Commitment and Settlement Clause in the Competition Act: The Right Way Ahead?

[Vijayaditya Reddy and Manjri Singh are III year students at NALSAR University of Law]

The Government has announced its plan to introduce a ‘commitment and settlement’ clause in the Competition Act, 2002 to allow for a quick resolution of anti-trust cases outside the otherwise lengthy adjudication process. This amendment is likely to take place in the upcoming winter session of Parliament. This will allow violators of competition law to commit to correct ways or settle by admitting violation and liability. This enabling clause is the need of the hour with the Competition Commission of India (CCI) taking at least four years on average to reach final decisions; moreover, the appellate authorities have set aside almost 45% of these orders. Further, an increasing number of cases are pending before the Office of the Director General. It is therefore crucial to adopt new methods to prevent long drawn investigations and ensure quicker disposal of cases without affecting the quality of adjudication and investigation. In order to achieve this goal, the Competition Law Review Committee, in its report submitted to the Ministry of Corporate Affairs, has called for the adoption of a commitment and settlement mechanism.

Commitments

In this case, the enterprise under investigation makes certain legally binding commitments as to its future behavior. The CCI will then put an end to the investigation without making a finding as to whether the enterprise was liable for any infringement. As the European Court of Justice explained in Commission v. Alrosa, the commitment mechanism enables a quick resolution of cases and is based on the considerations of procedural economy. This innovative clause was first influenced from the practice of settling cases based on consent decrees in the United States. In India, it is proposed that when the CCI intends to conclude the case and the concerned enterprise offers to abide by certain commitments to satisfy the concerns expressed by the CCI, it may decide to end the case and make the commitments binding on the company.

Practical considerations

The decision regarding commitments may be for a specified period and the CCI may reopen the proceedings if the company does not abide by the commitments. The CCI may also impose fines if the company acts contrary to the commitments. The fact that the CCI has accepted an enterprise’s offer to commit behavioural remedies in its business operations does not immunize the enterprise from its past actions. It follows that the company would still be vulnerable to a suit for damages in a national court for its past behavior. A third party may also choose to bring the case to court if it feels that the commitment accepted by the CCI is inadequate to end the infringement; this occurred in the case of Hynix Semiconductor v. Commission, where an appeal was filed against the European Commission’s (EC) decision. It is to be noted that the CCI is not obliged to accept commitments and can go ahead to find an infringement. Furthermore, commitments are usually excluded from egregious practices such as cartel cases.

Settlements

There are several ideas underlying the settlement mechanism. At a certain point in the investigation of the CCI, on seeing the evidence gathered by it, the enterprise acknowledges violation of laws and its liability for the same. In return, the CCI will impose a reduced fine than it would have otherwise imposed if the enterprise did not settle and admit liability. The reduction in fine is viewed as a reward for cooperation and not as a negotiation between the CCI and the infringing enterprise. This ensures that the CCI can conclude cases more quickly, having saved time and resources that could be invested in other investigations. Note that the reduction of fine under the settlement procedure is different from reduction of penalty for providing information under the leniency rules.

Practical considerations

The CCI will have broad discretion as to which cases are suitable for settlement; it follows that the parties do not have a right to settle. The CCI may also withdraw the settlement discussions at any point in time with respect to the case in general or in relation to any specific party or parties involved in the case.

Commitment and settlement in other competition regimes

Unlike in India, the more evolved antitrust regulators like the EC in Europe and the Federal Trade Commission in the United States have allowed commitments and settlements for a long time. The settlement procedure in the European Union was implemented on 16 December 2002 by Regulation 1/2003. Settlements in the European Union were limited to vertical infringements and cartel cases until 2016 when the Commission started allowing settlements for abuse of dominance cases. Regulation 1/2003 also includes a commitment clause that allows the EC to enter into commitment decisions.

In the US, the Federal Trade Commission has the power to enter into consent decrees. A consent decree is an agreement between the parties to resolve the dispute without an admission of guilt or liability. Such consent decrees must be filed before a District Court for approval along with a competitive impact statement. This practice is common and is generally preferred over prolonged litigation. Several other countries across the globe including Australia, South Africa, Canada and Brazil have the practice of commitment or settlement to expedite the process of resolution of cases.

Conclusion

From the perspective of the enterprises under investigation, the commitment and settlement mechanism is a boon as it ensures quick resolution of the dispute and negates the impact of an investigation on the reputation of the enterprise. This includes the possibility of avoiding a high penalty and any negative impact on the stocks of the enterprise under investigation.

The final goal of any competition law regime is to achieve a free market with healthy competition. Amending the Competition Act to add a commitment and settlement clause will give CCI the required flexibility and discretion to perform its functions and achieve its objectives in a more efficient manner. A timely conclusion to longstanding and pending litigation should be the primary aim of CCI; the introduction of these new mechanisms will ensure that this goal is achieved.

Vijayaditya Reddy & Manjri Singh

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