Competition Law Hotline
April 01, 2015
Director General and Competition Commission Powers Clarified
This article was published on the Law Street India Portal on March 9, 2015 and that the same can be accessed from the link.
The Madras High Court recently in Hyundai Motor India Limited (“Hyundai”) v. Competition Commission of India (“CCI”) has clarified that under the Competition Act, 2002 (“the Act”):
This article analyses the aforesaid decision of the Madras High Court.
Background and Factual Matrix
A complaint was lodged before the CCI under Sections 3 and 4 read with Section 19 (1) (a) of the Act alleging anti-competitive practices and abuse of dominant position against three Automobile manufacturers namely Honda Siel Cars India Limited, Volkswagen India Private Limited and Fiat India Automobiles Limited. The complainant had sought for an enquiry into the trade practices of the automobile manufacturers and a restraint order against them for practicing unfair, restrictive and monopolistic trade practices.
An order was passed under Section 26 (1) of the Act by the CCI directing the DG to conduct an investigation into the aforesaid allegation and submit a report within sixty days. Pursuant to which the Additional Director General filed a report before the CCI on April 19, 2011 seeking the approval of the CCI to expand the scope of the investigation to other car manufacturers as similar practices were adopted by them in the areas of after sales services and procurement of spare parts.
CCI thereafter passed an order on April 26, 2011 (“Impugned Order”) permitting the scope of expansion of the scope for investigation. Subsequent to the order of the CCI, the DG ordered for inspection of the records of Hyundai vide notice dated May 4, 2011 (“Impugned Notice”).
Hyundai and Nissan challenged the Impugned Order of the CCI (vide writ petitions), while Hyundai also challenged the Impugned Notice of the DG. The single judge of the Madras High Court dismissed the writ petitions stating that an effective alternative remedy of approaching the Competition Appellate Tribunal (“CAT”) exists.
Nissan filed an intra-court appeal against the order of the single judge on the ground that, no appeal would lie to CAT under Section 53 B of the Act against the Impugned Order. This is so because under Section 53 A of the Act, CAT is empowered to hear and dispose of appeals against an order passed by the CCI under Section 26 (2) to (6) of the Act. However, CAT is not empowered to hear an appeal from an order passed by the CCI under Section 26 (1) of the Act. The division bench thereafter remitted the matter back to the single judge for disposal of the case on merits.
The Madras High Court clubbed together the writ petitions filed as they involved similar questions of law.
JUDGMENT AND JUDICIAL REASONING
The reasoning of the Madras High Court speaking through V. Ramasubramanian J is stated as follows:
The Delhi High Court in Grasim Industries Limited v. Competition Commission1 (“Grasim Industries”) has held that the DG would have no power to undertake an investigation in respect of the complaint which the Commission did not consider while forming an opinion.
However, the Madras High Court has distinguished the decision of the Delhi High Court in Grasim Industries on facts by stating that the DG did not go beyond the scope of his powers as he was merely providing additional information in relation to the subject of which the CCI already had knowledge. Hence, the proviso to Section 26 (1) of the Act inserted by the Competition (Amendment) Act, 2007 would apply as the information received from the DG was simply additional information pertaining to the same subject matter of complaint.
In Grasim Industries, the DG was directed by the CCI to investigate into the alleged anti-competitive practices carried out by the manufacturers of manmade fibers. However, the DG extended his investigation in relation to manufacturers abusing their dominant position. This was clearly held to be beyond the powers of the DG as investigated into a complaint which the CCI did not consider at all.
Interestingly, the proviso to Section 26 (1) of the Act states that if the subject matter of information is in the opinion of the CCI substantially the same, then the new information may be clubbed together with the previous information and the CCI is not required to form a prima facie opinion. The Madras High Court has held that the information received from the DG will fall under Section 19 (1) (a) of the Act.
Further, the Court has left open the CCI and the DG to rope in other car manufacturers and automobile manufacturers for the investigation pertaining to the same subject matter.
Separately, the Competition (Amendment) Bill, 2012 (“Bill”) has proposed some radical changes to the powers of the DG. It has removed the provision of Section 41 (3) of the Act which currently provides that the powers of a DG shall be akin to that of an Inspector under Sections 240 and 240-A of the Companies Act, 1956 and the DG was required to obtain an order from the magistrate of relevant jurisdiction in order to conduct ‘search’ and ‘seizure’ operations. However, the Bill empowers the DG to conduct search and seizure operations by seeking permission from the chairperson of the CCI if he is satisfied that the entity or the person against whom investigation is carried has failed or would not provide the information sought for or would destroy, alter the requisite information. This Bill has been brought in to make the power of the DG similar to that of the investigative authorities under other enactments such as and Income Tax Act, 1961.2 This will enable the DG to carry out dawn raids and will go a long way in effective investigation of cartels and other anti-competitive practices carried out under Section 3 of the Act.
– Satish Padhi, Huzefa Tavawalla & Gowree Gokhale
You can direct your queries or comments to the authors
1 (2014) 41 Taxmann 333 (Delhi)
2 See Section 132 of the Income Tax Act, 1961
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