Revisiting the Scope of Authority of CCI to Review Powers of Statutory Bodies
[Palak and Aayush are students at National Law University Jodhpur.]
The Competition Commission of India (CCI) is broadly empowered to eliminate anti-competitive practices and promote competition, as per Section 18 of the Competition Act 2002 (Act). The statutory language of the Act indicates likelihood of confusion as Section 60 of the Act asserts the supremacy of the Act by providing it an overriding effect while, on the other hand, Section 62 of the Act provides for the CCI to “work along with other statutes”. Evidently, these three sections lie at the root of the tussle between CCI and other regulators. However, Section 18 of the Act seems to be in harmony with the law in international jurisdictions like the European Union. It is imperative for the law-makers to bring more clarity to the scope of jurisdiction of CCI to avoid any probable tension.
The Delhi High Court (DHC), on 2 June 2023, in the case of Institute of Chartered Accountants of India v. Competition Commission of India (ICAI), made an attempt to define the scope of jurisdiction of CCI which shall be analyzed in the article to understand the current position of Indian antitrust regime on this issue. In analyzing the scope of authority of CCI, the article delves into (i) the widening of the investigative powers of the Director-General (DG); and (ii) jurisdiction overlap between CCI and other statutory bodies.
Curbing the Investigative Dominion of CCI
Section 26(1) of the Act empowers CCI to order an investigation, by DG, if CCI is of “the opinion” that there exists a prima facie case for investigation. The Act loosely provides power to CCI to conduct an investigation based on opinion, and resultantly, the scope of DG’s investigative powers has widened. In the case of Competition Commission of India v. Steel Authority of India and Another (SAIL), it was observed that Section 26(1) of the Act is a “mere direction for investigation to one of the wings” and the additional facts can be examined by DG. Furthermore, the increase in the number of dawn raids by CCI on the basis of “reasonable apprehension” is also a matter of concern as the fairness and due process of the raids are doubtful. In the case of SAIL, even the principles of natural justice were waived off at the initial stage of enquiry by CCI, which is a clear violation of procedural safeguards. Contrary to the position taken in the case of SAIL, the European Court of Human Rights (ECHR), in the case of Delta Pekárny v. Czech Republic, held that dawn raids cannot breach the right to privacy as per Article 8 of the European Convention on Human Rights. Thus, there is a clear need to settle the dust surrounding the unfettered powers of CCI. However, this was not always the case; a change in approach has emerged post COVID-19, wherein CCI has adopted a very dynamic approach by imposing increased penalties, conducting detailed market studies, and higher number of dawn raids. Now, this has led to both effective discharge of CCI’s duties and jurisdictional overlapping.
Breaking Down the Case of ICAI
DHC, in this landmark case, addressed the following issues:
Whether ICAI would fall within the scope of the Act; and
Whether there is a case of abuse of dominant position against ICAI by creating monopoly in the form of providing Continuing Professional Education (CPE) seminars as a regulator, as per Section 4(1) of the Act.
DHC answered first issue in the affirmative and held that ICAI is an enterprise as per Section 2(h) of the Act even if it carries out regulatory functions. Furthermore, it was observed that ICAI adds “value to the field of accountancy”, which amounts to an economic activity. On this basis, DHC rules that it cannot be excluded from the scope of the Act.
Coming to second issue, DHC denied CCI’s contention that the CPE program, which is conducted to enroll Chartered Accountant and to maintain a standard of professional qualifications as per Section 30(k) of the Chartered Accountants Act 1949, was a non-regulatory function. DHC, while addressing this issue, dealt with the moot question of whether CCI, as a market regulator, possessed the authority to scrutinize the decisions of other statutory regulators that are not linked to trade and commerce and are performed merely to discharge their regulatory duties. As per Section 2(w) of the Act, ICAI was held to be a statutory body and that CCI cannot review the subject-matter as they do not account for trade and commerce.
Statutory bodies such as ICAI have the fettered right to make decisions as a part of its regulatory powers, and CCI cannot intervene. In the light of this, DHC interpreted Section 62 of the Act to imply powers of CCI as being “in addition and not in derogation of other statutes”. Thus, DHC held that the CPE program is not an abuse of its dominant position and further, rejecting CCI’s contention of “organisation of CP seminars / workshops / conferences” as a relevant market.
Is the Issue of CCI Jurisdiction Overlap Put to Rest?
The issue of jurisdiction overlap by regulatory authorities has been a bone of contention for years now. For instance, in the case of Shri Neeraj Malhotra v. North Delhi Power Limited and Others, it was alleged that the electricity distribution companies indulged in antitrust activities. The Act’s statutory language caused confusion and uncertainty. and the Electricity Act 2003 (2003 Act), with respect to, which authority shall exercise jurisdiction, the CCI or the Delhi Electricity Regulatory Commission (DERC), it was directed that electricity tariff aspect would be dealt by DERC and the anti-competitive aspect would be investigated by CCI. To further complicate the overlap, as per Section 60 of the 2003 Act, DERC has the power to issue directions, in case of abuse of dominant position related to the electricity industry. This is just one of the instances of jurisdiction overlap due to unclear statutory language. The ICAI judgment has brought much-awaited clarity on the issue of jurisdictional scope of CCI. DHC has noted that the role of CCI is that of a market regulator and, not that of a “grievance redressal portal or an appellate court for any statutory body”, thereby limiting its scope. Additionally, DHC held that CCI cannot compel an organisation to outsource its activities, even if it forms part of an economic activity.
Interestingly, CCI contended that the order under Section 26(1) of the Act was “an administrative / interdepartmental direction for merely conducting an investigation and it cannot be interfered with.” However, this was not addressed by DHC in its judgment. This judgment is a positive step, but there is a strict need for a clear and precise language in the Act to avoid any further confusions. The inherent contradiction in the language of Sections 60 and 62 of the Act must be resolved.
Lessons From the USA
The Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division have a defined jurisdiction in the antitrust cases. They have a well-defined clearance process which provides for “primary areas of responsibility, on an industry-wide basis”. As a result, even though there is an overlap in DOJ’s and FTC’s civil enforcement jurisdictions, they seem to have an amicable relationship. The clearance process even covers instances where both DOJ and FTC seek clearance to review the same transaction, referred to as “contested clearance”, the agencies can even escalate the decision. If no resolution is reached, the final clearance decisions may ultimately be made by the Assistant Attorney General for DOJ and the Chair for FTC. In a study conducted by United States Government Accountability Office, it was concluded that “DOJ and FTC jurisdictions overlap, but conflicts are infrequent”. This is a very efficient and timely solution to the problem of jurisdictional overlap eclipsing CCI.
The Competition (Amendment) Act 2023 Unleashes Quandary
The Competition Amendment Act 2023 (Amendment) aims at revamping Indian competition law regime vis-à-vis technology industry. However, it has further broadened the scope of DG’s powers. Firstly, the power of appointment of DG has shifted from the Central Government to CCI. Secondly, the Amendment has widened the power of DG to investigate “officers and other employees and agents (including legal advisors)of the party being investigated”, which is in clear violation of Section 126 of the Indian Evidence Act 1872 which provides for lawyer-client confidentiality, consequently leading to more unfettered power to DG.
The ICAI judgment was the need of the hour in the light of unfair dawn raids, stricter penalties, and widening of investigative powers of DG. The judgment has led to the much-needed compartmentalization of authorities for streamlining regulatory process, and better oversight. CCI needs to pay closer attention to the due process of law while conducting investigations under Section 26(1) of the Act. One of the possible solutions is to adopt formal schemes such as clearance process of the USA for better coordination.