Settlements and commitments are the way forward

By Karan S Chandhiok and Ruchi Khanna, Chandhiok & Mahajan
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In 2019, the Competition Law Review Committee published its report proposing the introduction of a settlement and commitment regime to speed up the resolution of cases. In 2020, the Ministry of Corporate Affairs published the Draft Competition (Amendment) Bill, 2020 (draft bill), for public comments. The draft bill includes provisions that would allow parties to settle proceedings and offer commitments in abuse of dominance and vertical restraint cases.

Karan S. Chandhiok
Partner
Chandhiok & Mahajan

Settlements

The draft bill excludes cartel cases from the proposed settlement provisions. This exclusion may have been because of leniency programmes available under India’s competition laws. On the other hand, the European Commission (EC) allows settlements only in cartel cases while also providing a leniency programmes. In fact,

the EC has settled 25 of its 69 cartel cases since the 2008 Settlement Notice was implemented. According to an OECD report, the average duration of a settlement case is under three years compared to five years using standard proce- dures. While a leniency program may be useful to gather evidence, settlements in cartel cases can speed up the adoption of decisions, reduce litiga- tion, reduce administrative expense and benefit parties through reduced fines.

The draft bill is unclear whether settlement proceedings would require parties’ admission to contravention or whether the Competition Commission of India (CCI) will record a finding of contravention in its order. The EC requires an admission of guilt in settlement cases. In the US, parties can settle charges with the Federal Trade Commission through consent agreements without admitting any infringement.

Proceedings where only some parties choose to settle may be difficult to adjudicate. In such cases, adjudicatory proceedings must proceed simultaneously to preserve the objective of the settlement mechanism – speedier resolution of cases.

Ruchi Khanna, Associate, Chandhiok & Mahajan
Ruchi Khanna
Associate
Chandhiok & Mahajan

Commitments

In abuse of dominance and vertical restraint cases, market correction is more important than imposing fines. Penalties may deter future anti-competitive conduct, but the harm caused to competition and markets may become irreversible when proceedings conclude. Swifter enforcement through commitments would not only promote a culture of voluntary compliance, but also reduce the risk associated with lengthy investigations.

The EC’s commitment regime allows commitment decisions to be issued without infringement findings and without the imposition of fines. The EC has been successful in reinforcing competition particularly in the digital space through commitments as seen in various cases including Broadcom, Amazon E-Books, and Cross-Border Pay-TV Services.

A similar regime in India would encourage enterprises to offer commitments that could result in timely market corrections. In order to ensure the regime’s success, no exceptions or exclusions must be carved out. Enterprises are more likely to engage with the CCI and offer commitments only when there is legislative certainty.

Guidance on the nature of commitments that can be proposed in specific industries or sectors, or for specific types of infringing conduct, would provide greater clarity and certainty.

Commitments apply to future conduct of enterprises and therefore, monitoring may be essential in some cases for a successful commitment regime. To this end, commitment proposals could include regular compliance filings with the CCI where appropriate. Settlement and commitment obligations should have a fixed termination date, and must not continue indefinitely. Confidentiality would also be vital in such proceedings. If the CCI seeks third-party responses before making a commitment decision, sensitive information provided by the party offering commitments must be safeguarded.

The final form of the proposed settlement and commitment regime is awaited with interest. It remains to be seen whether the CCI adopts the practices of other jurisdictions or develops a unique approach to increase enforcement efficiency. Adopting similar practices of other jurisdictions will help improve the ease of doing business in India and encourage more investments in India. The success of these mechanisms will depend on the transparency, predictability and certainty of their scope and applicability, keeping in mind the rights of parties.

Karan S Chandhiok is a partner and Ruchi Khanna is an associate at Chandhiok & Mahajan

competition law

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