Settlement of cases under Indian competition law

By Karan S. Chandhiok and Salman Qureshi, Chandhiok & Mahajan
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With competition law turning a decade old, there has, predictably, been a steep learning curve for the enforcement structure. The government recently constituted the Competition Law Review Committee to review the current provisions of the Competition Act, 2002 (act). One of the suggestions in the pipeline is introducing a settlement mechanism.

Presently, the Competition Commission of India (CCI) takes the view that settlement mechanisms are not permitted under the scheme of the act. While a legislative amendment is desirable, an argument can be made that the current provisions permit the CCI to implement a settlement mechanism.

Unspent power

competition law
Karan Chandhiok
Partner
Chandhiok & Mahajan

In the Tamil Nadu Film Exhibitors Association case, Madras High Court held that settlement can be permitted within the scheme of the act under section 27(g) as it affords residuary powers to the CCI. The sub-section gives the CCI the power to pass “any other order or issue such directions as it deems fit” that have not been enumerated in the section.

Currently, it takes the CCI an average of 871 days to arrive at an order of contravention from the date of passing a prima facie order. This clearly demonstrates the burden on the CCI. Settlements are intended to lessen the burden on the CCI’s scarce manpower. They could also benefit the contravener as the process ensures a fair amount of certainty. It may, however, lead to false positives. An innocent party alleged to have contravened the act might choose to settle to avoid the risk of a heavy penalty, impact of the investigation on its share prices and/or reputational loss.

Therefore, it is important to craft a settlement procedure that is balanced and efficient. There are various models of settlements that India can choose from, or it can have multiple models or even a hybrid one.

Different models

competition law
Salman Qureshi
Associate
Chandhiok & Mahajan

There are broadly two models of settlements, namely the with-admission model and no-admission (without prejudice) model.

In the with-admission model, the contravener admits to having engaged in anti-competitive conduct and then undertakes not to continue with such conduct and in return gets a reduced penalty. This model ensures that no appeal is filed by the party under investigation. However, under the current scheme, the informant or complainant can still challenge the settlement.

In the no-admission or without-prejudice model, parties volunteer or negotiate commitments to abate any initial competition concerns but do so without admitting to an infringement.

Madras High Court did not go into the question of whether admission is necessary to accept the settlement. This may be discerned by implication: under the present scheme, an order under section 27 can be passed only after the CCI has determined that there is a contravention. Nevertheless, if the legislature considers adopting the no-admission model, it is likely to reduce the investigative burden on the CCI as well as the parties, while addressing any prima facie anti-trust concerns.

Developed approach

In contrast to India, more evolved competition regimes such as the European Commission (EC) and the one in the US have allowed settlements for a long time. The EC initially only allowed settlements for cartel cases and vertical infringements. It has started allowing settlements of abuse of dominance cases since 2016, though the procedure for settlement is different. The EC can initiate a settlement procedure at its discretion and hold settlement discussions with the parties that are ready to acknowledge anti-competitive behaviour. The EC also offers a no-admission model under its commitment program.

In the US, settlements are even swifter as plea agreements can be reached before the conclusion of an investigation and consent decrees can be obtained even before trials. The reward for settling is reduced sentences and a reduction in penalty. The US process also requires that the parties waive their right to appeal, which prevents additional litigation.

Faulty comparison

Many compare the settlement procedure with the leniency procedure, but such comparison is faulty as the leniency procedure is an evidence gathering procedure, which still drains the resources of the regulator, unlike the settlement procedure. Moreover, both procedures can be simultaneously applied benefitting late applicants for the leniency procedure.

A settlement or commitment regime clearly has its advantages. India can, hopefully, take a leaf out of other competition regimes to allow for multiple possibilities of addressing anti-competitive conduct rather than sticking to rudimentary mechanisms of enforcement.

Karan Singh Chandhiok is a partner and Salman Qureshi is an associate at Chandhiok & Mahajan.

competition law

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