Section 26(1) of the Competition Act: Chance for Optimum Utilization of the Resources

[Sumit Jain is at the Centre for Competition Law and Economics (CCLE)]

Section 26(1) of the Competition Act, 2002 allows the Competition Commission of India (CCI) to order an investigation (Director General’s (DG’s) investigation) in case of ‘prima facie’ violations of the Act. The said investigation is under no circumstance bound to influence the final decision of the CCI, and is only ordered to dig deeper into the facts of the case. Even though the said step looks rather procedural in nature, it bears importance to understand what standard of proof qualifies to be the ‘prima-facie’ violation for the CCI for multiple reasons. First, such investigations have a huge bearing on the CCI’s finances and, given that it operates within limited resources, it has to carry out a cost-benefit analysis every time it orders an investigation. Second, such an order plays a direct role in determining the business practices adopted by the parties in future to conduct themselves to avoid scrutiny. Third, and lastly, the scheme of the Act does not allow the CCI to find an ultimate contravention until and unless the DG investigation is ordered. This allows the opposite parties involved in the case to defend themselves at two stages: first at the investigation stage and second after submission of the DG report.


The Competition Act, by virtue of being an economic law, envisages the allocation of resources available in the most efficient way. Even though the Act was enacted in 2002, the CCI – the nodal body to implement the legislation – only came into existence in 2009 when the Government notified the law. In ten years of implementation, the CCI has registered over 750 cases related to violation of section 3, i.e. anti-competitive agreements (ACAs) and section 4, i.e. abuse of dominant position (ADP) cases. With such a number of cases knocking on the door of the CCI, it becomes important for it to allocate the resources in best possible way, in order to achieve the aim and objectives established in the Preamble of the Act. One way to realize such optimum efficiency is to engage in a cautious interpretation of section 26(1), where the CCI, although it has the discretion to find prima facie violation of the Act, only orders investigation where it is confident of finding an ultimate contravention. Even though the CCI (General) Regulations, 2009 suggest such an investigation should be completed within 60 days, an analysis conducted at Centre for Competition Law and Economics suggest that the median time taken to complete the scrutiny is around 240 days. The said finding makes it clear that any prima facie violation of the Act found by the CCI results in considerable expenditure through the DG’s office.


For the purpose of this post, the author has looked into four cases, i.e. the Android case (Case No. 39 of 2018), the Maruti Suzuki case (Case No. 01 of 2019), OYO’s abuse of dominant position matter in hotel industry (Case No. 03 of 2019) and the Inox case (Case No. 10 of 2019), to analyze the evidence relied upon by the CCI to initiate an investigation under section 26(1), or to close the matter under section 26(2) of the Act. This is in light of the National Company Law Appellate Tribunal (NCLAT) ruling (Case No. 09 of 2019) where it held that the Informant has to demonstrate substance in its allegations in order to convince the CCI to order DG investigation.

Android Case

The said case was initiated by Umar Javeed and others, against Google. The crux of the information was that Google is abusing its dominant position on the Android platform by imposing unfair terms on the app developers and end-users, which is ultimately resulting in the foreclosure of the market to other players, thereby harming the competition. While making the said allegation, informants relied upon international precedents where the said company was already found dominant in the delineated relevant market. The CCI ordered an investigation in the said case and placed heavy reliance on the information supplied by the informants. In doing so, it did shift a part of burden of proof on the opposite party to discharge the doubt placed in its mind after going through the informant’s submission [Para 20].

Maruti Suzuki Case

The said matter was a suo moto case initiated by the CCI after receiving an anonymous email alleging abuse of dominant position by Maruti Suzuki in the said relevant market. The anonymous email alleged that Maruti does not allow its dealers to offer discounts to the end-consumer based on their own discretion; rather it places a cap on the same, beyond which it would levy a penalty on the dealership offering the extra discount. This, according to them, information resulted in consumer harm as they were not able to obtain best competitive price prevalent in the market. The CCI in this case as well ordered the investigation, and invoked section 3(4) of the Act to form a prima facie view of violation. However, it remains important to note in this case law that despite Maruti filing multiple affidavits testifying to the counter as to what was alleged in the anonymous mail, the CCI kept shifting the burden of proof on to it to prove there was no contravention occurring. The CCI ultimately adopted the ‘omission of act’ approach to form its opinion [Para 27].

OYO Rooms Case

The said case was filed by RKG Travels Pvt. Ltd. against OYO Rooms. The substance of the allegations were that the opposite party is abusing its dominant position in the relevant market to impose unfair conditions on hotel owners to maximize revenue and consumer base. The CCI in this case did not form a prima facie view of violation of the Act, and closed the said matter under section 26(2). This case law again remains important from the perspective of delineation of relevant market where the CCI defined it as ‘market for franchising services for budget hotels in India’ [Para 42]. However, it tracked back on the same later [Para 48]. This has an important bearing on the finding of the case as the CCI ultimately took a lenient view on the opposite party based on the relevant market defined in the first place.

Inox Case

The said case was initiated by Unilazer Ventures Private Limited against multiple cinema owners including Inox, PVR and Cinepolis. Primary allegations included in the information were that the opposite parties were levying extra ‘virtual print fee’ from the informant, and that the opposite parties were acting in collusion to control the market. The CCI in this case did not form a prima facie view of violation of the Act, and held that the informant has to discharge the initial burden of proof placed on it by the scheme of Act to order an investigation. It fell short of defining what is the ‘initial burden of proof’ placed on the parties.

A conjoint reading of the said case laws would suggest that the CCI placed explicit reliance on the NCLAT’s ruling only in one of the four instances, i.e. in the Inox case. Even though the appellate tribunal’s ruling was in the context of a bid-rigging case, it is worth noting that the observations made by the NCLAT in the said judgment were on the information relied, and therefore would be made applicable generic in nature. As dealt in the case briefs, there was considerable lacunae in at least two of the CCI orders, i.e. Maruti Suzuki and OYO rooms, while forming a prima facie view, and there was more scope for it to look into the merits of the case before ordering investigation or closing the said matter. Even in the Inox case, there was evident gap in the order, even though the CCI did pay reliance on the said ruling.


Section 26(1) of the Act allows the CCI to form prima facie view of violation of the Act. However by virtue of being an economic law, the Act seeks to make optimum utilization of resources present in the economy, as well as to the CCI itself. On the same lines, it has tried to adopt a consistent approach to find convincing evidence so as to what qualifies as prima facie violation. However, as it has been argued, the CCI did not even place reliance on the NCLAT’s ruling in three of the said four matters. Even in the one it did place reliance, there were considerable gaps in the reasoning adopted by it to reach the final conclusion. This leaves considerable gap for the CCI to find a more coherent approach in order to find prima facie violation of the Act. With the availability of the NCLAT’s ruling, the CCI should more often pay its reliance on the same so that there is better allocation of the resources.

Sumit Jain 

About the author


  • Ordering of investigation on the basis of cost-benefit analysis is not a sufficient threshold for determination of prima facie case, every case where section 3 or 4 violation is found the benefit is bound to be more than the cost, so to figure out whether there is prima facie violation of section 3 or 4, you need to be able to figure out whether the ingredients of the section might be satisfied without getting into the merits, therefore the test has to be more based upon it’s nexus with Section 3 or 4. An economic analysis might not further this.

  • Moreover the test of substance in allegations and not being wild allegations is in itself vague, which, is in fact no test at all, as the addition of this test has not made any alterations to the process of determining the prima facie case.


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