ABSTRACT
This paper comprehensively examines the new Settlement and Commitment framework introduced in the Competition Amendment act, 2023. Throughout the course of this, it has been substantially explained how such an introduction marks a significant step towards enhancing enforcement efficiency of the Competition Commission of India (CCI).
Settlements are an important procedural tool because they let the entities and the target parties resolve their disputes effectively, quickly, and thoroughly. And improvement in behavioral conduct on any entity is sought by the commitment. However, The test for an acceptable settlement and commitment, therefore, is whether it addresses the anticompetitive conduct in a way that eliminates the harm and prevents its recurrence. The CCI in its procedure as discussed further in this paper establishes affirmation for such test
Companies do not have to engage themselves in the long drawn-out process of litigation. The expanding necessity of applying alternative dispute resolution approaches to the field of competition law and this paper it is grasped by starting with the definition and outlining a few real-life case scenarios. The comparison of this act with other nations and under other statutes helps to clarify the inspiration and influence of such a framework.
The competition law has always been dynamic and changing itself according to growing economic tendencies of the Indian market. The CCI has been always granted a high magnitude of powers when it comes to adjudicating a case, and such powers have been amended as per the growing needs of the economy, such as this introduction of non-litigation factors of settlement and commitment in the highly tech-globalized world.
INTRODUCTION
The primary means of enforcement under the Competition Act 2002 were conducting investigations, gathering evidence, and bringing legal action until this modification was passed. It took Competition Commission of India(hereinafter referred to as CCI) around six years in 2018 to pass the final order in India Glycols Limited v. Indian Sugar Mills Association and Others, where, The CCI had imposed penalties upon 18 sugar mills and 2 Associations (Indian Sugar Mills Association and Ethanol Manufacturers Association of India) allegedly rigging the bids in a joint tender for the purchase of ethanol for gasoline blends that Oil Marketing Companies (HPCL, BPCL, and IOCL) issued on January 2, 2013.[1]
Also, it took around seven years to pass the final order in East India Petroleum Private Limited v. South Asia LPG Company Private Limited to pass the order.[2]
As per the CCI Annual Report 2016-17 (‘Report’), 129 cases were pending before the DG in the year 2016-2017. Pertinently, the Report notes the following: “It is observed that the investigations are taking increasingly more time for completion. This partly reflects inadequate staff strength in the office of the DG and partly reflects increasing complexity of cases being referred to the DG by the Commission.”[3]
Each of these instances demonstrates how the commission and the businesses used additional resources, both material and temporal. If the appropriate non-litigation procedure had been followed, this might have been prevented.
The Madras High Court in the case of Tamil Nadu Film Exhibitors Association v. CCI 2015 , held that the Competition Act’s framework permits parties to reach a compromise or settlement, and the CCI may accept such a compromise or settlement. “If for instance, a party which is held guilty of entering into an Anti-Competitive Agreement or abusing its dominant position comes up before the Commission and agrees for the discontinuance of the agreement with an undertaking not to re-enter into such agreements or to indulge in the abuse of dominant position, we see no reason as to why the same should not be accepted by the Commission.”[4]
Having taken inspiration from all the cases above, it was highly necessary to incorporate provisions of settling cases outside the purview of court.
The Settlement & Commitment structure was established in order to prevent large amount of time from being spent on antitrust problems during the litigation process. It contains characteristics that cause the market to correct more quickly. Without sacrificing the integrity of justice, these mechanisms have expedited the competition law while simultaneously streamlining it.
Section 48A (specifically talks about settlements) – (1) Any enterprise, against whom any inquiry has been initiated under sub-section (1) of section 26 for contravention of sub-section (4) of section 3 or section 4, may, for settlement of the proceeding initiated for the alleged contraventions, submit an application in writing to the Commission in such form and upon payment of such fee as may be specified by regulations
Section 48 B (specifically talks about offering commitments) – such measures that will be taken by the party to address the concerns of the Commission by paying a certain amount of fees for the application.[5]
Commitment, as used in competition law jurisprudence, describes a procedure when an under-investigation corporation proposes to modify its business practices to meet the issues brought forth by the competition authority. Without a formal finding of infringement, this may result in the investigation being closed.[6]
In a settlement, the company and the competition authority negotiate a settlement that usually entails the corporation admitting to the alleged infringement in exchange for a reduction in fines or penalties. Although the Competition Amendment Act’s settlement procedure does not actually require acknowledgment of guilt. Businesses that have been waiting for this will quickly take advantage of it rather than dragging out lengthy legal battles.
Section 48 before the amendment act did not require the parties to acknowledge their involvement in anti-competitive behavior. If found guilty of the violation, they could face legal action and punishment directly without having scope of settling in between.
Jayant Sinha, who headed the committee that recommended changes for the amendment in the Competition Act, in an interview contended that solving disputes through non litigation methods is a global practice, and a need of flexibility is to be given to the parties so that they can negotiate on their terms, therefore the new feature of flexibility is given and the admission of guilt is not necessarily mandated. These kinds of procedures should help the CCI expedite the resolution of antitrust cases, freeing up its limited resources in the process. Businesses can also stay away from ambiguity and drawn-out inquiries. In addition to providing victims with fair compensation, these negotiated remedies give authorities the ability to impose creative deterrents on responders.
He also says that such provision is a landmark reform and an extraordinarily important step forward for competition law as it immediately brings us up to world-leading standards and paves a way to settle matters without going into a long drawn out set of proceedings from CCI, NCLAT, and Supreme Court [7]
PROCEDURE FOLLOWED-
In settlement of proceedings initiated for any alleged contravention, the alleged violator can submit an application in writing to the commission in such form and upon payment of such fee as may be specified by regulations. This settlement application has to be given after the Director General(DG) issues a report under section 26. This report will be based on his findings and the investigation the DG has done up uptil now, the settlement application has to be given before the commission passes the final order if it thinks that it is in contravention of sections 3 and 4.
Initially, the CCI will establish a preliminary view regarding its approval of the commitment application or settlement application, depending on the situation. The applicant has 15 days to submit a revised proposal if the CCI is not pleased. Thereafter, the CCI shall invite third parties (including counter parties and the DG) to submit their opinion within 21 days.[8]
It is upon the commission to consider such application basing itself on the nature, gravity and impact of such contraventions. CCI will provide for an opportunity to the third parties before grant of such application, which includes the director general, and the opposite party. For such an application to be accepted by the commission, the opposite party can submit their objection and suggestions to such settlement procedure.
If the commission finds it appropriate to not proceed with such an application, it can continue with the proceeding under section 26.
There can be no appeal made under section 53 b (appeal to appellate tribunal) i.e. the national company law appellate tribunal. Once settlement and commitment are to be sought there is no appeal that can be made. The parties have to agree on that being the final decision. The benefit of this is twofold in the sense that the CCI can now move to other matters, and the companies can proceed with their work thus not affecting their efficiency.
“The ability to have a negotiated agreement and not having the ability to appeal it makes the amendment extraordinary.” Says Jayant Sinha.
A commitment procedure is to be initiated after the receipt of such information when the prime facie order is to be issued but before the receipt of the DG Report by the parties.
In the Commitment application, the alleged violator would have to provide the true and complete facts, including the gravity and impact of the contraventions and how the commitments offered would talk about the claimed infractions as well as the procedures for carrying out and keeping an eye on the promises made. The CCI may rescind its commitment or settlement order (and the investigation will restart) in the event that a party does not follow the terms of the agreement, does not disclose all relevant information, or if there is a major change in the facts. Additionally, the party will be responsible for covering the CCI’s legal expenses up to INR 10 million (about USD 120,000 / EUR 110,000).
In order to address the anticompetitive impacts of the alleged breach, commitments or settlement terms, as the case may be, can be created to restore competition through actions like divestitures and behavioral adjustments. Those impacted by the alleged anti-competitive actions have been given a voice by allowing comments from the other parties, and more transparency in antitrust enforcement has been sought.[9]
Such settlement amount to be credited to the consolidated fund of India
The Amendment Bill gives third parties the right to sue for damages or losses they have suffered under Section 53N of the Act in situations where the CCI issues a settlement order.
Section 48C deals with an applicant who fails to comply with the order passed under section 48A or section 48B or when it comes to the notice of the Commission that the applicant has not made full and true disclosure or there has been a material change in the facts, the order passed under section 48A or section 48B, as the case may be, shall stand revoked and withdrawn and such enterprise shall be liable to pay legal costs incurred by the
Commission which may extend to rupees one crore and the Commission may restore or initiate the inquiry in respect of which the order under section 48A or section 48B was Passed.[10]
QUANTUM OF PENALTY THAT WILL BE IMPOSED –
Previously, As per the Competition Act of 2002, the penalty levied by CCI could not exceed 10 percent of the mean “turnover” for the three preceding financial years.
But in the Excel Crop case, the Supreme Court held that the quantum of penalty has to be restricted to not more than 10 percent of the “relevant turnover” of the erring enterprise on grounds of proportionality to the violation. The “relevant turnover” had been defined as the turnover pertaining to the products or services (and the geography) for which the anti-competitive conduct of the parties relates to. This had a negative impact on the intended deterrent effect that such penalties should have had in the market as well as drastically reducing the scope of penalties that the CCI would have imposed.[11]
However, in the Excel Crop case, the Supreme Court ruled that, to be proportionate to the infraction, the penalty amount must be limited to no more than 10% of the “relevant turnover” of the offending firm. The turnover related to the goods or services (as well as the region) for which the parties’ anti-competitive behavior is relevant was previously referred to as the “relevant turnover.” This had a negative impact on the intended deterrent effect that such penalties should have had in the market as well as drastically reducing the scope of penalties that the CCI would have imposed.
The 2023 Amendment Act has “restored” the CCI’s authority to levy fines based on a party’s worldwide turnover. This was essential to making the non-adjudicatory methods more appealing to the parties.
Therefore, the enhanced criminal authority of the CCI is a desirable development that would not only strengthen the effect of deterrence against violations of competition law but also serve as a driving force behind the adoption of the mechanisms for commitment and settlement.
SIMILAR FRAMEWORK IN DIFFERENT COUNTRIES
Similar tools are already in place in several other jurisdictions such as the European Union, United Kingdom, USA Germany, Japan, and Italy.
- United States of America – Settlements are reached by working out the parameters of the remedy, drafting a precise and binding judgment, and then coming to an agreement with the parties, who consent to be bound by the final order’s terms, waive their rights to additional proceedings, and admit certain facts to establish jurisdiction. The agencies additionally publish or submit a complaint detailing pertinent details and claiming that the involved parties broke the law. In the US, a settlement can only be accepted under specific circumstances. They’re as follows:
(A) A cartel is in place In order to enter into a plea agreement with the Antitrust Division, the defendant must be willing to
(B) admit guilt or provide a factual basis for the plea;
(C) Cooperation of the cartel participants (the inclusion in the cartel settlement of agreements by the settling party to provide full, continuing, and complete cooperation)
(D) Promise by the Government not to bring further charges
In India, it is not required to acknowledge guilt.
- European Union – The European Commission (EC) allows commitment judgments in all antitrust matters whereas for cartels, the settlement route is available.However, in India, all antitrust issues would be settled, barring cartels. Cartels may choose to go for leniency. Further, while a settlement decision establishes an infringement and requires an admission of guilt from the parties, a commitment decision does not establish an infringement and does not require any admission by the parties. In India such admission of guilt is not necessary. EC notes that typically parties opt for a settlement decision when they are convinced of the strength of the EC’s case in view of the evidence gathered during investigation and of their own internal audit. In such cases, they may be ready to admit their participation in a cartel and accept liability for it. It was brought to the notice of the Committee that between May 2004 to February 2014, the EC adopted 34 commitment decisions and 19 infringement decisions[12] These procedures have proved to be more efficient and lead to quicker resolutions, since findings are not contested and the EC in particular can avoid the need, to draft detailed infringement decisions.For non-cartel behavior, the EC also uses an informal “cooperation procedure” in which infringement is found, structural remedies are imposed, and the parties receive a 30 percent reduction in fines in exchange for their cooperation.
- LENIENCY, CARTEL, SETTLEMENT – Experts in India assert that cartelization is considered a grave offense, which is likely the reason it is excluded from the settlement plan. “There is already a clause that allows persons involved in cartels to come clean about their behavior and receive mercy on their punishment. According to Amol Kulkarni, head of research at CUTS International, a non-profit, non-governmental organization that works on public interest issues, “keeping cartels out of the proposed settlement scheme could be a balancing act.”[13]
Section 46 of the Competition Act 2023 contains the Leniency Regulations, which provide that an entity requesting leniency must not only make essential disclosures but also stop participating in the cartel (unless instructed otherwise by the CCI) and provide full cooperation to the CCI. Throughout the investigation and other processes before the CCI, such cooperation is necessary. Furthermore, the requester for leniency shall not remove, alter, destroy, or hide any pertinent material related to the cartel.[14]
- JAPAN: The Japan Fair Trade Commission (JFTC) is empowered by the Anti-Monopoly Act (AMA) of Japan to formally accept voluntary promises from businesses that may have violated the law. Following notification, companies have sixty days to present proposed commitments and provide proof that the alleged infringement has stopped. Companies can utilize the process without having to admit that there has been an infringement. Therefore, it is not required to admit responsibility here either. The settlement process for cartel and bid-rigging charges is procedural; first, a leniency application is filed, and if it is approved, an application for negotiation is made.
- United Kingdom– National authorities in Europe have also heavily relied on these mechanisms for antitrust enforcement. In February 2022, the UK’s Competition and Markets Authority (“CMA”) accepted commitments from Google in relation to the Privacy Sandbox for its Chrome browser. The CMA is presently reviewing promises made by Google on its Play Store billing policies as part of a separate probe.
- Germany – In its eleventh amendment act, the German Competition Act (Gesetz gegen Wettbewerbsbeschränkungen, or GWB) provided a number of remedies, including structural and behavioral modifications. Unlike CAA2023, which typically arises when there is a violation, these are introduced not just for cases where infringement has happened but also for market conditions that necessitate solutions. It recently accepted commitments offered by the German Olympic Sports Confederation and International Olympic Committee in respect of advertising restrictions imposed on the participants in the Olympic games and companies.
- ITALY- The Italian Competition Authority also offers a settlement procedure that allows businesses accused of engaging in anti-competitive agreements or practices to do so. This conforms to the criteria set by Europe. The settlement procedure’s goals are to expedite the legal process and give the parties the opportunity to receive a reduction in penalty. Parties may benefit from a 10% reduction in fines for settling with the ICA if the ICA aligns its process with the European Commission’s.[15]
SIMILAR MECHANISM UNDER DIFFERENT STATUTES
In order to keep up with the increasing number of litigation cases and lessen the workload for courts and tribunals, section 48 draws inspiration from various statutes as well. This allows for a concentration on more important cases rather than wasting time, effort, and resources on less serious harms.
The Securities and Exchange Board of India’s (SEBI) 2018 Regulations – gives SEBI more latitude to resolve some serious offenses, with the exception of situations that could have an impact on the entire market, result in losses for a significant number of investors, or compromise the integrity of the market. Additionally, it concentrates on increasing transparency in investor-related settlement matters (such as disclosure violations, refunds, and exit alternatives) and, for the first time, established a confidential settlement in exchange for assistance from SEBI in its investigations. [16]
The Income Tax Act, 1961 also sets out a settlement framework – Any assessee who is the subject of an ongoing legal case before an income-tax authority may submit an application in the required format to the Settlement Commission in order to resolve the matter. The application cannot be withdrawn once it has been filed, and it must be submitted with the required fee. The aims are to decrease litigation, guarantee prompt tax collection, and give taxpayers the tools they need to clean house through negotiation and settlement. It is a crucial alternative dispute resolution procedure for settling tax disagreements involving direct taxes.
Vivad-se-wishwas is yet another significant plan. This program, “Vivad se Vishwas II – (Contractual Disputes),” was introduced by the Ministry of Finance’s Department of Expenditure, a one time settlement scheme, to efficiently resolve outstanding contractual disputes involving the government and government-affiliated enterprises. [17]
CRITICAL FACTORS –
1. Can the parties fear that their application will be used as evidence against them if rejected? The parties do not necessarily have to admit to their guilt as per the provisions. Following a thorough discussion, the Standing Committee recommended against requiring a party to “admit guilt” in exchange for agreeing to resolve a dispute or make promises.
However, Parties considering entering a plea for settlement should be mindful of the possibility of follow-on claims for damages. This possibility should be based on the nature, gravity, and future consequences of the alleged violation done.
Follow-on cases are claims for damages where the infringement of competition law has already been established by a competition authority
The CCI may utilize information disclosed in a settlement or commitment application against the relevant applicants or any other persons involved in the investigation who are not involved in the settlement or commitment procedures.
The investigation into the remaining infractions will continue, although in some circumstances, the settlement application or the commitment application, as the case may be, may be approved in connection to some (but not all) of the infractions mentioned in the DG’s investigation report.
The Draft Settlement Regulations stipulate that a settlement order shall not be regarded as a finding of contravention, even when a settlement will not prejudice the damages procedures. This means that applicants may have difficulties proving loss as a settlement applicant in the event of follow-on damages. [18]
2. The fact that the amendment ignores the settlement in cartels is a significant disadvantage. For corporations who would have preferred to settle out of court, including cartels would have been a practical step toward closing the proceedings. The claim that “cartels” benefit from leniency fails to recognize the fundamental distinction between leniency—a technique for starting investigations—and settlements, which are an effective means of bringing a lawsuit to an end.
Author : Utkarsha Rananaware, A studentat ILS Law College, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at IIPRD
[1] India Glycols Limited v. Indian Sugar Mills Association and Others 2018.
https://pib.gov.in/PressReleasePage.aspx?PRID=1546553
[2] Manupatra, S.J. and Kumari, S. (no date) Manupatra, Articles. Available at: https://articles.manupatra.com/article-details/THE-SETTLEMENT-AND-COMMITMENT-SC-MECHANISM-AN-ANTIDOTE-FOR-THE-PREMATURE-BUSINESS-FRIENDLY-POLICY-OF-CCI (Accessed: 19 January 2024).
[3] The need for settlements and commitments under the Competition Act (no date) azb. Available at: https://www.azbpartners.com/bank/the-need-for-settlements-and-commitments-under-the-competition-act/ (Accessed: 19 January 2024).
[4] Tamil Nadu Film Exhibitors Association v. CCI (2015)
http://www.scconline.com/DocumentLink/js2SjZ2X
[5] Competition Amendment Act 2023, Section 48 https://www.cci.gov.in/images/publications_booklet/en/competition-amendment-act-2023-salient-features1684831868.pdf
[6] CCI Draft regulations https://www.cci.gov.in/images/whatsnew/en/background-note-settlement1692847181.pdf
[7] CNBC (2022) Available at :
(https://www.youtube.com/watch?v=b4xiF1HsECM
[8] Prateek, P., Verma, T. and Vohra, R. CCI publishes draft regulations on settlement and commitment mechanism, Khaitan & Co. Available at: https://www.khaitanco.com/thought-leaderships/CCI-Publishes-Draft-Regulations-on-Settlement-and-Commitment-Mechanism (Accessed: 5 January 2024).
[9] Guest Contributor (2023) Financialexpress, Opinion News | The Financial Express. Available at: https://www.financialexpress.com/opinion/a-new-era-of-competition-law-not-only-does-this-compel-violators-to-make-amends-but-also-gives-those-affected-a-voice/3286598/ (Accessed: 15 January 2024).
[10]https://www.cci.gov.in/images/publications_booklet/en/competition-amendment-act-2023-salient-features1684831868.pdf
[11] Excel Crop Care Limited v. Competition Commission of India & Anr., (2017) 8 SCC 47
[12] Competition law review committee report page 45, 2019
[13] Prasad, G.C. (2023) Cartels may be kept out of settlement purview, mint. Available at: https://www.livemint.com/news/india/cartels-may-be-kept-out-of-settlement-purview-11675963419838.html (Accessed: 29 January 2024).
[14] Kakkar, A.K. and Chauhan, V.P.S. (2023) Cartels & Leniency Laws and Regulations Report 2024, International Comparative Legal Guides International Business Reports. Available at:
https://iclg.com/practice-areas/cartels-and-leniency-laws-and-regulations/india (Accessed: 29 January 2024).
[15] Vassallo, G. et al. (2023) Main developments in competition law and Policy 2022 – italy, Kluwer Competition Law Blog. Available at: https://competitionlawblog.kluwercompetitionlaw.com/2023/05/05/main-developments-in-competition-law-and-policy-2022-italy/ (Accessed: 29 January 2024).
[16] Gazal Rawal, R.G. (2022) Amendments to sebi settlement regime – a snapshot, India Corporate Law. Available at: https://corporate.cyrilamarchandblogs.com/2022/01/amendments-to-sebi-settlement-regime-a-snapshot/ (Accessed: 29 January 2024).
[17] Government launches a one-time settlement Scheme Vivad se Vishwas – II (Contractual Disputes) to effectively settle pending contractual disputes, as announced in the Union Budget 2023-2, 2023
[18] DRAFT CCI (SETTLEMENT) REGULATIONS, 2023 https://www.cci.gov.in/images/whatsnew/en/background-note-settlement1692847181.pdf
