CCI’S COMPLIANCE WITH PRINCIPLES OF NATURAL JUSTICE: A NEED FOR UNIFORM APPROACH
This post is authored by Mahima Chhabrani, a third-year student of B.A. LL.B (Hons.) at the West Bengal National University of Juridical Sciences, Kolkata.
Section 26(1) of the Competition Act, 2002 (hereinafter Act) confers power on the Competition Commission of India (hereinafter CCI) to order an investigation when it finds the prima facie contravention of the Act. Before passing the order of the investigation to the Director-General (hereinafter DG), CCI, in most cases, relies on the information produced by the Informant in forming a prima facie opinion. Much recently, there has been an on-going debate about the mandatory requirement of the CCI to allow both the Informant and the opposite party (hereinafter OP) to present their case before launching the investigation. Failure to do so will be a violation of principles of natural justice of the audi alteram partem. This debate arises in the backdrop of a shift in the trend of CCI to hear both the Informant and the OPs despite there being no statutory requirement to do so. The article attempts to address the question regarding the compliance of principles of natural justice, pointing out the benefits of adopting this approach.
COMPLIANCE WITH PRINCIPLES OF NATURAL JUSTICE
There has been an on-going debate about the need for the CCI to comply with all the facets of natural justice while passing an order and imposing a penalty (if any) under section 27 of the Act. Once again, the point of contention remains whether CCI is mandatorily required to serve a notice and give the Respondent an opportunity to present their case. The judicial trend suggests that CCI is not expected to serve a notice or hear the parties since this investigation is merely a preparatory step and not a final order.[i] The Commission has a discretionary power to notify the parties by giving them an opportunity to present their case in the initial stage. The Supreme Court has held that the act of the prima facie order of investigation to the DG is an administrative inquiry.[ii] Any such requirement would have otherwise been explicitly laid down in the wording of the statute.[iii]
It has been witnessed that despite the above being settled law, the Commission has followed the overarching principles of natural justice out of its own accord in the case of SAIL. It gave the OP a chance to respond to Informants by filing written submission. Furthermore, the Madras High Court made a reference to the practice adopted by the CCI of giving both the parties a chance to present their case at the preliminary stage.[iv] This has been reaffirmed in the famous case of CCI v. Bharti Airtel [v] in which the CCI held conferences, noted detailed information, and took down the evidence adduced by both the Informants and the alleged parties. Critiques of such a practice would argue that taking detailed evidence and conducting conferences involving both the parties and third parties who are stakeholders, amount to CCI performing the quasi-judicial function of determining the rights of the case. However, in the present case, the information gathered from both these parties was only to determine whether there was an anti-competitive agreement involved.[vi]
This question once again came before the CCI in a recent case of Re: Delhi Vyapar Mahasangh,[vii] CCI took into consideration the pieces of evidence, the emails and the SMSs produced by the Informant and after that launched an order of investigation on accounts of deep discounting, preferential listing, and exclusive agreements.[viii]This case has spurred debate to institutionalize the practice of mandatory consultation with both the parties to a case before launching an investigation. In the past, similar complaints were received by CCI from All India Online Vendors Association v. Flipkart Internet and Flipkart India[ix] in November 2018. In these cases, the Commission held conferences and also gave an opportunity of hearing to Amazon, a significant player in the e-market and a key stakeholder in the present case. Therefore, this trend depicts the discriminatory approach of the CCI.
Despite various amendments, the legislature has failed to consider this non-uniform approach of the CCI in its recent Amendment Bill[x]. There will be many benefits of institutionalizing this mandatory practice of consulting both the parties before passing the order under section 26(1) by the CCI in all cases.
Firstly, allowing both sides to present their case will help speed up the CCI's process of forming a prima facie opinion regarding the anti-competitive element. Secondly, this will save the resources, time, and labour of both CCI and parties. It is pertinent to note that CCI funds the investigation performed by the DG. Thus, if the CCI finds a case of anti-competitive agreements at the preliminary stage, taking into consideration the information and evidence adduced by both parties will save time and resources. With respect to parties, it is seen there is a trend where the OPs are approaching the Courts as in the recent case of Delhi Vyapar[xi], where Amazon, in the Karnataka High Court claimed that CCI failed in complying with principles of natural justice as Amazon was not given an opportunity to be heard before the passing of the order. The claim of Amazon, in this case, was that CCI had received similar complaints in the past, and OPs were well heard, after which the matter was closed by the CCI under section 26(2) of the Act. Thus, due to this reason, if CCI adopts a uniform approach, it will avoid the cases being dragged to the doors of the court. It is a proven fact in India that once a case reaches the court, the litigation goes on for many years and causes unnecessary delay. Thirdly, such a mandatory practice would help prevent anyone from filing malicious complaints. For instance, an Informant filed a complaint, and DG, after investigation held the Respondent guilty only to later find out that the Respondent was innocent. Such a situation holds the potential of severe ramifications on the reputation of the OPs.
Furthermore, it could lead to wastage of the resources of the CCI as well as Respondents. However, such consequences could be avoided if, by way of an amendment, consulting the parties, holding conferences and cross-examining witnesses is made mandatory for the CCI before passing the order. However, to keep the nature of the suggested approach restricted to that of inquisitorial and not adjudicatory, CCI would rely on the information gathered from the Informant, Respondent, and other witnesses and stakeholders as the case may be, to only form an opinion of any anti-competitive element. It should, by all means, refrain from entering into the merits at this primary stage.
In the absence of any statutory requirement, the issue pertaining to principles of natural justice becomes a matter of discretion of the CCI. Despite a shift in the trend of CCI serving a notice and hearing both the parties, there needs to be an amendment to maintain uniformity to give an equal opportunity to the parties involved in all cases. There is no basis for the CCI to be selective in some cases and not give an equal opportunity to the parties in other cases. In fact, it is observed from the discussion, the current practice makes the process of forming prima facie cases unfair and unjust for some parties. Furthermore, the parties in the court of law have taken this ground of CCI’s noncompliance with principles of natural justice which has hindered the proceedings and caused delays.
Second, it would help CCI to come to a more conclusive decision about prima facie violation if any, as both parties will be able to present their cases by adducing necessary evidence. This will be a step in the right direction to prevent informants from filing complaints with malafide intention. However, the screening of evidence will involve only checking of the veracity and the authenticity and not deciding the merits, as the latter is a task to be carried out by the DG, after CCI orders an investigation. Third, giving a chance to both the parties at this preliminary stage would potentially help curb the delay caused by the appeals filed by the Respondent on the grounds of non-observance of procedures followed by the CCI as in the case of Delhi Vyapar. Fourth, the involvement of other parties along with the Informant will keep the CCI on its toes to ensure forming a prima facie violation, if any and launching an investigation is done in a consistent manner by adhering to all procedural requirements, one major being recording of brief reasons for ordering an investigation.
[i] Competition Commission of India v. Steel Authority of India Ltd. and Anr., (2010) 10 SCC 744. [ii] Id. [iii] Id. [iv] Chettinad International Coal v. The Competition Commission of India and others, 2016 SCC OnLine Mad 14805 [v] Competition Commission of India v. Bharti Airtel Limited and Ors., (2019) 2 SCC 521 : 2018 SCC OnLine SC 2678. [vi] Id. [vii] Delhi Vyapar Mahasangh v. Flipkart Internet Private Ltd. and Another, 2020 SCC OnLine CCI 3. [viii] Id. [ix] All India Online Vendors Association v. Flipkart India Private Ltd. and Another, 2018 SCC OnLine CCI 97. [x] The Competition (Amendment) Bill, 2020, Draft (India), available at https://www.taxmanagementindia.com/file_folder/folder_5/Draft_Competition_Amendment_Bill_2020.pdf. [xi] Supra note vii.