Is The Government Proposing To Limit Competition Regulator’s Powers? 

In the last 17 years of its existence, India’s competition regulator has investigated 1,008 cases of anti-trust conduct. If a recent proposal by the Ministry of Corporate Affairs becomes law, the regulator may not be able to look at any fresh complaints if the issues raised are similar or substantially similar to what it has already decided upon in the past.

Illustratively, if the Competition Commission of India had done a cartel investigation in the steel industry, the issues would effectively be the same in a fresh complaint, i.e. alleged price-fixing, market allocation, restriction of supply, or bid rigging, Nisha Uberoi, partner at Trilegal, said. The issues will not change, especially in case of bid rigging where the allegation would always be that the parties colluded in relation to a bid.

“Let’s go back to the DLF case,” Avaantika Kakkar, partner at Cyril Amarchand Mangaldas, said. After the CCI found DLF Ltd. guilty of abuse of dominance, there were a series of fresh complaints against the real estate company. Eventually the CCI started clubbing them because that’s a reasonable thing to do — there were different parties who were complaining, with DLF as a constant.

Both Uberoi and Kakkar said the amendment needed to ensure there was no abuse of process — where there’s a single informant who repeatedly goes after a particular company every two years. But it can’t be that the regulator is prohibited, for instance, from looking into a sector after a period of time.

It also needs to be specified that whether this proposal will apply if the CCI has passed a final order or even to preliminary or prima-facie orders. If it’s the latter, there is potential for litigation — the party against whom a fresh complaint is filed can argue that the same set of facts have been looked at earlier, and the regulator decided not to direct an investigation. But the new informant could be coming with more evidence, Kakkar said.

Besides, the other key proposals by the ministry include:

• Lowering the threshold for what qualifies as control. Acquisition of control makes a transaction notifiable to the CCI. So far, the competition regulator has used the “decisive influence” test to determine control. The ministry is now suggesting the “material influence” threshold. The proposal is unfortunate from an ease of doing business and an industry standpoint, Uberoi said.

• Giving relief to stock exchange transactions by doing away with prior CCI approval as long as the acquirer doesn’t exercise any voting or dividend rights, maintains convertible securities or shares in a specified manner, and notifies the transaction within the prescribed time period. The regulator, too, had circulated this proposal in November last year. This will be beneficial for open offers, block deals where, currently, a prior CCI approval means losing the price advantage, Kakkar explained.

So, the proposal is saying — go ahead and do that trade or the series of trades and when you’re ready to report it, file with the CCI and you may even get an approval under the faster green channel route if the deal is eligible for it, she said.

• Providing protection to patent holders against allegations of abuse of dominance. The provisions relating to abuse of dominance under the law shall not restrict the right of any person to restrain any infringement of, or to impose reasonable conditions, for protecting intellectual property rights.

In the 2014 auto-parts case, carmakers had presented this argument to the regulator against allegations of abuse of dominance. They had argued that their design, drawing, technical specification, technology, etc. was shared only with authorised manufacturers to protect proprietary information in relation to spare parts. But the defence was dismissed by the regulator on grounds that the law didn’t allow for it.

Intellectual property rights and the assertion of any sort of exclusivity is at direct contradiction with competition law, and there never will be peace between the two, Kakkar said. This proposal, if it becomes part of the law, will at least open up a line of defence.

But how effective this argument or defence will be and in what circumstances it’s accepted remains to be seen, she said.

Watch the full interview here, with additional views on the proposal to reduce timelines for M&A approval, the CCI approval threshold for deals in the digital market and higher scrutiny of anti-competitive agreements.