SC starts CCI hearing; decision likely to have bearing on future of competition law

SC starts CCI hearing; decision likely to have bearing on future of competition law
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First Published: Thu, Jul 29 2010. 12 15 AM IST
Updated: Thu, Jul 29 2010. 12 15 AM IST
New Delhi: The Supreme Court’s questioning of counsel in a case between India’s competition body and its appellate entity may, if it leads to an order along the same lines, provide some relief to companies worried about loss of reputation arising from an investigation by the former and the consequent financial implications.
The principal question of law that has arisen is whether the Competition Commission of India (CCI) should hear parties at the preliminary stage, after an informant has filed a complaint with it. It currently doesn’t, and unilaterally decides whether the complaint merits investigation. Only after the investigation is the company or the organization being investigated given a chance to be heard. But the court is concerned that the very investigation—launched without giving the company concerned an opportunity to be heard—could hurt. “If I am an investor, I will not invest in a company against which a complaint is pending. We are concerned about what the notice (from CCI) will be like,” said Chief Justice of India, S.H. Kapadia.
Also See Issues Before the Court (PDF)
The Supreme Court on Wednesday began to hear the dispute between CCI and its appellate body, the Competition Appellate Tribunal, or Compat. The outcome of the case will likely have a significant impact on the way competition law will operate in India.
CCI has thus far not granted hearings to parties against which it has found reasons to pursue investigations. This is because the Competition Act does not explicitly grant this right to parties; it merely says that CCI can summon parties or ask for information whenever it deems necessary.
The background of the present case relates to a complaint filed by Jindal Steel and Power Ltd (JSPL) last year with CCI against Steel Authority of India Ltd (SAIL) for an alleged anti-competitive agreement the latter had with the Indian Railways for the supply of rails.
CCI, after viewing evidence from Jindal Steel, formed a prima facie opinion that the agreement between SAIL and the Indian Railways was a case for investigation. SAIL appealed to Compat, claiming that it was not being allowed a hearing before the start of the investigation. Compat upheld SAIL’s claim in February and passed an order against CCI. This legal tangle resulted in CCI appealing Compat’s decision in the Supreme Court.
The Supreme Court’s decision will answer several important questions: Whether a full-fledged hearing is owed to all parties by CCI before commencing any investigation; whether the initial opinion formed by CCI can be appealed with Compat; whether CCI has to reveal its reasons for forming such an opinion (CCI claims this will prejudice its investigative team); and whether CCI can appear before its own appellate body.
Harish Salve, who is representing JSPL, argued before the court that the “jurisdiction of the commission is principally inquisitive”. He said that CCI is only looking to find whether an anti-competitive practice actually exists. CCI is not deciding if a party is in contravention of competition law at the inquiry stage, he emphasized.
The bench, however, was not fully convinced and posed a counter-question to Salve and solicitor general Gopal Subramanium, who is representing CCI, on the likelihood of a notice to a company being “pejorative” in nature.
If the court upholds the Compat order in its present form, CCI’s functioning is likely to be adversely affected, according to competition law experts. “It is not the intent of the legislature that the CCI should function in this way. The statute (Competition Act, 2002) does not provide the respondent a hearing at the preliminary stage,” said lawyer Manas Kumar Chaudhuri of Khaitan and Co. On the other hand, a basic principle of natural justice hangs in the balance—whether a party can be investigated without being heard.
The 47 paragraph judgement issued by Arijit Pasayat, who heads Compat, relies on past Supreme Court rulings, which deal with giving all parties the opportunity to be heard, which stems from the Latin jurisprudential phrase audi alteram partem.
Indian competition law is based on Article 101 and 102 of the European Commission Treaty, which contains the rules of competition law for the EU and on Chapters 1 and 2 of the Competition Act of the UK.
“This comes closest to the European model where you (CCI) don’t interfere, but you are watchful,” said Subramanium. Salve took a slightly removed position from Subramanium, saying that Indian conditions and culture are different from that of the EU, where politicians routinely bat for corporations in the public sphere. Salve asked the court to define the way the commission must work. He said that a full hearing at the inquiry stage was not desirable, but a “preliminary conference” by CCI could be a suitable remedy for the present problem.
nikhil.k@livemint.com
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First Published: Thu, Jul 29 2010. 12 15 AM IST