Fixing Markets or Fixing Behaviour? Rethinking Structural and Behavioral Remedies

[Pathmanabhan and Mahadev are students at National University of Advanced Legal Studies, Kochi, and National Law University, Odisha, respectively.]

The Supreme Court’s (SC) recent decision in Crown Theatre v. Kerala Film Exhibitors Federation (Crown Theatre) marks a watershed moment in the evolution of Indian competition law enforcement. Over the years, the Competition Commission of India (CCI) has focused its remedial approach on monetary fines as a solution to violations without the need to remedy the structural distortions that they may have brought about. The decision in Crown Theatre has changed this perception since it established the ability of the CCI to provide both structural (i.e. to directly change the market’s structure in the form of divestiture and selling off assets) and behavioral remedies (i.e. obligations that regulate the conduct of a company after a transaction such as introduction of capping prices or pricing tariffs), which strengthens deterrence as a key pillar of enforcement. 

Fundamentally, the case revives one of the critical debates, namely, whether the competition regime in India should shift its focus on fines, and implement a more preventive, deterrent-driven approach that would alter market behaviour? Traditionally, there was confusion as to whether the CCI would be able to effectively combine these remedies and whether such interventions would be proportional to constitutional and economic review. The SC has now explained that the toolkit of the CCI does not apply to punishment alone, but must encompass structural changes to provide a market correction and fairness in the long term. The authors in this blog critically examine, first, how the Crown Theatre decision fits within the plethora of India’s competition regime, second, comparing India’s approach with global antitrust regimes and lastly, suggesting policy pathways to strengthen deterrence without overreach.

CCI’s Approach in Crown Theatre: Reinforcement of Remedial Measures

The case of Crown Theatre came up when the theatre complained that the Kerala Film Exhibitors Federation had organized a boycott and was coercing producers and distributors into refusing to screen their films in its theatre. Taking cognizance of the issue, the CCI found this conduct to be a clear violation of Section 3(3) of the Competition Act 2002 (Act), which prohibits anti-competitive agreements such as collusive boycotts. The CCI imposed both “behavioral remedies”, including fines and restrictions on future conducts like these and “structural remedies” to ensure non-recurrence. 

Although these sanctions were initially watered down by the National Company Law Appellate Tribunal, the SC overturned the ruling and reinstated the penalties of the CCI. The Court further emphasized that under Section 27 of the Act, the CCI can impose more than financial fines, and it also has the power to provide for structural and behavioral remedies to redress such violations of market distortions. This decision confirms that the remedies of competition law are not only punitive, but that they are remedial and preventive in nature. In a larger context, this decision symbolizes a significant departure in the previous India-based “fine-centric” perspective on enforcement to a more comprehensive enforcement model, where fines are not only concerned with punishment but with lasting compliance, future deterrence, and recovery of true market competition.

Structural v/s Behavioral Remedies: Crown Theatre and Beyond

The delineation between structural and behavioral remedies emerges to be pivotal in recalibrating India’s competition enforcement. Structural remedies, encompassing measures such as enterprise divestitures, breakups, or mandatory reorganizations under Section 28 of the Act, targets the very essence of market power, aiming to dismantle entrenched distortions at their root for ensuring that the market remains competitive. These interventions, while potent in forging a long-term deterrence, carry inherent issues that can potentially disrupt operational synergies and invite further scrutiny by the appellate courts. By contrast, as seen in the Crown Theatre, through the cease-and-desist order and the two-year restriction on the concerned officials and management represents a more constructive approach in terms of regulating behaviour. This reflects a more balanced approach promoting non-discrimination and better governance to prevent future lapses. Such a strategy transcends the Act’s departure from the Monopolies and Restrictive Trade Practices Act 1969’s behavioral only legacy, which creates a deterrence that prioritizes market correction over mere fiscal benefits.

The court’s decision reveals a systematic classification for such remedies which includes a distinguishing between internal behavioral remedies, such as compliance training programmes and behavioral remedies like the directive to discontinue boycott practices affecting third-party distributors.  The main implication of the case lies in its recognition that behavioral remedies, while less intrusive and easier to implement than structural measures, suffer from inherent vulnerabilities and they require sustained monitoring. Further, it is also susceptible to strategic evasion, and risks becoming merely symbolic if enforcement capacity is inadequate. Therefore, structural remedies are justified when the anti-competitive conduct is entrenched and is recurrent in nature and unlikely to be remedied through behavioral modifications alone.

Comparative Lessons from EU and UK: A Need for Proportionality?

Jurisdictions such as the European Union (EU) and the United Kingdom (UK) are much more experienced in terms of designing and implementing structural and behavioral remedies. To protect the market from potential disruptions such as over enforcement, it is important for India to draw lessons from such jurisdictions.

Taking into perspective, the global competition regime, the balance between structural and behavioral remedies depends on two key factors; (a) how proportionate the remedy is to the harm caused, and (b) whether regulators have the capacity to properly monitor and enforce those remedies. The EU tends to prefer structural remedies such as such as divestitures (the action or process of selling off subsidiary business interests or investments) or dismantling anti-competitive structures, which are perceived as the most effective means of eliminating the cause of market distortion. 

However, the EU also applies behavioral remedies when a structural change would be excessive or disruptive, as long as there are stringent monitoring mechanisms. For instance, in Microsoft v. European Commission (EC), instead of forcing a structural breakup, the EC required Microsoft to share interoperability information (the ability of different systems, software, and devices to work together by securely and automatically exchanging and using data) and offer users a choice of web browsers, ensuring fair competition without dismantling the company. This proves that behavioral remedies are equally effective in terms of offering a solutions-based approach and can be effective when combined with oversight and compliance by the EC.

The UK adheres to a hybrid framework, combining both models with a high level of institutional control and surveillance of adherence. For instance, in Lloyds Banking Group v. TSB, the UK’s Competition and Markets Authority (CMA) required a bank to sell a part of its retail business (as a structural remedy), while also mandating behavioral commitments to ensure TSB’s independence, and consumer access.

The most important lesson to India is the need to have a proportionality-based framework that makes the remedy commensurate with the severity and nature of the violation. Although both structural and behavioral remedies were considered to be legitimate in Crown Theatres, their effectiveness is determined by the ability of the CCI to track compliance. The lack of appropriate institutional arrangements, such as post-order audits (retrospective evaluation of business transactions, particularly mergers, after they have been completed) and follow-up evaluations, makes such behavioral remedies purely symbolic. On the other hand, the lack of proportionality safeguards such as the imposition of harsh remedies and forced divestitures for minor or first-time violations, might result in the over-enforcement and disruption of the market through structural remedies.

Implications for India: Towards a Balanced Regime 

This decision represents a breakthrough in the area of competition enforcement in India, yet the long-term effect of such a decision lies in the ability of the CCI to establish a balanced and transparent framework of remedies. Currently, the regime in India has three main gaps which include: 

(i) A lack of proper hierarchy between structural and behavioral solutions, 

(ii) Inadequate institutional ability to monitor compliance, and 

(iii) The propensity to interpret penalties as punitive rather than remedial. 

Further, there is a lack of remedial guidelines or post-order oversight mechanisms, which means that the likelihood of inconsistency and overreach is high. India can resort to best practices adopted internationally to create credibility and predictability, such as the EC’s clear hierarchy in its Notice on Remedies, where it stipulates that structural interventions can only be used in cases where behavioral measures lack effectiveness. Likewise, UK’s CMA adheres to a hybrid approach, where in-depth monitoring frameworks are put in place to hold behavioral commitments working. India may consider the Remedy Guidelines such as proportionality, predictability, and post-enforcement evaluation. This would enable the CCI to ensure that deterrence is achieved at the expense of fairness, where penalties are used to correct conduct and not merely to punish it.

In prospect, this ruling has also provided a chance to transform ad hoc sanctioning to a consistent deterrence-first system that safeguards markets without suffocating the enterprise. In order to make this shift successful, structural remedies should be applied sparingly and with a purpose, whereas behavioral guidelines should be followed closely and strictly adhered to. India will only escape this “vicious system” of arbitrary penalties only by integrating tough enforcement with institutional protection and transition to a more mature, principle-based competition regime.

Conclusion 

The SC in Crown Theatres has transformed the philosophy of competition regulation to be based on prevention and market correction rather than punishment by confirming the authority of the CCI to deliver structural and behavioral remedies. The main lesson learned is that remedies cannot work independently and that a hybrid system of structural interventions to correct systemic distortions and behavioral interventions is the most balanced solution. India now has the jurisprudential green light to build upon these principles. The challenge, however, lies in translating this vision into an institutional reality by developing clear remedial guidelines and strengthening post-order monitoring mechanisms. If implemented effectively, this shift could transform the CCI from a reactive watchdog into a proactive guardian of market fairness, one that promotes compliance through clarity and confidence rather than a fear of punishment.