perspective, it allows for a shorter, quicker administrative process, allowing for a lot more efficient use of the CCI’s resources and a reduction in antitrust litigation due to reduced appeals. As of now, the CCI has the power to pass a final order under section 27 of the Act; however, these orders come after years of investigation and several hurdles are created sometimes, as it was said in the Madras High Court judgment. An order under section 27(g) can be passed for a settlement decree. However, it is necessary to have an elaborate and exhaustive provision for it to avoid any kind of jurisprudential dilemmas. It is necessary to be precise on the point that a settlement is made only between the CCI and the cartel, not between the informant (in case another competitor) and accused, as antitrust concerns have common public as the biggest stakeholders. Like having lesser penalty regulations, we can also have a settlement regulation similar to the EU model of Regulation 1/2003 to clear any ambiguity in terms of implementation.

Conclusion

The end purpose of any antitrust legislation and commission should be to provide consumers and competitors for a free market with healthy competition. It is essential that no player or competitor in the market should cause an appreciable adverse effect on competition in the country. For this, the CCI should be given with the necessary flexibility and discretion to perform its function in such a manner that it meets the objectives of the legislation. Bringing an end to the antitrust concerns should be the primary objective if this can be met in the most possible efficient manner.

Yash Bajpai

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1 comment

  • How is the settlement system different from the leniency regulations already existing in India? In the leniency system, the party does accept to the violation and fully co-operate with the investigation to receive lesser penalty and infact 100% waiver of their penalty, which is pretty much the same objective as settlement system

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