The Troubled Waters of CCI’s Penalty Regime

[Akanshha Agrawal is a III year student at the National Law University, Delhi]

The recent Competition Commission of India (CCI) order finding SKF India, Schaeffler India and Tata Steel guilty of forming an anti-competitive cartel has received much attention due to the regulator’s curious decision not to impose any penalty on the offenders. The CCI had taken a suo moto cognisance of the issue after Schaeffler filed a lesser penalty application for reduction of penalty in exchange of information. Following an investigation, the CCI found the parties guilty of cartelising from 2009 to 2014 to the pass the increase of cement prices to the automotive and industrial original equipment manufacturers. However, despite such a finding of contravention for over half a decade, the CCI curiously decided that ends of justice would be met without imposition of any penalty, whether monetary or behavioural. This is even more surprising as the regulator is not known to shy away from imposing high penalties. Quite often, the CCI resorts to the maximum penalty provided for in the Competition Act, such as the penalty of a whopping ₹ 6,715 crores on a cartel of cement manufacturers or ₹ 2,545 crores on leading car manufacturers. While in the past the CCI has taken the small size of a company as reason enough for providing a massive reduction in penalty, it seems rather challenging to see that the same cushion might be offered to market leaders such as Tata Steel.

In the instant case, even though the CCI notes that this finding is “in light of peculiar facts and circumstances”, it remains noteworthy that the 36-page order fails to provide any discussion of the mentioned peculiarity. It is also interesting that while some parties did raise mitigating factors for reduction of penalty such as evidence of compliance measures to abide by the Act or the need to participate in the cartel for safeguarding its commercial interests, the decision to waive penalty was not based on any such factor.  

A similar trend was seen in another recent high-profile case involving the Bengal Chemists and Druggists Association (BCDA), Alkem Laboratories and Macleods Pharmaceuticals. The CCI found the parties guilty of operating an anti-competitive cartel by enforcing practices such as a mandatory no-objection certificate prior to supply of drugs or collecting monetary considerations from prospective stockists. However, despite such finding, the CCI, in consideration of the mitigating factors raised by the parties, decided to not impose any monetary penalties.

The BCDA showed that it had taken certain compliance measures to end the anti-competitive practice. Even though the CCI has considered this as a mitigating factor in various cases in the past involving Madhya Pradesh Chemists and Druggist Association, Film Distributors Association, Kerala or Western Coalfields, the CCI merely provided a reduction in the amount of penalty rather than doing away with it in its entirety. Similarly, Alkem and Macleods argued that they were operating under threat or duress of the BCDA. The CCI accepted this as a mitigating factor. However, rather than following the trend in previous cases involving Kerala Cine Exhibitors Association or Association of Malayalam Movie Artists, whereby it provided a reduction in penalty, the CCI in the present case completely waived any monetary penalty. It remains noteworthy that even in the cases where a reduction was provided, the quantum of the same varied drastically.

Perhaps the only common thread that flows though all of these orders is the astounding lack of reasoning provided by the CCI for arriving at its findings. The CCI has consistently failed to provide any objective criteria for deciding the quantum of penalty or the reduction to the same on account of various mitigating factors. This shifting stand taken by the competition regulator creates several issues. Firstly, it leads to increasing uncertainty in the jurisprudence. The lack of an objective criteria severely affects the interested parties. Such practice also fails to create the desired deterrent effect for future offenders. Secondly, the National Company Law Appellate Tribunal has an established practice of requiring the appellant to deposit a substantial amount of the imposed penalties prior to granting stay and hearing the appeal. This creates a hurdle for an appellant to ask for relief against an unreasoned order.  

At this juncture, it is essential to point out that the Competition Act provides very wide discretionary powers and allows the CCI to impose any penalty it deems fit. However, the Supreme Court, in a plethora of judgements, has clarified that such discretion cannot be exercised in an arbitrary manner and needs to be fair and reasonable. It is quite evident that the practice has woefully failed to abide by the same, necessitating an established framework to guide the CCI’s orders in this regard and to ensure a more reasoned decision making in the future.

Akanshha Agrawal 

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