CCI publishes draft regulations on settlements, commitments

Our previous article on the Competition (Amendment) Act, 2023, drew attention to several amendments that had not been implemented since the Competition Commission of India (CCI) had yet to finalise the accompanying regulations. These included the provisions for settlement and commitments introduced under sections 48A and 48B of the Competition Act, 2002. On 23 August 2023, the CCI published its draft regulations on the settlement and commitment schemes for public comment. An overview of the two draft regulations is provided below.

Timelines: Commitment applications may be submitted within 45 days from the receipt of the CCI’s prima facie order. In contrast, settlement applications may be submitted within 45 days from the receipt of the investigation report. In both cases, the CCI may allow an extension of up to 30 days. Since settlements and commitments can only be proposed against allegations involving non-horizontal, anti-competitive agreements and/or abuse of dominance, these timelines may be insufficient to analyse whether to settle or contest the CCI’s position on complex issues such as relevant market, market power and theories of harm. The regulations also prescribe a short timeline for the overall disposal of a commitment application (i.e., 90 days) and a settlement application (i.e.,120 days). While the CCI may extend these timelines via a reasoned order, the overall time limits are critical since it can dispose of the applications if there is a failure to agree on the terms of the commitment or settlement within the timelines.

Process: Applicants can opt for commitments or settlements for some allegations while contesting the remaining claims. Once an application is filed, the investigation or inquiry will be suspended till its disposal. The CCI will review the application on a prima facie basis and may even direct the applicant to file a revised application. Next, the CCI will invite comments and objections from other parties to the proceedings based on a non-confidential summary of the allegations and the commitment or settlement proposal. After considering these submissions, the CCI may accept, reject, or allow a revised proposal. The CCI may also hear the concerned parties before passing a final order. While applications can be withdrawn at any time before the CCI makes a final order, the applicant will not be able to appeal the CCI’s final order approving a settlement or commitment agreement. Both regulations provide that an approved settlement or commitment proposal will not be “construed as a finding of contravention by the commission”.

Disclosures and confidentiality: Disclosure requirements under the two schemes are the same. They include: (a) full and true disclosures about the nature, duration and extent of the alleged contraventions; and (b) details and impact of the corrective measures offered, including implementation, compliance and monitoring. In stating that a “non-confidential summary” will be supplied to other parties, the regulations indicate that the disclosures will be deemed confidential. However, while the regulations expressly state that information provided by applicants may be used by the CCI against other parties, they should also clarify whether such disclosures can be: (a) used against applicants if the applications are rejected or withdrawn and the CCI continues with the investigation or inquiry; and (b) disclosed by the CCI to other authorities, which may expose applicants to liabilities under other laws. The risk of self-incrimination may dampen the success of the two schemes.

Differences: Settlements entail two significant, additional liabilities: (a) payment of a “settlement amount” that can extend up to the maximum penalty levied under section 27(b) of the Competition Act; and (b) compensation claims filed under section 53N of the act. Although the CCI has proposed a maximum 15% discount on the settlement amount, since penalties will now be computed on “global turnover derived from all products and services” under the amended section 27(b) (read with the “Penalty Guidelines” which are yet to be issued by the CCI), these additional liabilities may disincentivise parties from wanting to pursue settlements. We hope the CCI will adddress these concerns in the revised regulations. Companies would be well advised to watch this space to track further developments on the amended Competition Act.

Modhulika Bose is a counsel at P&A Law Offices.