Ex ante regulation of the Big Tech in India-Digital Competition Bill,2023- Is it really required as yet ?
The fair market regulator in India, the Competition Commission of India (CCI), despite its excellent track record in regulation of merger control, has been lately found wanting in the other core area of its function, the enforcement of the competition law.
The year 2024 has seen the CCI in a challenging position, as some of its ongoing investigations have been significantly stalled. This delay is largely due to parties raising concerns about breaches of sensitive confidential data shared with CCI and various procedural errors in the investigations being conducted. Compared to advanced jurisdictions like the EU and the US, where similar antitrust investigations are concluded swiftly, CCI’s investigations often extend to several years. In some cases, these delays can be attributed to judicial scrutiny during the investigation due to procedural irregularities.
Timely investigations are essential in antitrust proceedings because markets are dynamic. As entities often adopt anti-competitive tactics to gain an unfair advantage, therefore, it becomes imperative for CCI to conduct thorough yet swift investigations to mitigate potential harm to the market. However, the recent incidents of parties halting CCI investigations through judicial interventions have raised serious questions about the effectiveness of India’s antitrust watchdog. Some recent instances are highlighted below.
In April 2022, when the National Restaurant Association of India (NRAI) filed a complaint against food delivery platforms Swiggy and Zomato, alleging anti-competitive agreements. The CCI formed a prima facie opinion and ordered an investigation, but in May 2024, Swiggy challenged the CCI’s decision in the Hon’ble Karnataka High Court (KHC). The KHC in July 2024 ruled in favor of Swiggy, finding that the CCI had improperly allowed NRAI representatives access to sensitive data of Swiggy’s mobile application. The KHC set aside the CCI’s order and remanded the matter back for reconsideration. In this case it was argued that the statutory mandate under Regulation 35 (8) of the CCI (General) Regulations, 2009, was ignored, which clearly states that the informant should not ordinarily be included in the confidentiality ring and should only have access to non-confidential records, unless its inclusion is considered necessary or expedient for effective inquiry. Despite this, the CCI allowed the NRAI as an informant to be part of the confidentiality ring, leading to judicial scrutiny by the KHC.
In another instance, in July 2024, the Director General (DG) of the CCI submitted an investigation report in an investigation initiated against Apple Inc., which had been ongoing since 2021. In 2021
, CCI prima facie observed Apple Inc. to have abused its dominant position and directed DG to investigate. After nearly two years, the DG concluded the investigation and concluded in its investigation report that Apple had violated certain provisions of the Competition Act., 2002. However, Apple Inc. subsequently raised concerns about the breach of its confidential commercial sensitive information, which was included in the non-confidential report. This led the CCI to order all parties to return the reports, as the DG had ignored regulatory mandates inappropriately including confidential information in the non-confidential version.
In September 2024, during an investigation against Indian e-commerce giants Amazon and Flipkart, three Amazon sellers Appario, Darshita and Rocket Commerce who were third parties in the case, after the supply of the investigation report filed a writ petition before the KHC. They argued that the DG improperly included these third parties as opposite parties in the investigation report without obtaining the necessary approval from the Competition Commission of India (CCI). The petitioners asserted that the DG exceeded his authority and breached the procedural safeguards established by the Competition Act. The KHC vide order dated 27.09.2024 granted interim relief in the favor of these resellers, temporarily halting the CCI’s proceedings against Amazon and Flipkart. After this order of the KHC six other resellers, Green Mobiles, Xanique, Cigfil, Wishery, Savex and Adilaxmi who were also made opposite parties by the DG, filed a writ petition before KHC praying for similar relief as was granted to the other resellers, the KHC maintaining the parity granted similar relief to the other six resellers as well.
It is pertinent to note that the Madras High Court (MHC), in April 2024 in the case of MRF vs. CCI, has already observed thatany third party to the investigation before its inclusion/impleadment as a contesting party/opposite party must be put on notice by the CCI. The court emphasized that the CCI must provide an opportunity for third parties to respond before changing their status from “third person” to “contesting party.” Ignoring this judicial precedent as pronounced by the MHC the DG erroneously, without putting the third parties to notice included them as the opposite parties, it is anticipated that this procedural ignorance may invite similar observations by the KHC as well which may possibly halt the investigation process.
In light of the interim Order of the KHC dated 27.09.2024, the associated resellers of Amazon and Flipkart filed writ petitions in Karnataka, Punjab and Haryana, Delhi, Madras, Allahabad and Telangana High Courts challenging different aspects of the CCI’s investigation. The CCI, through its transfer petition in the Hon’ble Supreme Court, sought to consolidate these cases to prevent multiplicity of proceedings and delays.However, recently on 13.12.2024 the Hon’ble Supreme Court refused to transfer 24 Writ in various High Courts by the sellers of Amazon and Flipkart to a division bench of KHC in a transfer petition filed by the CCI. The Supreme Court suggested that it was ready to send the cases to the KHC if both parties agreed. However, with no consensus reached, the matter was deferred until 16.12.2024.
Although the writ petitions in the above cases are pending, it will not be proper to pass any comments on the final outcome, yet, at least prima facie, both the DG, the investigating arm and the CCI itself, seem to be losing grip on procedural aspects. Such frequent procedural errors not only prolong investigations but also cast doubt on the effectiveness of the CCI as the sole fair market watchdog and send wrong signals to the prospective investors in India’s growth story.
The frequent judicial interventions by higher courts due to avoidable procedural lapses within the CCI establishment, not only delay the conclusion of the inquiry process but also undermine the credibility and effectiveness of the investigations conducted by the CCI and dampen the faith of the victims of anti-competitive market conduct who approach the CCI with some hope. Such procedural errors also create opportunities for belligerent entities to manipulate market perceptions in their favor during the pendency of the case, potentially leading to significant undue profits. thereby hampering the CCI’s efforts to effectively enforce competition laws. Let’s hope the CCI can overcome these lapses in the new year.
Note : 1. Ankit Singh Rajput, my Associate contributed in drafting this article .
2 .This article was first published in “Bar & Bench” on 28th December 2024 and can be assessed here.
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