Updated: May 2
This article has been authored by Utkarshini Rai, a third-year student at NUSRL, Ranchi.
Recently, the National Company Law Appellate Tribunal (NCLAT) in the matter of Samir Agarwal v. Competition Commission of India & Ors. ruled that any person who submits an information to the Competition Commission should be one “who has suffered an invasion of their legal rights as a consumer or as a beneficiary of healthy competitive practices”, and held that the informant (Appellant) had no locus standi to maintain an action of the alleged contravention of the Competition Act, 2002 (hereinafter “the Act”). This judgement is problematic on more than one grounds which is discussed in the present article.
Right in Rem v. Right in Personam: Who’s an Informant?
Section 19(1)(a) of the Act states that the Competition Commission of India (hereinafter “CCI” or “the Commission”) may inquire into any alleged contravention of anti-competitive agreements on its own motion or on receipt of any information from any person, consumer, or trade association. “Person” has been defined under Section 2(l) of the Act including an individual, a Hindu Undivided Family (HUF), a company, a firm, and an association et al. On a conjoint reading of the two sections, it can be prudently concluded that “any” person is supposed to indicate the absence of any restrictions as to the qualification of who can submit an information for contravention of the provisions of the Act to the Commission.
The phrase “any person” can also be construed liberally as the Section 26(1) of the Act states that the Commission, upon finding a prima facie case, shall direct the Director General (“DG”) to cause an investigation to be made. This leads to concerns regarding frivolous and mala fide information being filed to the Commission, which was expressed by the NCLAT in the judgement and also raised in the 44th Standing Committee Report. However, the Ministry of Corporate Affairs had agreed that the regulations under the Act would sufficiently tackle such information over time. Section 26 of the Act also stipulated closure of matter in case no prima facie case is formed. Preventive measures have also been put into place through the CCI (General) Regulations, 2009 such as the power to impose penalty on misleading the Commission, filing of litigation history between both the parties, etc.
The Apex Court has also construed the phrase “any person” in CCI v. Steel Authority of India. It was held that the phrase needs to be interpreted liberally because of the objective of the Act. The Act was constituted with the intention to create a fair playing field for all the players, ensure that no one party has an unfair advantage in a certain market, and ensure fair trade, and the benefit of consumers. It was also reiterated in Tara Chand v. Gram Panchayat, Jhupa Khurd wherein the Court said that the phrase must be given the widest possible interpretation and include even those not mentioned explicitly in the provision of the statute.
Now that the definition of “person” under the Act has been concluded, the qualification of “Informant” can be discussed. Locus standi is a concept which was first discussed by the Hon’ble Apex Court in S P Gupta v. Union of India. The Court stated that the “party must be acting bona fide and must have sufficient interest before he can be accorded standing. “Sufficient interest” would have to be determined by the court in each individual case”. But to determine sufficient interest, it is pertinent to ascertain whether the right which is claimed to be violated is in rem or in personam. A right in personam would be the power to sue by a particular person in a specific circumstance, like that of parties to a contract upon breach of performance. It is not available the world at large as it affects only the parties to the said contract. Whereas, right in rem is available against the whole world as it relates to a duty imposed on a person in general. That is the reasoning as to why in criminal cases, the other party is primarily the State, since the duty of not committing a crime was owed to the world in general.
This question was answered by the Commission itself in its judgement titled Matrix Info Systems Pvt. Ltd. v. Intel Corp. The respondent in the aforementioned case had alleged that the Informant had approached the Commission with unclean hands, on which CCI observed that “said allegations have no bearing upon the merits of the present case as the proceedings before the Commission are in rem and not in personam”. The erstwhile Competition Appellate Tribunal (COMPAT) had also held in Dr L H Hiranandani Hospital v. CCI that the Commission is not mandated to identify the locus but only to ensure that the Informant is not acting on an ulterior motive towards someone else.
The adjudicating powers of a body also determine the locus for the matter. The Hon’ble Delhi High Court had explained the extent of powers of CCI, under the Act, in Mahindra Electric Mobility & Ors. v. CCI as “vested with inquisitorial, investigative, regulatory, adjudicatory, and even limited advisory jurisdiction. Vast powers have been given to the Commission to deal with the complaints or information leading to invocation of the provisions under Sections 3 and 4 of the Act read with Section 19 of the Act” and stated that it doesn’t adjudicate a lis like courts or tribunals.
The Act was also amended in 2007, replacing the word “complaint” with “information” in order to clarify the legislature’s intent for providing liberty on locus standi and avoiding adversarial litigation. Furthermore, COMPAT had held that the Commission does not have the “power to reject the prayer for an investigation involving violation of Sections 3 and 4 of the Act only on the ground that the informant does not have personal interest in the matter or appears to be acting at the behest of someone else”.
Whistle-blower Protection: Analysing the other Jurisdictions
The 2007 Amendment to Section 35 of the Act further signified the intent of the legislation to encourage the public at large to report any potential antitrust violation and help to curb them at the earliest. It would be remiss to not mention the role of whistle-blowers when it comes to anti-competitive practices. Cartels can be hard to uncover and therefore, various regulators around the world offer financial incentives and promise of anonymity to encourage their involvement.
UK’s Competition Watchdog (CMA) offers a reward of £1,00,000 to individual whistle-blowers and protection through trained officers. In October, 2019, the US Senate had unanimously passed the Criminal Antitrust Anti-Retaliation Act of 2019. This was the fourth time since 2013 that the Senate had unanimously passed whistle-blower protections for reporting criminal antitrust violations. Around the same time, the European Council finally adopted EU-wide whistle-blower protection directives. Japan’s Whistle-blower Protection Act also extends protection to reports under the Unfair Competition Prevention Laws. India, on the other hand, fairs poorly in this area.
The Whistle-blowers’ Protection Act, 2011 received the assent of the President in 2014 but the Act has not yet come into force because its rules have not been notified. In October 2014, activist Venkatesh Nayak sought information through an RTI query on the delay in enforcing the Act and on plans for amending it. The Central Government declined to furnish any information on the grounds that an amendment to the Bill was underway. The Government brought in the Whistle-blowers’ Protection (Amendment) Bill, 2015 with certain amendments, which the Lok Sabha passed on May 13, 2015. But the Bill failed in the Rajya Sabha and lapsed when the 16th Lok Sabha got dissolved in May 2019. Thereafter, the Government claimed that the original Act was adequate. On 10 March, 2017, another Amendment Bill was personally introduced by a Member of Parliament, which was not passed and finally lapsed. The non-enforcement of the provisions already discourages third-party and whistle-blower reports of anti-competitive practices. NCLAT’s judgement further worsened the environment.
By comparison, the European Commission largely relies on the aforementioned two sources to investigate such practices. A third party can be customer or a competitor, but not necessarily have suffered an invasion of legal rights. In the case of Bureau Européen des Medias est de l'Industrie Musicale (BENIM) v Commission, the Court of First Instance held that any natural or legal person is entitled to submit an application to bring an action for violation of erstwhile Articles 85 and 86 of the EC Treaty (presently Articles 103 and 104 of Treaty on Functioning of the European Union). The Court explained the phrase “legitimate interest” and stated that where the undertakings operating in the market, not necessarily the complainant, are either affected or likely to get affected by the alleged anti-competitive conduct, a legitimate interest arises. Further, any natural or legal person, not directly affected by alleged unfair competition practice, can have a legitimate interest in filing a complaint. Lastly, CMA has also highlighted the importance of complaints and information received directly from third parties.
Larger Impact of the Order
The eligibility to submit information only on invasion of right in personam makes the matter similar to those under consumer protection law, which is meant primarily for the particular consumer and secondarily for the consumers at large. Conversely, it can be very well said that competition law is meant primarily for the market in general and secondarily, if at all, for the consumers. An order like this blurs the lines between the two and goes against the very object of the Act. Since anti-competitive practices are unlikely to directly infringe legal rights of a person, the CCI will lose out on an important source of information which further weakens the fair-market framework of India. This is also detrimental to the country’s ease of doing business ranking since monopolistic markets crush start-ups easily. In the end, the consumers will definitely be affected by arbitrary pricing of monopolies and lack of options. To conclude, such a framework goes against the whole objective of the Competition Act as well as the duty of the Commission under Section 18 of the Act which states that “it shall be the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India”, and hence, needs to be reconsidered.