By Vaibhav Choukse & Nripi Jolly
This year will mark 12 years of enforcement by the Competition Commission of India. Despite a number of challenges to its jurisdiction and current upheavals stemming from the pandemic, the CCI has emerged as a robust financial regulator. It has imposed fines of approx Rs 15,000 crore on organizations and people undertaking such practices. Interestingly, it only recovered 1% of it as most penalty orders have been appealed by the parties difficult its legality, ie, the proportionality of the fines imposed. Recently, the two cartel infringement orders re-opened the in no way genuinely settled debate on optimal sanctions against cartels—whether the sanctions for cartels have been characteristic of more than-enforcement or below-enforcement?
The very first case relates to cartelisation in the provide of industrial and automotive bearings to automotive suppliers among 2009 and 2011. The CCI initiated an investigation primarily based on a leniency application filed by Schaeffler, possessing noted that the Bearing Companies met to talk about pricing approaches for looking for cost enhance from a variety of automotive suppliers. While CCI held that they indulged in cartelisation, it decided against imposing a penalty concluding that “ends of justice would be met if the parties cease such cartel behaviour and desist from indulging in it in future”.
The second relates to bid-rigging in the provide of composite brake block (CBB) to Railways by 12 CBB suppliers among 2009 and 2017. A complaint by IR led the CCI to investigate the case, which discovered smoking-gun proof of cartel, like Whatsapp chats of CBB suppliers, and admissions in the course of deposition by the corporation representatives on the agreement to repair cost quotations and quantity inter se though bidding for the tender. Again, the CCI decided against imposing a penalty mainly because of mitigating components, like “…economic impact of Covid-19 on the credit needs and liquidity of MSME”.
These orders raised eyebrows at the lenient view taken by the CCI, in particular in cartel circumstances mainly because cartel agreements: (i) culminated in the pre-Covid-19 period, ie, among 2009 and 2017 and (ii) involved bid rigging in public procurement, ie, the use of taxpayers’ revenue. Additionally, parties that had filed for leniency disclosing the existence of the cartel received the similar therapy as other individuals.
The circumstances have reinforced the need to have for penalty suggestions. There is a genuine sense amongst the competitors authorities that, if competitors law is about 1 issue above all, it is the detection and punishment of cartels. Evidence of current action in this region demonstrates that even the possibility of substantial fines is insufficient to deter firms as firms finish up lucrative even following they spend all the penalties.
Globally, the competitors authorities, like the European Commission, the US, and the UK competitors authorities, have issued penalty suggestions to make certain that the penalty imposed does not grow to be disproportionate.
In 2017, the SC in the landmark case of Excel Crop stressed the need to have for indigenous consideration (rather than reliance on foreign jurisprudence) though figuring out antitrust penalties and observed that proportionality requirements to be factored into any penalty imposed.
Following the lead, in 2019, the Competition Law Review Committee, in its report inter alia acknowledged the need to have for penalty suggestions and encouraged that the CCI really should be ‘mandated to issue guidance on imposition and computation of penalties’, which subsequently discovered a location in the draft Competition (Amendment) Bill, 2020 released by the MCA in March 2020.
Effective competitors authorities aim to strike a balance among punitive and proper sanctions. While imposing penalties, the CCI has been conscious of striking a balance among the need to have to deter anti-competitive conduct and maintaining the markets competitive as an alternative of killing an enterprise and wiping off competitors. While there can’t be soft pedalling in such circumstances, due consideration requirements to be offered to aggravating and mitigating components though arriving at the quantum of penalty. CCI need to come out with detailed penalty suggestions to encourage organizations not to indulge in such activities.
Choukse is a companion and Jolly an Associate, competitors law practice, J Sagar Associates, New Delhi. Views are private