LAW

COMPETITION LAW
Duties, Power AND Functions of Competition
authorities in India: DG, CCI and COMPAT
 Q1: E-TEXT
Module ID 22:
Duties, Powers and Functions of Competition Authorities in India, DG, CCI and
COMPAT

Duties, Powers and Functions of Competition Authorities in India, DG, CCI and
COMPAT.
By: Dr Souvik Chatterji.
Module Overview:The Competition Act, 2002, as amended by the Competition
(Amendment) Act, 2007, governs competition law in India. Competition Commission of India
is the organ which prevents anti-competitive activities, abuse of dominance and anti-
competitive combinations. Director General (DG) leads the investigation relating to anti-
competitive activities. The Competition Appellate Tribunal (COMPAT) has the appellate
jurisdiction against decisions of the CCI. Any appeal filed against the order of the COMPAT
has to be filed before the Supreme Court of India. The modules deals with the duties, powers
and functions of the competition authorities in India, DG, CCI and COMPAT.

Abuse of dominance

Competition
Commission of India Anti-competitive
(CCI) activities

Anti-competitive
combinations in
India
Competition Law In Director General
India (DG)
Investigation
relating to anti-
competitive
activities in the
country

Competition Appellate
Tribunal (COMPAT) Appellate
jurisdiction against
decisions of the CCI

Subject Name: Law

Paper Name: Competition Law

Module ID:

Pre-requisites:

Objectives: The objectives for studying the modules on duties, powers and functions of DG,
CCI and COMPAT are as follows:

(a) Understanding the functions and duties of DG in the context of investigation relating
to anti-competitive activities.
(b) Understanding the role played by CCI in respect of anti-competitive activities, abuse
of dominance positions and anti-competitive combinations
(c) Getting an overview of appellate jurisdiction of COMPAT
 Objectives

Understanding the role

Understanding the functions
Getting an overview of played by CCI in respect of
and duties of DG in the
appellate jurisdiction of anti-competitive activities,
context of investigation
COMPAT. abuse of dominance
relating to anti-competitive
positions and anti-
activities.
competitive combinations

Keywords: Director General, Competition Commission of India, Competition Appellate

Tribunal, Competition Act, 2002, India, anti-competitive activities, abuse of dominance,
combinations.

Introduction: The Competition Act in India was enacted in 2002. But came into force from
2007. The Competition Commission of India had been empowered to address anti-
competitive activities, abuse of dominance and anti-competitive combinations in India. The
DG leads the investigation relating to anti-competitive activities in the country. Any order of
CCI can be challenged in the Competition Appellate Tribunal (COMPAT).

Learning outcomes: The learning outcomes of the modules are as follows. There will be a
prima-facie idea of how the DG carry out investigations in the cases relating to anti-
competitive activities, especially those arising out of suo motu jurisdiction. The role of CCI
can be understood in India in the context anti-competitive practices. The appellate powers of
COMPAT will be understood in the module.

Content:

1. Powers and duties of DG

 2. Duties, powers and functions of CCI
3. Powers and functions of COMPAT
4. Conclusion.

1. Powers and duties of DG.

The Director General leads the investigation wing of the Competition Commission of India.
Director General in India refers to the Director General appointed under sub-section 1 of
section 16 and includes any Additional, Joint, Deputy or Assistant Directors General
appointed under the section.1The Director General, is expected by the Commission, to assist
the Commission in investigating into any contravention of the provisions of the Competition
Act whenever required or investigate into contravention of any rules or regulations
thereunder.2 (2) The Director General have all the powers conferred upon the Commission
under sub-section (2) of section 36.(3)

Where the CCI upon private complaint or suo motu consider that a prima facie case exists it
shall ask the DG to investigate into the matter.3In respect of investigations whether carried out
suo motu or on complained filed by the aggrieved party DG submits investigation report to
the CCI within a specific time period. CCI sends the DG Report to both the parties for
inviting their comments and objections. After further hearing the CCI passes the appropriate
orders.

The success stories of DG and the CCI in the last 5 years can be summarised as follows. In
December 2010, CCI investigated the case of cartelisation among traders when onion prices
touched 80 rupees. This was done anticipating that the actual cause of the increase of price of
onions was secret pact between the traders.4 But the investigation was not successful to the
extent that the onion traders could be booked.5
In June 2012, CCI imposed a fine of 63.07 billion (US$1.0 billion) 11 cement companies for
cartelisation. CCI investigation was successful and the evidence suggested that the cement
companies made secret pacts when they met at regular intervals. Their motive was to control
market share and hold back supply. 6 The profits that earned out of the cartelization was
designated as illegal profits.7

1
Section 2(g) of The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007.
2
Section 41 (1) of The Competition Act, 2002, as amended by the Competition (Amendment) Act,
2007.
3
Section 26 (1) of The Competition Act, 2002, as amended by the Competition (Amendment) Act,
2007.
4http://www.cci.gov.in/images/media/completed/AO.pdf

Last visited on 10th September, 2014.

5
http://www.hindustantimes.com/business-news/competition-panel-to-probe-hoarding-onion-price-
rigging/article1-1108457.aspx, last visited on 13th July, 2014
6http://www.cci.gov.in/May2011/OrderOfCommission/CaseNo29of2010MainOrder.pdf

Last visited on 4th July, 2014

7
http://articles.economictimes.indiatimes.com/2012-06-22/news/32368892_1_cement-makers-madras-
cements-jk-cement, last visited 5th September, 2014
In January 2013, CCI made notable alterations and amendments in agreements between real
estate company DLF Limited and apartment buyers.8 Some of the important modifications
were: The Builder cannot undertake any additional construction beyond the approved
building plan given to the buyers. The builder will not have complete ownership of open
spaces within the residential project area not sold.Not just the buyer but the builder will be
liable for any defaults. All payments made by the buyers must be based on construction
milestones and not "on demand". The builder will not have the sole power to form the
owner’s association.It is not very clear whether the landmark fine in the DLF Case had
created deterrence for high rise builders in India, but the landmark fines stand out as one of
CCI’s greatest success stories in carrying out investigations.

On 8 February 2013, CCI imposed a penalty of 522 million (US$8.6 million) on the Board
of Control for Cricket in India (BCCI) for misusing its dominant position. CCI’s investigation
revealed that IPL team ownership agreements were unfair and discriminatory, and that the
terms of the IPL franchise agreements were heavy in favour of BCCI and franchises had no
say in the terms of the contract. 9 The CCI ordered BCCI to "cease and desist" from any
practice in future denying market access to potential competitors and not use its regulatory
powers in deciding matters relating to its commercial activities.

In 2014, CCI imposed a fine of Rs. 1 Crore upon Google for failure to abide by the binding
directives given by the Director General(DG)seeking information and documents. 10
In August 2014, CCI imposed a fine of around 2,545 crores on 14 auto companies for
indulging in anti-competitive trade agreements.CCI in its order has directed these companies
to put in place an effective system for purchasing spare parts.11

Self-Learning Exercises:
Q1. What are the duties of the Director General?
Q2. Which are the most successful cases of DG in India?

8
Belaire Owner’s Association versus DLF Limited, Case No. 19 of 2010.

9Shri Surinder Singh Barmi v. Board of Cricket Control for India, Date of Order 8.12.2013,
http://www.cci.gov.in/May2011/OrderOfCommission/612 010, last visited on 24th August, 2014
10
Case No. 7 and 30 of 2012.
11
http://www.hindustantimes.com/business-news/cci-imposes-rs-2-545-crore-penalty-on-14-car-
makers/article1-1256484.aspx, last visited 16th August 2014
 2. Duties, powers and functions of CCI.

CCI has a very important role to play in the context of addressing cartels, abuse of dominance
and combinations. The Commission comprises of a Chairperson and six members. Ashok
Chawla is the current Chairperson of the CCI. The MRTP Act, 1969 only required enterprises
to “cease and desist” from anti-competitive activities. The Supreme Court in the case Union
of India v Hindustan Development Corporationhas also commented on the undesirability of
cartels,12 and has lamented the inability of the MRTP Act to effectively deal with the problem
of cartels, partly because of the lack of an effective definition of the same and partly because
of the lack of effective powers to control cartels.

The provisions of the Competition Act, 2002, as amended by the Competition (Amendment)
Act, 2007, which are relevant are mentioned below. A cartel is defined in Section 2(c) of the
Competition Act, 2002, as “including associations of producers, sellers, distributors, traders
or service providers who agree to limit control or attempt to control the production,
distribution, sale or price of, or, trade in goods or provision of services”.13 Section 3 of the
Act lays down a general prohibition against enterprises or association of enterprises and
persons or association of persons entering into an agreement (horizontal or vertical) which
causes or is likely to cause an appreciable adverse effect on competition. 14 Section 3(3)
provides an exhaustive list of prohibited horizontal agreements (for example, price-fixing,
output restrictions, market sharing and bid rigging) which are presumed to cause an
appreciable adverse effect on competition in India.15 In the proviso to the section there is an

12
Union of India vs. Hindustan Development Corporation, AIR 1994 SC 988
13
Section 2, Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007.
14
Section 3(1) of the Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007,
states: No enterprise or association of enterprises or person or association of persons shall enter into
any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause an appreciable adverse effect on competition
within India.
15
S. 3(3) states: Any agreement entered into between enterprises or associations of enterprises or
persons or associations of persons or between any person and enterprise or practice carried on, or
decision taken by, any association of enterprises or association of persons, including cartels, engaged in
identical or similar trade of goods or provision of services, which—
exemption for joint ventures entered into by competitors, which enhances efficiencies in
production, supply, distribution, storage, acquisition or control of goods or provision of
services.16 So save those types of joint ventures every other form of horizontal agreements
having cartelization shall be considered by the CCI to have appreciable adverse effect on
competition in India.

An enquiry into a violation of the Act can be triggered upon the receipt of a complaint by the
Commission or upon its own motion which is also called suo motu action. If the Commission
is convinced that a prima facie case exists, it proceeds to direct the Director General to
commence an investigation. When the director general completes the investigation he submits
a report to the Commission which then decided what action to take.

Section 46 of the Competition Act, 2002, as amended by the Competition (Amendment) Act,
2007, in India provides for such leniency as well, and the Act allows the Commission to draft
regulations in connection with this.17 By the power vested in it through this provision, along
with the power to make rules and regulations vested by s. 64 of the Act,18 the Government of
India brought out the Competition Commission of India (Lesser Penalty) Regulations, 2009 in
August 2009.

(a) directly or indirectly determines purchase or sale prices;

(b) limits or controls production, supply, markets, technical development, investment or provision of
services;
(c) shares the market or source of production or provision of services by way of allocation of
geographical area of market, or type of goods or services, or number of customers in the market or any
other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding,
shall be presumed to have an appreciable adverse effect on competition
16
The Proviso States: Provided that nothing contained in this sub-section shall apply to any agreement
entered into by way of joint ventures if such agreement increases efficiency in production, supply,
distribution, storage, acquisition or control of goods or provision of services.
17
S. 46 states: The Commission may, if it is satisfied that any producer, seller, distributor, trader or
service provider included in any cartel, which is alleged to have violated section 3, has made a full and
true disclosure in respect of the alleged violations and such disclosure is vital, impose upon such
producer, seller, distributor, trader or service provider a lesser penalty as it may deem fit, than leviable
under this Act or the rules or the regulations:
Provided that lesser penalty shall not be imposed by the Commission in cases where the report of
investigation directed under section 26 has been received before making of such disclosure.
Provided further that lesser penalty shall be imposed by the Commission only in respect of a producer,
seller, distributor, trader or service provider included in the cartel, who has made the full, true and vital
disclosures under this section.
Provided also that lesser penalty shall not be imposed by the Commission if the person making the
disclosure does not continue to cooperate with the Commission till the completion of the proceedings
before the Commission.
Provided also that the Commission may, if it is satisfied that such producer, seller, distributor, trader or
service provider included in the cartel had in the course of proceedings,—
(a) not complied with the condition on which the lesser penalty was imposed by the Commission; or
(b) had given false evidence; or
(c) the disclosure made is not vital,
and thereupon such producer, seller, distributor, trader or service provider may be tried for the offence
with respect to which the lesser penalty was imposed and shall also be liable to the imposition of
penalty to which such person has been liable, had lesser penalty not been imposed.
18
S. 64 (1) states: The Commission may, by notification, make regulations consistent with this Act and
the rules made thereunder to carry out the purposes of this Act.
These Regulations provide the framework in which the Competition Commission of India can
give lower punishments than statutorily provided in the case of cartel membership. The
Lesser Penalty Regulations have provided for the first informant from a cartel to receive a full
amnesty from penalty.19

One question that does arise with respect to the interpretation of section 46 is whether “lesser
penalty” can be interpreted to mean a complete waiver of penalty. It clearly has been in the
current regulations, but whether this is valid is yet to be seen.20 With the use of the amnesty
program in India in future years, the efficacy of the program will be understood.

Abuse of dominance is the other infringement of law which CCI addresses under section 4 of
the Competition Act, 2002. DLF Case is the most landmark case in India in the context of
success of Competition Commission of India in addressing abuse of dominance. 21 The
conditions that CCI found abusive in DLF’s Belaire Project agreement. Unilateral changes
(changes as proposed or thought about by DLF only) can be made by the builder without the
buyers’ consent. Buyer’s views did not matter at all in the context of decisions taken by DLF.
DLF unilaterally decided to increase the size of the building from 19 floors to 29. The builder
enjoys unilateral right to increase/decrease super area at his sole discretion without consulting
allottees, who nevertheless are bound to pay additional amounts or accept a reduction in the
area.

Allottees have no exit option except when builder fails to deliver possession within the agreed
time, but even in this case they get refunds without interest, and that too only after the
apartment is sold. 22 So a buyer who was already staying in a rented house, did not have the
scope of getting the earnest deposit back and negotiate with any other builder till all the flats
were sold in the said complex in Gurgaon.23 Punitive penalties can be imposed if you default,
but not if the builder defaults.24 DLF took crores of rupees from the allottees, even before the
first brick was laid. CCI found the 16 conditions all, being unfair and abusive.

The CCI can regulate combinations that cross the threshold limit created by the Competition
Act, 2002, as amended by the Competition (Amendment) Act, 2007;25 only if the notification
is made mandatory. If it was voluntary, many companies could have escaped the review of
the CCI inspite of crossing the threshold limit.

At the same time the CCI does not want any of these big companies to gain that amount of
market share from where they can control the market and abuse their dominance. Neither the
CCI want the giant companies in entering into combinations and get involved in predatory
pricing and driving out the rest of the companies from the market.

19
Regulation 4(a), Lesser Penalty Regulations
20http://www.cci.gov.in/images/media/Regulations/regu_lesser.pdf

Last visited 13th September, 2014

21
Belaire Owner’s Association versus DLF Limited, Case No. 19 of 2010.
22Dr Souvik Chatterji, Finding the Yardstick, measuring relevant market in India, Competition Law

Insight, 30th July, 2013, pages 13 to 15, UK.

23
http://indiankanoon.org/doc/143869586/
Last visited on 15th September, 2014
24
Dr. Souvik Chatterji , The DLF case is a landmark decision regarding abuse of dominance and
relevant market in India, Competition Law Insight, 29th April, 2014, Opinion, Relevance and abuse,
Registered in England under no. 1072954, registered office: Mortimer House, 37-41 Mortimer Street,
London W1T 3JH, Volume 13, Inbrief 5,
25
Section 5 of the Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007.
The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, had
been enacted after examining the competition laws of most of the other countries of the
world, like US, UK, Canada, etc. Most of the countries had mandatory notification and India
is no exception to it.

The Competition Commission of India (Amendment Regulations) 2011 and (Amendment

Regulations) 2013.
The CCI had brought in Amendment Regulations in 2011 and 2013 to amend the thresholds
and process relating to combination review under the Competition Act.26As the purchasing
power of money had changed with passage of time, the thresholds required amendment. So
they were changed. In 2011 the following asset and turnover threshold had been created.

Assets Turnover

No INR 1,500 Crores (approximately USD 330 INR 4,500 Crores (approximately
Group million) USD 1 billion)

In India
Group INR 6,000 Crores (approximately USD 1,320 INR 18,000 Crores (approximately
million) USD 4 billion)

Assets Turnover

Total India Total India

In India or No USD INR 750 Crores (approximately USD USD INR 2,250 Crores
outside Group 750 165 million) 2.25 (approximately USD 500
million billion million)
Group USD 3 INR 750 Crores (approximately USD USD 9 INR 2,250 Crores
billion 165 million) billion (approximately USD 500
million)

According to that regulation the value of assets include the brand value, goodwill, value of
intellectual property, but not the depreciation. Amendments of Schedule 1 of the Combination
Regulations, 2013 were grossly highlighted which describes the different activities not likely
to have appreciable adverse effect on competition in India. In the CII Press Release it was
said that the exemption of intra-group Mergers and Acquisitions of two or more enterprises
where more than 50% shares or voting rights of the other enterprise are held by enterprise(s)
within the same group is very vital.27

26Itis called The Competition Commission of India (Procedure in regard to the transaction of business
relating to combinations) Amendment Regulations, 2011 and Competition Commission of India
(Procedure in regard to the transaction of business relating to combinations) Amendment Regulations,
2013.
27
CII Welcomes Amendments to Combination Regulations, 9th April, 2013,
http://www.indiainfoline.com/Markets/News/CII-welcomes-amendments-to-Combination-
Regulations/5655558832
 Self – Learning Exercise:

Q1. What is corporate leniency?

Q2. How are cartels dealt with by CCI?

Q3. What does CCI prevent abuse of dominance?

Q4. What is a combination reviewed by CCI?

3. Powers and functions of COMPAT

The Competition Appellate Tribunal is the adjudicatory body which hears appeals from order passed by the
CCI. The Competition Appellate Tribunal (COMPAT) is empowered for the purpose of hearing appeals and
disposing of appeals against any directions issued by CCI or directions given by CCI under sub-section (2)
and (6) of Section 26, section 27, section 28, section 31, section 32, section 38, section 39, section 43, section
43A, section 44, section 45, section 46 of The Competition Act, 2002.28The Central Government has set up
the Appellate Tribunal on 15th May, 2009 having its Headquarter at New Delhi. Hon’ble Dr. Justice Arijit
Pasayat, former Judge of Supreme Court, has been appointed as the First Chairperson of the Appellate
Tribunal.29 As far as the composition of the Competition Appellate Tribunal is concerned, in addition to the
Chairperson, there are two Members to be appointed by the Central Government.

The Chairperson of the Appellate Tribunal requires the following qualification. He has to be the Judge of the
Supreme Court or the Chief Justice of a High Court. A Member of the Appellate Tribunal should have special
knowledge of, and professional experience of not less than twenty-five years in, competition matters,
including competition law and policy, international trade, economics, business, commerce, law, finance,
accountancy, management, industry, public affairs, administration or in any other matter which in the opinion
of the Central Government, may be useful to the Appellate Tribunal.30 The Chairperson and the members of
the Appellate Tribunal can hold office for a term of five years and they are be eligible for re-appointment. The
Proviso says that no Chairperson or other Member of the Appellate Tribunal shall hold office after he has
attained the age of sixty-eight years or sixty-five years respectively.
Every appeal shall be filed within a period of 60 days from the date on which a copy of the direction or
decision or order made by the Competition Commission of India is received and it shall be in the prescribed
form and be accompanied by the prescribed fees. The Appellate Tribunal may entertain an appeal after the
expiry of the period of 60 days if it is satisfied that there was sufficient cause for not filing it within that

28
Section 53A (1) of The Competition Act, 2002, as amended by The Competition (Amendment) Act,
2007.
29http://www.supremecourtofindia.nic.in/speeches/speeches_2009/com.app.tribunal.pdf

Last visited on 13th August 2014.

30
Section 53D of the Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007.
period. This rule is similar to the power of other Tribunals in India.

The COMPAT is bound by procedure laid down by Civil Procedure Code, 1908. It is empowered to summon
and enforce attendance of any person and examine him on oath, require discovery and production of
documents, receiving evidence on affidavit, issue commission for examining of witnesses, dismiss a
representation on default under the Competition Act, 2002.31 Although the powers are similar to Civil Court of
original jurisdiction, the technical details are not expected in the Tribunal and strict adherence to Indian
Evidence Act is also not required.

Self –Learning Exercise:

Q1. What are the powers of the COMPAT?

Q2. How is the COMPAT constituted?

Q3. What is the period of filing appeal before the COMPAT?

4. Conclusion.

In conclusion it can be said that the DG’s office, CCI and COMPAT had started working
from 2008 onwards. All these bodies are very new. It will take time to gather expertise to deal
with complicated cases. Already CCI had shown huge success in investigating and proving
the cement cartel and abuse of dominance in the DLF case. More number of penalties and
better utilization of the corporate leniency policy can create more confidence on the CCI and
the other bodies.

31Section 53 (O) of the Competition Act, 2002, as amended by The Competition (Amendment) Act,
2007.