Establishing Locus Standi under the Competition Act: A Problem-Solution Mismatch

[Kajal Singh and Nikunj Maheshwari are 4th year law students at Institute of Law, Nirma University]

The Competition Act, 2002, is a comprehensive piece of legislation intended to identify and curb any anti-competitive practices, which goal is sought to be achieved by the Competition Commission of India (CCI). In furtherance of the same, the CCI has been vested with powers to initiate an inquiry in accordance with section 19 of the Act.

The relevant portion of section 19 of the Act reads:

“19. (1) The Commission may inquire into any alleged contravention of the provisions contained in sub-section (1) of section 3 or sub-section (1) section 4 either on its on motion or on-

 (a) receipt of a complaint from any person, consumer or their association or trade association; or…

Axiomatically, the provision is widely worded and, thus, ensures that information pertaining to anti-competitive practices can reach the CCI through multiple avenues. At the same time, this broadly worded provision has ensured the CCI can effectively maintain healthy competition in the Indian market. However, it has also opened the flood gates for frivolous and ill-motivated complaints to reach the CCI.

Recently, the National Company Law Appellant Tribunal (NCLAT) in Samir Agarwal v. Competition Commission of India (29 May 2020) in an attempt to find a cogent solution that separates legitimate cases from vexatious ones, interpreted the term ‘person’ under section 19 of the Act. In relation to the foregoing decision, the authors will critically analyse the interpretation provided by the NCLAT and reflect upon how the same is in disregard of the intent of the legislature, settled principles of interpretation, and does more harm than good to the anti-trust regime of India.

Judgment

In the present case, the appellant before CCI, Mr. Samir Agarwal, challenged the business operation of Ola and Uber (cab aggregators) on the grounds that they have formed a hub and spoke cartel. Agarwal argued that the cab aggregators fixed pricing, applicable to all taxi drivers and no autonomy was provided to the cab drivers. This accordingly eliminated the competition in the taxi or cab industry. The CCI rejected the petition and stated that there is no prima facie case, as the pricing was decided by an algorithm, and there is no evidence to suggest any kind of agreement between the two companies. Accordingly, the order was challenged before the NCLAT.

The NCLAT dismissed the application on the grounds that there is no evidence to show any kind of anti-competitive agreement between the cab aggregators to prove the formation of a cartel, and that Agarwal has no locus standi to approach the court. Elaborating upon the later ground, the NCLAT said that Agarwal is neither an aggrieved person nor has any prejudice been caused to him. Further, the term “person” under section 19(1)(a) means “a person who had suffered invasion of his legal rights as a consumer or beneficiary of healthy competitive practices”. The NCLAT went on to opine that any other interpretation would make “room for unscrupulous people to rake issues of anti-competitive agreement or abuse of dominant position targeting some enterprises with oblique motives”.

Analysis

Pertinently, reading an additional condition of locus standi into a provision merits consideration. The issue remains res integra to Indian anti-trust jurisprudence as the same can neither be deduced from the intent of the legislature nor does any judicial precedent adumbrate the idea. The observation of the NCLAT is myopic, contrary to the intent of the legislature and is a flawed attempt at dealing with the pressing issue of frivolous cases before the CCI.

The intent of the legislature

Primarily, the term ‘person’ as defined under section 2(l) of the Competition Act includes an individual, a Hindu undivided family, a company, a firm, and an association amongst others. The definition as enumerated in the Act is broad and inclusive. The use of “any” as a qualifier under section 19(1)(a) by the legislature is indicative of its intent to not place unwarranted restrictions and deter people from approaching the CCI. 

Notably, the Supreme Court in CCI v. SAIL, while interpreting the phrase ‘any person’ under section 53B of the Act noted that it needs to be construed liberally because of the framework and objective of the Act. The rationale was reiterated in Tara Chand v. Gram panchayat, Jhupa Khurd wherein the Supreme Court held that the phrase ‘any person’ must be given widest possible import and cover and include even those who are not mentioned explicitly in the provision of the statute.

Further, it is a well-settled principle that if the words of the statute are clear and unambiguous and the intent of the legislature is clear as well, the Court must apply the literal rule of interpretation and give plain meaning to the words. This is to suggest that, at the very outset, courts must see what the provision says. However, the NCLAT in the instant matter has curtailed or narrowed the meaning of the word which otherwise has a plain and unambiguous meaning.

Additionally, as laid down in Bengal Immunity Co. Ltd. v. State of Bihar, while interpreting an enactment the courts should take into consideration the purpose, antecedent history of the legislation and mischief it seeks to suppress. Pertinently, as enshrined in the preamble of the Competition Act and affirmed by the Supreme Court in CCI v. coordination committee of artistes and technicians of W.B. Films and television, the Act aims to curb the “activities of those undertaking who while undertaking their economic activities, indulge in practices which effect the competition adversely or take advantage of their dominant position” 

The envisaged objective is sought to be achieved by an active engagement of the regulator with the different stakeholders, including research organizations, non-governmental organisations, and the like. In practical terms, these stakeholders are the additional aid that the CCI needs, to ensure that the Indian markets remain robust and that entities engaging in anti-competitive practices do not escape the clutches of the law enforcement agencies. However, the NCLAT’s interpretation in essence means that a research organization will be barred from approaching the CCI against a cartel, for instance that of real estate builders, because neither its legal rights as a consumer nor as a beneficiary of a healthy competition will be infringed upon.

A problem-solution mismatch

Notably, proceedings before the CCI areproceedings in rem and not in persona. Thus, as long as the information is credible and can be acted upon, the person who is providing the information should not be material. At this juncture, it is apposite to refer to the judgement of the CCI in Matrix Info Systems Private Limited v. Intel Corporation. The CCI in that case was poised with a question of whether a petitioner with unclean hands can approach the CCI or not. It held that “such allegation has no bearing on the present case as the proceedings before the tribunal is in rem and not in persona. Antecedents of the Informant cannot be a ground for the Commission to not take cognizance of an abusive conduct of any entity”.

Pertinently, in the past as well, there have been significant changes introduced and suggestions made to improve the functioning of the regime. For instance, according to an amendment to the Competition Commission of India (General) Regulations, 2009: “Informants are to submit details of any pending disputes or litigation they may have against the party about which they provide information”. Another notable suggestion for the CCI would be to look into matters pertaining to a sector after only the sectoral regulator has provided its findings. Notably, no amendment or suggestion was intended at curtailing the scope of section 19 of the Act. An informed and cautious attempt by the CCI to ascertain whether claims raised by and are substantiated with evidence and fact will serve the purpose.

Thus, the NCLAT’s assertion that a narrow interpretation of the “person” will deter people with oblique motives from approaching the CCI is unfounded, and does not seem to have the potential to achieve the intended goal. Conversely, the interpretation offered as explained in the above discussion will potentially deter public-spirited individuals and organizations from approaching the commission. It only places a limitation wherein people will find ways to do things indirectly which they cannot to directly. 

Conclusion

The NCLAT’s observation limiting the eligibility of a “person” to only those having a locus standi is not in keeping with the scheme and the fundamentals of the Competition Act. A more ideal approach could have been to issue an instructive set of guidelines that guides the CCI in assessing the frivolous nature of a complaint with utmost caution.

It is hoped that the NCLAT will sooner rather than later reconsider its approach to the important issue. Otherwise, it will eviscerate the powers of society to respond to the chorus of disquiet caused by enterprises displaying anti-competitive behaviour in the market that the CCI would need to fully investigate.  

Kajal Singh & Nikunj Maheshwari

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