Unifying the Divide: Putting a Nail in the Debate of DG’s Ownership under Indian Competition Law
[Kabir is a student at Jindal Global Law School.]
The Competition Act 2002 (Competition Act) was brought into force with the aim of ensuring fair competition, and it does so by actively stopping activities which cause an appreciable adverse effect on competition. In furtherance of the same, Section 16(1) of the Competition Act allows the appointment of a Director General (DG), who is responsible for assisting the Competition Commission of India (CCI) in conducting inquiries into any contravention of the Competition Act. Widely recognised as the investigative wing of the CCI, the DG is responsible for preparing the final investigative report on the basis of which the CCI determines whether a contravention of the Competition Act has occurred or not. Thus, the DG plays an essential and irreplaceable role in enforcement of competition law in India, making it important for us to understand DG’s structure, and most importantly, ascertain its ownership.
The question of the DG’s ownership has been a legal conundrum since the enactment of the Competition Act years ago, and addressing it would not only lead to administrative benefits, but also enhance the enforcement of competition law in India. While, on a prima facie glance, one might conclude that since the DG only exists for the purpose of assisting the CCI with investigations, it is the latter which controls the former. However, upon a closer reading of Section 16(1) of the Competition Act, we may come to a different conclusion. Section 16(1) of the Competition Act states that “The Central Government may, by notification, appoint a Director General for the purposes of assisting the Commission in conducting inquiry” (emphasis supplied). While the latter half (“assisting the Commission in conducting inquiry”) furthers the argument of CCI controlling the DG, the section itself begins with stating that it is “the Central Government” which is responsible for the appointment of the DG. This leads to the possibility of the fact that it is the Central Government which is responsible for controlling the DG, rather than the CCI. These two contrasting theories of control require us to examine the nature and extent of control possessed by the Central Government and the CCI over the DG.
The Central Government: De Jure Control
As mentioned earlier, it is the Central Government which is responsible for the appointment of the DG. Their extent of control over the DG is further reflected from the role played by them under the Competition Commission of India (Director General) Recruitment Rules 2009 (Recruitment Rules) and the Competition Commission of India (Number of Additional, Joint, Deputy or Assistant Director-General Other Officers and Employees, Their Manner of Appointment, Qualification, Salary, Allowances and Other Terms and Conditions of Service) Rules 2009 (Office Rules) i.e., rules formed under Section 16 of the Competition Act for the functioning and formation of the DG. Both the Recruitment Rules and the Office Rules grant the Central Government a huge amount of control over the DG, as they allow the former to govern and manage the latter’s appointment, the number of appointments, the qualifications required, key human resources such as salary, offices, leaves etc.
Another example of the Central Government’s continuous control over the DG is the mandated presence of Central Government officials (such as the Secretary, Ministry of Corporate Affairs; Expert-person appointed by Central Government) for not only the appointment of the DG, but also for evaluating their performance and deciding their future promotions under the Departmental Promotion Committee, which is formed under the Office Rules. The usage of the word continuous is to denote the fact that the Central Government’s control over the DG does not cease to exist after the DG’s appointment, and instead continues even after the appointment.
Hence, we may reasonably infer from the above, that under the current framework, the DG’s accountability lies with the Central Government, rather than with the CCI. The Central Government’s control over the DG may be described as de jure in nature, as it solely arises from the ownership framework of the DG, as mandated by the present legal framework.
The Competition Commission of India: De Facto Control
It is important to note that while according to the current legislative framework the DG’s control lies with the Central Government, the same is not necessarily true in practice. Interestingly, once the DG’s appointment is over, it is the CCI which is responsible for giving the DG directions, keeping track of its actions and dealing with its administrative aspects. To illustrate, only the CCI under Section 26 of the Competition Act may direct the DG to conduct investigations. The DG is also legally obligated to submit its findings to the DG, and must perform its duties without fail. The CCI’s control over the DG has also been recognised by courts at various junctures. For example, the Supreme Court in 2010, in the matter of CCI v. Steel Authority of India Limited, noted that the DG is “a specialized investigating wing of the Commission”. The same assists us in inferring the court’s position in terms of recognising that the DG comes under the purview and control of the CCI, in the form of an investigative wing. This position has also been reiterated in 2019 by the Delhi High Court in the case of Mahindra and Mahindra Limited v CCI and Another, wherein the court emphasised on the DG’s role as an investigative wing of the CCI, and its importance in carrying out investigations. Hence, the same may be used to reasonably infer that the CCI exercises de facto control (Latin for ‘in fact’) over the DG, as while its control does not arise from the DG’s legal framework (like that of the Central Government), it still controls the DG in practice and is able to influence its day-to-day functioning.
Thus, while the DG is accountable to the Central Government on paper due to the present legal framework (de jure control), the CCI is the one that actually exercises control over the DG in practice (de facto control).
The Way Forward: Unifying the Divide
Hence, as noted in the beginning of this article, there exists a lot of dubiety with respect to whose purview does the DG actually come under. The current Indian model seems to closely resemble the bifurcated agency model, under which a competition authority carries out specialised investigative functions (the DG), and presents the violations before a different authority which carries out adjudicative functions (the CCI). This model, despite being followed by a few countries such as Chile, Canada, etc. has certain shortcomings, and hence the draft Competition (Amendment) Bill 2020 recommended leaving the current model and shifting towards the integrated agency model.
Under this model (integrated agency model), a competition authority possesses both investigative and adjudicative powers. Applying the same in India would translate into reality by merging the DG Office with the CCI, thereby putting a nail in the debate of the DG’s ownership. This merger would also bring India in line with established international practice, as the integrated agency model is followed by numerous jurisdictions such as the USA, the European Union, China, Brazil, etc. Moreover, this shift of competition model is not unprecedented in nature, as Brazil too did the same in 2012, for the sake of improving their competition law framework.
To elaborate, Brazil’s erstwhile competition law regime consisted of – (a) the Administrative Council for Economic Defence (an administrative decision-making tribunal responsible for anti-competitive cases); (b) the Secretariat of Economic Law of the Ministry of Justice (the investigative wing for looking into anticompetitive mergers and cases); and (c) the Secretariat for Economic Monitoring of the Ministry of Finance (majorly performing advocacy functions and giving non-binding opinion in mergers). With the introduction of Law Number 12,529/11 on 30 November 2011, the previously three different competition authorities were unified to form a single all-functioning agency, the new Administrative Council for Economic Defence (CADE). This agency unification, largely motivated by the need of increasing institutional efficiency, proved to be a massive success. Over the last 10 years, Brazil’s new CADE has shown to be incredibly efficient, by virtue of reducing function overlap between multiple agencies, and is regarded to be one of the most reputed competition law enforcement agencies across the world, especially from an institutional point of view.
A similar merger between the DG’s office and CCI in India, would lead to the unification of the de jure and de facto control over the DG, and would bring the law in alignment with the followed practice. The merger would also yield benefits with respect to administrative matters, conducting investigations and adjudications, by increasing efficiency, reducing timelines etc. Moreover, the merger might lead to the appointment of DG’s who possess greater domain expertise, since appointments made under the CCI need not be via deputation, unlike the current legal regime.
To conclude, with a view to resolving the debate of the DG’s ownership, alongside improving India’s competition law regime as a whole, it is recommended that the DG’s office is merged with the CCI.