Introduction

The Competition (Amendment) Act, 2023 (‘Amendment Act’) which was recently passed by the Indian Parliament and received the President’s assent in April 2023, proposes various new amendments to the Competition Act, 2002 (‘Act’). One of the key changes being introduced is the mechanisms for settlements and commitments for certain categories of enforcement cases i.e., anticompetitive vertical agreements and abuse of dominance. The Amendment Act also clarifies that the process to be followed for settlements and commitments will be implemented by way of subsequent regulations. These regulations are being drafted by the Competition Commission of India (‘Commission/CCI’), and will be released for public consultation before they are implemented.

Commitment Mechanism

Under the newly introduced Section 48B, parties may offer commitments at any point of time after the CCI initiates an investigation under Section 26(1) if the Act, but before the parties receive the Director General’s (‘DG’) investigative report. As a part of the commitment process, the CCI is required to provide the parties, the DG, and any other third parties the opportunity to provide their objections/ suggestions to the commitment proposal. That said, the CCI has the sole discretion to accept or reject a commitment proposal, and its order to this effect is final and may not be appealed. In case the CCI does not find the commitments offered to appropriately address its concerns, or the parties and the CCI do not reach an agreement on the terms of the commitment, the CCI has the power to reject the proposal and resume its investigation.

Settlement Mechanism

Under the newly introduced Section 48A, the CCI can accept a settlement proposal offered by parties under investigation. However, parties may offer to settle proceedings before the CCI at any point of time after they receive the DG’s report, but before the CCI has passed its final order. The provisions governing settlements under the Amendment Act are largely similar to those governing commitments. While assessing commitments, the CCI has (i) to provide the parties, the DG, and third parties the opportunity to be heard, and (ii) the sole discretion to accept or reject the terms of the settlement by way of a non-appealable order.

However, unlike in a commitment offer, a settlement proposal entails an admission of guilt by the parties. This is evident from the amendments to newly introduced Section 53N, which allows compensation claims arising out of settlement orders. The Amendment Act is consistent with the practice of the European Commission in this regard, where commitment decisions do not involve an infringement finding, whereas companies that settle admit responsibility for the conduct.^[1]

Revocation of Settlement / Commitment Order

The Amendment Act allows the CCI to ensure that parties comply with the proposal terms. Specifically, under the newly introduced Section 48C, an order passed by the CCI under Section 48A or 48B will stand revoked if (i) parties fail to comply with the terms of the order, (ii) the CCI notes that the party had not made a ‘full and true disclosure’, or (iii) in case of a material change in facts. In addition, the Commission also has the power to restore or initiate the original enquiry for which the proposal was offered.

Concerns with the Newly Introduced Mechanisms

While certainly a welcome introduction, Sections 48A and 48B (as they currently stand) leave certain aspects unclear. For example:

i.    Exclusion of Cartels from Settlement Provisions: As stated above, both commitments and settlements are only available to parties being investigated for anticompetitive vertical agreements and abuse of dominance. This is inconsistent with the practice followed by jurisdictions such as the European Commission (which has heavily influenced the evolution of Indian competition law), where settlements are available only in cartel cases. It was also the Standing Committee on Finance’s (‘Standing Committee’) recommendation to include cartels within the scope of the Amendment Act’s settlement provisions, on a case-by-case basis. However, the version of the Amendment Act which received the President’s assent does not incorporate this recommendation. While it is unclear why such an exclusion was made, the Standing Committee’s report indicates that the Ministry of Corporate Affairs had advocated against the inclusion of cartels under the settlement provisions, given that (i) a leniency regime already exists for cartels, and (ii) cartels are egregious and pernicious in nature.^[2] It may be noted that the European Commission,^[3] the United Kingdom,^[4] and Germany,^[5] all allow cartels to offer settlements despite the existence of a leniency regime.

ii.   Uncertainty Relating to Commitment Proposals: As the Amendment Act currently stands, parties seeking to avail of the commitment mechanism must necessarily include their commitment offerings as a part of its application. However, at the stage of application, the only binding material that the parties would have to base their application off of is the prima facie order under Section 26(1) of the Act (which may not necessarily explicitly list out the concerns). The parties would thus have limited guidance while preparing their applications without any input from the CCI at the first instance. In contrast, the European Commission requires the parties to only signal their interest in discussing a possible commitment decision as a first step.^[6] Once the European Commission is convinced of the parties’ ‘genuine willingness’ to propose commitments to address competition concerns, it prepares a ‘Preliminary Assessment’ which summarises the main facts of the case and identifies competition concerns. The Preliminary Assessment serves as a basis for parties to propose appropriate commitments, or better define previously discussed commitments. The CCI’s regulations regarding commitments should ideally include a similar system, to promote transparency between the regulator and the investigated parties, and ensure that the commitment process is conducive to a satisfactory resolution.

iii.  Applicability of Res Judicata: The Amendment Act introduces Section 19(2A), which specifically precludes the CCI from investigating conduct that it has previously decided on. While the Amendment Act does allow the CCI to reopen an investigation only if entities do not abide by the terms of their settlement/ commitment proposals, it does not make it immediately obvious whether the CCI’s orders under Sections 48A(3) and 48B(3) would be covered under the res judicata provision under Section 19(2A). Additionally, the language of Sections 48A and 48B does not include any indication on the nature of the CCI’s orders under these sections. Arguably, since the orders under these sections cannot be appealed, the CCI’s decisions in this regard would be final, and would thus be covered under Section 19(2A) so long as the terms of the settlement/ commitment proposals are abided by.

iv.   Commitment Decision not to Preclude Subsequent Settlement Proposal: The Amendment Act does not clarify whether failed commitment negotiations would preclude a party from submitting a settlement proposal. It may be reasonably assumed that this would not be the case, given that commitments and settlements need to be offered at different stages of an investigation. However, for clarity and certainty, the regulations must clarify that a decision rejecting a commitment offer would have no impact on a party’s rights in relation to offering a settlement proposal. This would also ensure efficient and speedy justice, while allowing parties the ability to exercise their legal rights without any chilling effect.

v.    Computation of “Settlement Amount”: Section 48A(3) introduced by the Amendment Act allows the CCI to accept a settlement proposal subject to the payment of a settlement amount (to be decided by regulations). The regulations should ideally include detailed guidelines on the computation of the settlement amount for effective utilisation of the provisions. This would enable parties to adequately assess the cost and benefits of proposing a settlement as compared to paying a final penalty. Additionally, the guidelines need to strike a balance between ensuring that the settlement amount is large enough to disincentivise anti competitive conduct, but not large enough (to the extent that it is similar to or only slightly less than the potential penalty payable by an investigated party) to disincentivise parties from proposing settlements, rendering the provision redundant.

Conclusion

While the newly introduced Section 48A and 48B are welcome changes for parties as well as the CCI, there are a few loose ends which require tying by way of regulations. The effectiveness of these provisions would thus depend on the finer details of the settlement and commitment mechanisms to be included in the regulations.

^[1]  See Speech: Remedies, commitments and settlements in antitrust (Joaquin Almunia), 8 March 2013, available at https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_13_210.

^[2]  See, Fifty-Second Report of the Standing Committee on Finance (2022-2023): The Competition (Amendment) Bill, 2022, para 3.47, available at https://prsindia.org/files/bills_acts/bills_parliament/2022/SC%20Report_Competition%20(A)%20Bill,%202022.pdf.

^[3]  See the European Commission’s Frequently Asked Questions (FAQS) on Leniency, available at https://competition-policy.ec.europa.eu/system/files/2022-10/leniency_FAQs_2.pdf.

^[4]  See the Competition & Markets Authority’s Guidance on the CMA’s investigation procedures in Competition Act 1998 cases: CMA8, available at https://www.gov.uk/government/publications/guidance-on-the-cmas-investigation-procedures-in-competition-act-1998-cases/guidance-on-the-cmas-investigation-procedures-in-competition-act-1998-cases#settlement.

^[5]  See the Bundeskartellamt’s Information Leaflet on Settlement procedure used by the Bunderskartellamt in fine proceedings, available at https://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Merkblaetter/Leaflet_Settlement_procedure.pdf?__blob=publicationFile&v=3

^[6]  See the European Commission’s Antitrust: commitment decisions – frequently asked questions, available at https://ec.europa.eu/commission/presscorner/detail/en/MEMO_13_189.