The DG (Director General) is the “right arm” of CCI (Competition Commission of India), the investigation wing which looks into information received under Section 26(1)1 where CCI forms a prima facie opinion that there exists a case and need to gather all the details and facts of the case to take a decision in relation to the anti-competitive activity reported upon.2 In India, the DG works at an arm’s length distance with the Commission unlike in other jurisdiction like USA, UK and EU where 2 or more agencies combinedly work to formulate a case report if an antitrust concern arises in respect of anti-competitive agreement, abuse of dominance or cartels. In case of mergers and acquisitions the enforcement authority is the CCI and DG office cannot take any action without being ordered by CCI. In the CA Act, 2023 [Competition (Amendment) Act, 2023]3, the subsequent amendment in relation to appointment of DG, powers of DG office in an ongoing investigation, ambit of investigation in cartel cases, power of search & seizure and method of collection of information have been broadly modified, to make the process much efficient and effective.
(1) The CA Act, 2023, allows the DG office to implement principles of natural justice (PNJ) and help to remove the element of bias and constrictions as well as provide operational freedom to the DG.
(2) The current Competition Act, 20024, needs to include the scope of wider segregation of roles of DG & CCI in relation to investigation and enforcement mechanisms as done in comparative jurisdictions.
Objective of the study
The primary objective of my study is to understand and analyse the present framework of how the CA Act, 2023 will be effective in the present competition regime to start a paradigm shift towards providing the investigating agency with its own departmental units and operational freedom so that it can analyse and enforce its findings independent of the view of the CCI, as done by Department of Justice (DOJ) & Federal Trade Commission (FTC) in USA, Competition and Markets Authority (CMA) in UK.
The present research on the “Scope of powers of Director General in light of the Competition (Amendment) Act, 2023” has been undertaken using secondary/doctrinal research sources.
Owing to the nature of the subject-matter involved in the research a great emphasis has been given to journal articles and online research papers, judgments of the Supreme Court of India, High Courts in India, orders given by the Competition Commission of India, foreign courts, CCI market study reports and independent studies.
Analysing the existing framework of DG office in India through the lens of Competition Regulation
Procedural powers of DG to investigate (Section 26)
Examining the administrative and operational difficulties as well as the success and failures of India’s competition law, can help Indian policymakers address the numerous difficulties accompanying the implementation of competition policies.5 In accordance with the Raghavan Committee Report6, the DG office cannot suo motu act upon any information received by it without any specific order by Commission accompanying it to do so, whereas the timelines laid down under the CCI (General) Regulations, 20097 states that the report shall be communicated to the Commission within 60 days.
These provisions are as follows:
The Commission forming a prima facie (PF) opinion8 under Section 26(1) directs DG to investigate.
The Secretary must convey the directions of the Commission and send along with a copy of information or reference, with all other materials or affidavits or statements which have been filed either along with the said information or reference at the time of preliminary conference i.e. an informal meeting post directing an investigation into an information received.9
Such report shall be filed by DG within a time period not exceeding 60 days at most. CCI on an application by DG giving sufficient reasons may extend the timeline of the investigation report beyond 60 days.10
It has been stated that when the DG submits his report then within 7 days of receipt of the same the Secretary must put the same before the Commission for further orders.11
The DG for discharging his functions under the Act will be vested with the same power as a civil court under the Code of Civil Procedure, 190812 in accordance with Section 41(2) of the Act, 200213 and will also investigate into the offence as an inspector appointed under Sections 240 and 240-A of the Companies Act, 201314.
If the report recommends no contravention under the Act of 2002, the DG will invite objections or suggestions from opposite parties (OP) and parties concerned.15 On consideration of the same if the Commission agrees with the DG report, it may close the proceedings and pass an order as it deems appropriate to communicate the same to the parties concerned.16
If the DG report recommends that there is contravention of the Act, 2002, then the Commission will inquire further into the same forthwith.17
After considering the objections and suggestions if the Commission feels either further investigation or further inquiry by Commission is required it shall direct the DG or proceed with the same itself.18
The DG initiates an investigation when he receives the Commission’s order19 provided that on receipt of any information, the Commission is of the opinion that primafacie case exists, it shall direct the DG to cause an investigation. Thus, two important aspects need consideration here: (i) whether the CCI, on receiving any information regarding a violation of any provisions of the Act, should make an opinion regarding the existence of a prima facie case without giving the opposite party an opportunity to rebut the allegations against them; and (ii) whether the DG, while investigating the case, should rely on evidence/witnesses against the respondent without giving him an opportunity to rebut such evidence. The CCI and the DG never seem to give the parties concerned an opportunity to rebut the evidence while deciding about the existence of a prima facie case. In one matter placed before the Commission, the parties accused alleged that evidence collected by the DG was in violation of principles of natural justice since the same was translated from Hindi to English while filing the investigation report however such frivolous allegations were waived aside by the Commission.20 However in some cases, the order of the Commission has come into challenge by filing a writ petition before the High Court of Delhi, wherein the question of law arose that in investigation of OP concerned, if involvement of any other party is found, the DG shall investigate the conduct of such other parties who may have indulged in such contravention or not.21 In the abovestated cases, what can be concluded is that the powers of DG were under a lot of scrutiny and consistently various High Courts were entertaining a string of writ petitions for the same.22 However what really needs to be considered is whether the same has changed, and if yes, then what can be the impacts of the same on different sectors of the society as such.
Expansion of powers of DG under the Competition (Amendment) Act, 2023 (Section 41)
Q. Can the DG investigate facts CCI has not considered in prima facie order under Section 26(1)?
In light of the Supreme Court’s judgment in Excel Crop Care Ltd. v. CCI23, wherein the matter in regard to floating of tender which was issued prior to competition law enactment being notified, the contention of OPs was that the contents of the tender was not a component which could be directed to be looked at by CCI through DG in its investigation. The Supreme Court ruled that the power of Section 26(1) was very broad. Hence the DG was directed to look at each and every angle, everything in terms of that letter, and could cover the question of boycotting of that rigged tender as it falls within his powers and duty to investigate. In another case, the Delhi High Court was dealing with a case under Section 19(1)24 wherein on inquiry, CCI was of the view that contravention under Section 3(3)25 was formed and issued direction to DG to investigate into the offence under Section 3 of the Act and any other contravention of the Act. The same was construed by the OP i.e. Grasim Industries as a narrow specific direction whereas under the meaning of the enactment and in the court’s ruling, the phrase “any other contravention” was meant to construe a directive that DG was free to investigate into any suspicious activity which could directly or indirectly bring the OP under a range of alleged contravention of the Act i.e. malpractice under the enactment.26 Hence in the findings of the report under Section 26(3) the contravention of Section 427 was well founded upon by the Commission.
Limitation of DG’s investigative powers under Competition Act, 2002
DG’s investigative power restricted to order under Section 26(1)
The DG does not have power to investigate into any offence which the Commission deems to be not violated on prima facie opinion, meaning thereby if Commission does not note any contravention in regards to that particular offence, the DG cannot probe into the same while investigating other offences.28 This in turn may have a widespread negative impact. Certain practices that appear anti-competitive can only be allowed to continuously occur in case the same does not have appreciable adverse effect on competition (AAEC) or acknowledgement of debt (AOD) on the market, however, the DG, is restricted due to procedural mandate resulting in problems while investigating market behaviour.
In Air Cargo Agents Assn. of India v. International Air Transport Assn.29, where the Commission rejected DG investigation report, constituting violation of particular provisions of the Act and directed investigation for violation of other provisions. Then DG had no option but to confine the investigation only to such allegation. If the Commission does not specifically reject an allegation that constitutes a violation of a particular provision and issues an omnibus direction for investigation for allegation of violation of then DG can bring under its scope any contravention being made out by the OP or any other competitor at large in the relevant market. Initially the Appellate Tribunal set aside the order of Commission as an administrative order, de facto, in the latest order post the scrutiny of supplementary report, the Commission recorded no contravention under Section 3(3) or Section 4. The Commission has also noted in cases like CCI v. Grasim Industries Ltd.30 and All India Tyre Dealers’ Federation v. Tyre Manufacturers31 the law on the point has been distinctly clarified that, during the course of investigation, the DG find some other area of contraventions over another picture of time but some other persons which was not in the knowledge of the Commission. The Act does not put any limitations on the powers of the DG. The DG can investigate and report the issue to the Commission. The powers of a DG are comparable to the assessing officer under the Institutes of Technology Act (IT Act), 196132. In Sheth & Co., In re33 similar findings in DG report were noticed as in the automobiles case, however investigating into the same the Commission stated that the DG was bound to confine his investigation to the mandate in the directive issued by the Commission, but he suo motu expanded the scope of investigation and reported the appellants and other suppliers who had acted in contravention of Section 3(3)(a) and this exercise by the DG was held to be per se legal.
Prima facie opinion: Sine qua non
The direction to cause investigation should only be made by the Commission when it has formed a PF opinion with a speaking order to demonstrate application of mind to the relevant considerations and exclusions of irrelevant and extraneous factors. The jurisprudence of the same has been laid down by the Supreme Court in CCI v. SAIL34, wherein the Commission states it is not expected to give notice to the parties, informant or the OPs, before forming its opinion. The same is a preliminary process and a departmental function, hence stating that the conclusion that the Commission has not adhered to the principle of audi alteram partem is not well founded considering the order is not having a judicial mandate. The same is well founded upon the notion that, direction to DG under Section 26(1) is in the nature of an administrative process itself. The Commission has also laid down the same in Board of Control for Cricket in India v. CCI35.
No mandate of investigation vested in DG for cases under Section 29
Section 29 of the Act, 200236 lays down the procedure for investigation of combinations which requires the Commission to, before causing investigation by the DG, issue a notice to show cause the parties to the combination as to why investigation should not be conducted. It is difficult to understand that why the difference in the violations of Section 3(1) along with Section 4(1) r/w Section 26 of the Act is treated differently from the procedure under Section 5(1)37 r/w Section 29 of the Act, 2002, wherein a show cause has been issued before the investigation to give the notifying parties or parties to combination a chance to prevent the investigation from happening at all. It is the discretion of the Commission to hear or not to hear the enterprise/person concerned at stage of Section 26(1) order. Mere filing of an application by the OPs will not mean that investigation of DG will be stopped until that application is decided upon. The Commission noticed in CCI v. SAIL38 that such application should be disposed of without calling for objection/replies, etc.
Arm’s length protocol
In Toyota Kirloskar Motor (P) Ltd. v. CCI39, the OP in appeal against the order of Commission, contended before the Appellate Tribunal, that the Commission acted ultra vires its powers under the scheme of Section 26 of the Act by permitting the DG expand the scope of investigation beyond the original equipment manufacturers companies i.e. Nissan, Honda & Ford mentioned in the Commission’s initiation order by including 14 other car manufacturers. However, it was laid down that the order was of an administrative nature and had no adjudicatory or determinative purpose. Considering the same fact DG & CCI maintained an arm’s length distance, this was something that can be done by the DG as a departmental process. However, in light of the Amendment Act, 2023 these averments are completely overturned since the DG, was presently appointed by the Government. The Amendment Act, 2023, provides that the CCI will appoint the DG. This means that the CCI will now have greater control over the DG, who up to now has been acting at “arm’s length” from the CCI. The DG will also have greater powers for seeking information, including from third parties about the affairs of entities under investigation. There is now a positive obligation on parties under investigation to preserve and protect relevant documents and offer all assistance required by the DG.
Department of Justice (DOJ)
US antitrust law is not concerned with effect of government departments influencing the market. US antitrust law applies when they operate as economic actors i.e. when they act within the market.40 Antitrust law may, for example, apply to the commercial and sometimes even quasi-regulatory conduct of local Governments. The scope of US antitrust law also excludes disputes among competitors based solely on claims for compensation that one has harmed the other by virtue of the unfairness of its conduct.41
The Sherman Act thus focuses the legal analysis on the economic consequences of the agreements rather than on the types of agreements. It is interesting to note that the Sherman Act can be enforced criminally or civil by the Antitrust Division (Division) of the US DOJ.42 To establish a criminal violation of Section 1 of the Sherman Act, the Government must prove three essential elements:
the charged conspiracy was knowingly formed and was in existence at or about the time alleged;
the defendant knowingly joined the charged conspiracy; and
the charged conspiracy either substantially affected inter-State or foreign commerce or occurred within the flow of inter-State or foreign commerce.43
In Hoffmann- La Roche Ltd. v. Empagran S.A.44, the DOJ uncovered in 1999 is one of the rare circumstances in which DO sought criminal penalties45. All of the major manufacturers of vitamins met regularly and secretly in various locations in many countries to agree to fix prices at levels that had the effect of increasing the firms’ revenues by billions of dollars each year. With the active cooperation of antitrust authorities in several other countries, DOJ obtained evidence that was so powerful that each of the firms and individuals in the firms that participated in the conspiracy agreed to accept serious criminal and civil penalties without a court trial. In the rare situation in which DOJ seeks criminal penalties, and the firms and individuals who are accused of criminal violations attempt to defend their conduct in court, the defendants are entitled to a jury trial in which they enjoy all of the many procedural safeguards to which all criminal defendants are entitled in the US.
Plea agreements are the traditional form of settlement of criminal antitrust cartel charges with the DOJ. Although a company may plead guilty to criminal charges without a plea agreement, the plea agreement allows the company to plead guilty to antitrust cartel conduct in exchange for favourable settlement terms or recommendations that are then presented to a Federal Judge for approval.46
Federal Trade Commission
The Federal Trade Commission (FTC) Act, 191447 bans “unfair methods of competition” and “unfair or deceptive acts or practices”. The Supreme Court has said that all violations of the Sherman Act also violate the FTC Act. Thus, although the FTC does not technically enforce the Sherman Act, it can bring cases under the FTC Act against the same kinds of activities that violate the Sherman Act. The FTC Act also reaches other practices that harm competition, but that may not fit neatly into categories of conduct formally prohibited by the Sherman Act. Only the FTC brings cases under the FTC Act.
Procedures to announce interpretations of antitrust law
The substantive standards in the Sherman and Clayton antitrust statutes are broad and vague. The statutes prohibit contracts that unreasonably restrain trade, conduct that is considered to be an inappropriate means of obtaining, retaining or attempting to obtain monopoly power, and tying, requirements contracts, price discrimination, mergers and acquisitions when the effects of any of those forms of conduct may be to substantially lessen competition or tend to create a monopoly. Thus, it is particularly important that government officials, Judges, and firms have good ways of determining how those vague standards are interpreted by DOJ, FTC, and the courts. The reliable source of interpretation of antitrust law is contained in judicial opinions. In many cases, there are no recent opinions that address patterns of fact similar to the pattern of facts that an enforcement agency, a court, or a lawyer who is advising her clients with respect to the legality of some proposed form of conduct can use as the basis for an opinion about the legality of the conduct at issue. In that common situation, the court, agency or private attorney must make an educated guess with respect to the legality of the conduct based on judicial opinions that address patterns of fact that often differ in material ways from the pattern of facts that is before the agency, court, or private attorney.48
United Kingdom: Investigation by CMA under the CA Act, 1998
Key stages in an investigation
Competition markets authority
The UK competition law regime earlier has 2 principal legislation, the Competition Act, 199850 and the Enterprises Act, 200251 with enforcement authority being the CMA52, which came into effect post the abolishment of the office of fair trading (OFT)53 and Competition Commission (CC).54 As a corporate body & a non-ministerial government department55 it was instituted with the duty to promote competition within and outside the UK for the benefit of the consumers. Management of CMA is taken forward through the Executive Committee, sub-committee and the Operations Committee. Case and Policy committee is responsible for ensuring that CMA has appropriate policies and case and project adhere to those policies.
Application of prioritisation principle56 is used to decide which discretionary projects (market studies and market investigations) and cases the CMA will take on across its responsibility. General functions, as opposed to the enforcement function, the CMA of training, compiling, and keeping under review information relating to the exercise of its functions, making the public aware of ways in which competition may benefit consumers and economy and providing information and advice to Ministers.57 In case of a public enforcement, CM has considerable power and the Competition Act, 1998. It plays the principal role in enforcing Chapters I and II prohibitions having significant powers to obtain information, enter premise to conduct investigations, adopt interim measures and make final decisions and impose penalties.58
Procedure of investigation: CMA
When a complaint is received by the CMA, the case is investigated by Senior Response Officer (SRO), who opens a formal investigation by sending case initiation letter to the businesses, with relevant legislation and case-specific timeline. Notice of investigation published on the website of the CMA including any criminal investigations or other investigation under their Act for the purpose of deciding whether to make a resolution for a disqualification order or not.
The CMA is both an investigation and an enforcement body, hence at the stage of investigation it simply invites objections/suggestions on the notice of investigation, to delineate the market and inform the players of that market that an investigation into some alleged market malpractice is underway, hence their decisions can also encompass any player in that market once the investigation is underway. Collection of evidence and objections and claims of OP are regarded to take a view on whether infringement is made out on account of various representations made. If any infringement is made out on scrutiny of the evidence, then action for levying penalties and giving out other directions can be done or if no case is made out the investigation is closed without any action.
Reincorporation of suo motu investigation power
In light of rising writ petitions and challenges to the jurisdiction of DG, the power of suo motu investigation should be judiciously exercised. However, DG reports is getting challenged all the time owing to the fact that the investigation power of the DG comes not from the act and is conferred by the Commission. This also means if any contravention or violation of any particular section of the Act goes unnoticed by the Commission and the same is noticed by the DG, it has no power to look into the same. Also, the DG has no ambit of informing Commission about a contravention which is ironic considering it is the investigating body. It cannot bring into notice of the Commission about the contraventions that occur in the market, or consider investigating into contraventions the Commission deems to be not made out. If the DG is given back its suo motu power then it can investigate into market behaviour and anti-competitive conduct of players which the Commission might have overlooked. For investigation into more sensitive issues under Sections 26 and 29, the Commission can set a parameter that for initiation of investigation the permission of the Commission is necessary. The Raghavan Committee Report has not stated any reason for setting aside the mandate of suo motu investigation that was earlier conferred on the DG. However, to uphold the objectives of the Competition Act, 2002, the power of the investigating body must have a wider scope.59
Amendment to make cartelisation a criminal offence
Similar to the US regime India needs to have a body and enactment that imposes criminal liability upon the contravention of the provisions of the Competition Act of 2002. The investigating body (DG) finds it extremely difficult especially in cases of cartelisation to bring out evidence against the OPs to show the meeting of minds in the actions initiated by each of them. However, to impose criminal liability, requires simply proving mens rea intention to cartelise and intention to enter into conspiracy as has to be shown by help of circumstances and conduct per se. The court currently does not recognise this criminal element to cartelisation offences however the same needs to be recognised and implemented. This will make it easier for informants to report more cartelisation offences especially ones where OPs do not leave behind tracks of collusion, it will be easier to bring them under the scope of investigation for DG. Also, the further amendment to include plea bargaining for offences in cartelisation cases can be added.
Power to DG to give information to the Commission
Since Section 26(1) is an administrative order under current CA Act, 2002 the same is not communicated to the parties while investigation is ongoing. However, if the DG is granted power to give information to the Commission to investigate into any suspicious market behaviour by any of the market players in this particular sector, this could help the Commission to identify more relevant anti-competitive practices happening in the market and regulate them more efficiently. Since DG is a better Judge of the nature of practices and whether they are actually anti-competitive or not as compared to a regular informant.
It is apparent that the Competition (Amendment) Act, 2023 has brought in a string of amendments and changes in light of the developing competition law regime. However, power of the DG to investigate into the offences without getting into a tussle with the other agencies involved has increased. The Competition Act was drafted after examining the circumstances, market characteristics, and obstacles encountered therein by certain other jurisdictions, as the aim of the Act and the penalty provisions contained within it are to a large extent parallel to them. The distinctions between competition law regimes around the globe, in the present discussion, upon the US and the UK, it is relevant to state that the investigating body must be given a substantial amount of operational freedom so that it can identify the relevant anti-competitive practices more efficiently in the market.
†5th year student, BBA LLB, Vivekananda Institute of Professional Studies, New Delhi. Author can be reached at firstname.lastname@example.org.
2. “Practice & Procedure” in Competition Law Module for Administrative & Judicial Training Academies (Competition Commission of India, New Delhi, 2019).
5. A.E. Rodriguez & Ashok Menon, “The Causes of Competition Agency Ineffectiveness in Developing Countries”, 79 Law & Contemp. Probs. 37 (2016).
6. V.S. Raghavan Committee, Report of Competition Law Review Committee (Ministry of Law & Justice, 08-2020).
22. Kunal Kumar, “CCI and DG’s Powers Under the Competition Act and the Principles of Natural Justice” (indiacorplaw.in, 11-3-2018).
28. Sudhanshu Kumar and S.M. Dugar, Guide to Competition Act, 2002 (8th Edn., LexisNexis, 2020).
41. David J. Gerber, “Competition Law”, The American Journal of Comparative Law, Vol. 50, Supplement: American Law in a Time of Global Interdependence: US National Reports to the 16th International Congress of Comparative Law (Autumn, 2002), p. 275.
42. Cartels Laws and Regulations, 2023, (globallegalinsights.com).
43. The United States Department of Justice, “Elements of the Offence” (justice.gov, 20-2-2020).
45. The United States Department of Justice, “Elements of the Offence” (justice.gov, 20-2-2020).
46. Bruce Murdoch & Meredith Mommers “US: Settling Antitrust Cartel Conduct Matters with the US DOJ” (globalcompetitionreview.com, 2-2-2021).
47. Federal Trade Commission Act, 1914.
48. Richard J. Pierce Jr., “Comparing the Competition Law Regimes of the United States and India”, 29 National Law School of India Review 48 (2017).
49. Competition & Markets Authority, “Guidance on the CMA’s Investigation Procedures in Competition Act, 1998 Cases: CMA8”, (gov.uk, 10-12-2021), Para 1.1.
50. Competition Act, 1998
51. Enterprise Act, 2002.
52. Enterprise & Regulatory Reform Act, 2013, S. 25(1).
53. Enterprise & Regulatory Reform Act, 2013, S. 26(2).
54. Enterprise & Regulatory Reform Act, 2013, S. 26(1).
55. Enterprise & Regulatory Reform Act, 2013, S. 33.
56. Competition & Markets Authority, “Guidance on the CMA’s Investigation Procedures in Competition Act, 1998 Cases” (10-12-2021) pp. 411-412.
57. Enterprise Act, 2002, Ss. 5-7.
58. Competition and Markets Authority, UK Exit from the EU: Guidance on the Functions of the CMA under the Withdrawal Agreement (January 2020) 113.
59. Competition Bill, 2001.