Module 8

MODULE 8

INQUIRY AND INVESTIGATION UNDER THE COMPETITION ACT,
2002

8.1 PROCEDURE OF INQUIRY BY THE COMPETITION COMMISSION OF
INDIA AND INVESTIGATION BY THE DIRECTOR GENERAL

8.1.1 Section 19 (1), The Competition Act, 2002

“The Commission may inquire into any alleged contravention of the provisions
contained in subsection (1) of section 3 or sub-section (1) of section 4 either on its
own motion or on—

(a) receipt of any information, in such manner and accompanied by such fee as may
be determined by regulations, from any person, consumer or their association or
trade association; or

(b) a reference made to it by the Central Government or a State Government or a
statutory authority.”

8.1.2 Section 26, The Competition Act, 2002

“(1) On receipt of a reference from the Central Government or a State Government or
a statutory authority or on its own knowledge or information received under section
19, if the Commission is of the opinion that there exists a prima facie case, it shall
direct the Director General to cause an investigation to be made into the matter:

Provided that if the subject matter of an information received is, in the opinion of the
Commission, substantially the same as or has been covered by any previous
information received, then the new information may be clubbed with the previous
information.

(2) Where on receipt of a reference from the Central Government or a State
Government or a statutory authority or information received under section 19, the
Commission is of the opinion that there exists no prima facie case, it shall close the
matter forthwith and pass such orders as it deems fit and send a copy of its order to
the Central Government or the State Government or the statutory authority or the
parties concerned, as the case may be.

(3) The Director General shall, on receipt of direction under sub-section(1),submit a
report on his findings within such period as may be specified by the Commission.

(4) The Commission may forward a copy of the report referred to in sub-section(3) to
the parties concerned:

Provided that in case the investigation is caused to be made based on reference
received from the Central Government or the State Government or the statutory
authority, the Commission shall forward a copy of the report referred to in sub-
section (3) to the Central Government or the State Government or the statutory
authority, as the case may be.

(5) If the report of the Director General referred to in sub-section (3) recommends
that there is no contravention of the provisions of this Act, the Commission shall
invite objections or suggestions from the Central Government or the State
Government or the statutory authority or the parties concerned, as the case may be,
on such report of the Director General.

(6) If, after consideration of the objections and suggestions referred to in sub section
(5), if any, the Commission agrees with the recommendation of the Director General,
it shall close the matter forthwith and pass such orders as it deems fit and
communicate its order to the Central Government or the State Government or the
statutory authority or the parties concerned, as the case may be.

(7) If, after consideration of the objections or suggestions referred to in sub section
(5), if any, the Commission is of the opinion that further investigations is called for, it
may direct further investigation in the matter by the Director General or cause
further inquiry to be made by in the matter or itself proceed with further inquiry in the
matter in accordance with the provisions of this Act.

(8) If the report of the Director General referred to in sub-section (3) recommends
that there is contravention of any of the provisions of this Act, and the Commission is
of the opinion that further inquiry is called for, it shall inquire into such
contravention in accordance with the provisions of this Act.”

The starting point of an inquiry under the Competition Act, 2002 is through receipt of an
information either suo moto or through reference made to the Commission by the Central
Government or the State Government or a statutory authority. After a preliminary analysis by

the Commission, it is determined if there exists a prima facie case. Once a prima facie case is
established in the view of the Commission, the matter is sent to the Director General for
detailed investigation under Section 26(1) of the Act. The provisions of the Act permit
clubbing of new informations with the previous information if they are substantially the same
or involve the same parties. The Director General, after having made a proper investigation,
submits the Investigation Report to the Commission. The Commission may direct for further
investigation, if need arises. A further investigation report is known as “Supplementary
Investigation Report”. The report is then sent to the parties for their reply and objections.
After further analysis and hearing of the parties on the matter, the Commission passes the
order determining the liability and penalty to be imposed upon the parties. The procedure of
inquiry by the Commission is covered in detail under the provisions of Section 19 of the Act.

Any person, consumer or their association or trade association can file Information before the
Commission. Central government, State Government or a statutory authority can also make a
reference to the Commission for conducting an inquiry.

8.1.3 Filing of Information

The Information should contain relevant details as prescribed1 by the Commission under
Regulation 102 of the Competition Commission of India (General) Regulations, 2009. The
Information should be in the form of statement of facts, containing details of the alleged
contraventions of the Act. The same has to be sent to the Secretary in person or by registered
post or courier service or fax.3

Section 19 empowers the Commission to make inquiry into certain agreements and dominant
position of enterprise for alleged contravention of the provisions of Section 3(1) or Section
4(1) either on its own motion, or on receipt of information from any person, consumer or
their association or trade association, or on reference made to it by the Central Government,
the State Government or any statutory authority. Section 20 empowers the Commission to
conduct an inquiry into combinations. It may do so upon its own knowledge or information
relating to acquisition referred to under Section 5(a) or acquiring of control under Section

1 Available at
https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/How%20to%20file%20Info.pdf.
2 Regulation 18(2), Competition Commission of India (General) Regulations, 2009.
3 Regulation 12, Ibid.

5(b) or merger or amalgamation under Section 5(c) to inquire into whether such a
combination has caused or is likely to cause an appreciable adverse effect on competition in
India. On a receipt of notice under Section 6(2), the Commission shall inquire whether a
combination has caused or is likely to cause an appreciable adverse effect on competition.

Section 26 deals with the procedure for inquiry under Section 19. The Commission is
required to compulsorily refer the matter to the DG for investigation when a prima facie case
exists. A direction of investigation to the DG is deemed to be the commencement of an
enquiry under the Act.4

8.1.4 Investigation by the Director General
The Act mandates reference of the matter to the DG for investigation under Section 26. The
investigation commences as soon as the CCI passes a prima-facie order. The DG is to submit
the report ordinarily within sixty days or less as may be specified by the Commission, which
can be extended reasonably on an application made by the DG. Regulation 20 lays down
detailed rules for Investigation by the DG.

8.2 PRINCIPLES OF NATURAL JUSTICE DURING INQUIRY/INVESTIGATION

8.2.1 Section 36(1), The Competition Act, 2002

In the discharge of its functions, the Commission shall be guided by the principles of natural
justice and, subject to the other provisions of this Act and of any rules made by the Central
Government, the Commission shall have the powers to regulate its own procedure.

The principles of natural justice are to be followed by CCI in discharge of its functions.
However, the question whether the Commission or the DG is required to give the party an
opportunity to rebut the allegations levelled against has been an issue in several cases. In
Board of Control for Cricket in India, the COMPAT overruled CCI’s order for lack of due
process and procedural fairness in relation to the investigation, and held that before issuing
any adverse decision, the CCI must comply with the principles of natural justice, including
following the rule of audi alteram partem.

4 Regulation 18(2), Competition Commission of India (General) Regulations, 2009.

The Competition Commission of India (General) Regulations, 2009 in Regulation 41(5)
provides that when evidence by a party is to be led by way of oral submissions, the other
party may be granted an opportunity to cross-examine the person giving the evidence only if
the CCI or the DG considers it necessary or expedient (discretionary).

However, in recent matters pertaining to Competition law in India, upon the issue of cross-
examinations, the courts have taken a robust view with regard to this discretionary power of
allowing cross-examination.

In the case of Cadila Healthcare v Competition Commission of India5, the Division Bench of
the Delhi High Court while decreeing upon the issue of cross-examination viewed that:

“This court is of the opinion that the discretion, which is undoubtedly vested with the CCI to
permit or refuse cross examination of a witness, is to be exercised judiciously. The reason for
denial of the request for cross examination is that the justification given by Cadila is not
"satisfactory" and that the testimony of witnesses who have deposed and whose cross
examination is sought, are not relied upon in the DG's report. This court is of the opinion
that such reasons are not germane; mere "dissatisfaction" does not imply judicious exercise
of discretion. As regards the reliance by the DG in his report is concerned, the grounds of
cross examination are necessarily wider; it is avowedly to establish whether the witnesses
were credible and whether any part of their statements could be relied on; furthermore they
can be cross examined on relevant facts, which are not necessarily confined to what they
depose about. Therefore, it is held that CCI erred in refusing to grant cross examination (to
Cadila) of the three witnesses who had deposed before the DG.”

Thus, it can be understood, that although the power to grant the opportunity of cross-
examination vests with the CCI, the refusal of such opportunity of cross-examination needs to
be backed by sufficient reason.

Chapter V of the Competition Act, 2002 entitled ‘Duties of Director General’ deals with the
powers of the DG to investigate contraventions as ordered by the CCI. The DG is vested with
certain powers of the Civil Courts and powers of Inspectors relating to production of
documents and evidences and seizure of documents.

5 LPA 160/2018 & CM APPL. Nos. 11741-44/2018

8.3 IMPOSITION OF PENALTIES BY THE CCI

Section 27 of the Act in orders by Commission after inquiry into agreements or abuse of
dominant position provides for imposition of “such penalty which shall not be more than ten
percent of the average of the turnover for the last three preceding financial years”.
Moreover, Chapter VI (Section 42-48) of the Act deals with ‘Penalties’. The leading case on
this is Excel Corporation v. CCI.

8.4 IMPORTANT CASE LAWS

8.4.1 Excel Corporation v. CCI

It is a case on anti-competitive agreements under Section 3 of the Competition Act, 2002 as
an appeal against the order of the COMPAT. The Food Corporation of India informed the
CCI of alleged violation of Section 3(3) by Excel Corp. and two other firms. It was alleged
that they were guilty of big rigging in relation to supply of Aluminium Phosphide Tablets
(APT). CCI after considering the report of the DG and replies filed by the parties, held them
guilty of violating Section 3(3) of the Act and imposed a penalty @9% of the average total
turnover of these companies during the preceding three years. On appeal the COMPAT
affirmed the order of the CCI except that the penalty of 9% should be levied on the turnover
of the supplied product and not on total turnover.

The validity of the order of the COMPAT on the aforesaid aspect was challenged by the
appellant. The DG in his report pointed out that between years 2002-2009 the appellants
quoted identical price for supply of APT, except in 2007. In the years 2005 and 2008 all the
parties abstained from submitting the bid. In 2009 the representatives of all the three
companies made common entry in the office of FCI and the entries for all were made by only
one of them. The CCI accepted the report of the DG and found the explanations given by the
appellant of common entry, identical prices and simultaneous abstaining from bidding,
unsatisfactory and unconvincing. A penalty @ of 9% at the total average turnover during the
three preceding years was imposed. On appeal the COMPAT agreed with the order of the
CCI but modified it to the extent of imposing it only on the turnover of the relevant product,
that is, APT.

The following principles of law were laid down by the Supreme Court in this case-

§ The tender was floated by FCI and agreement was entered into before the commencement
of the Competition Act, 2002 but transactions under the agreement took effect after
Section 3 came into effect. Therefore, the agreement shall be tested on the touchstone of
section 3.

§ No doubt, Clause (d) of Sub-section (3) of Section 3 of Act, uses both expressions 'bid
rigging' and 'collusive bidding', but Explanation thereto refers to 'bid rigging' only.
However, it cannot be said that, intention was to exclude 'collusive bidding'.

§ Whether CCI was barred from investigating the matter pertaining to the tender floated by
FCI in March, 2011 because of reason that FCI in its complaint dated 4th February, 2011
given to CCI had not complained about this tender? Scope of section 26 is wide enough to
empower the CCI to cover all necessary evidence to find out violation of section 3.

§ The Court also justified the conclusion of the CCI, on the basis of the facts of the case, in
finding that Section 3 has been violated.

§ On imposition of penalty the Court agreed with COMPAT to hold that penalty can be
imposed only on the turnover of the relevant product. This is because the purpose of
imposing penalty is not to destroy the enterprise.

The Court decided that penalty should be imposed on the turnover of the relevant product that
is the product or service which is the subject matter of anti-competitive agreement on the
basis of the doctrine of proportionality. Further reliance should be placed on grounds of
Article 14 and 21 of the Constitution of India and not on the turnover of all the product or
services produced or provided by the enterprise. According to the Supreme Court, the
purpose of penalty is deterrence and not destruction of the enterprise. This approach may
create complications and contradictions in certain circumstances. (a) Assuming enterprise X
produces products A, B and C, the anti-competitive agreement relates only with reference to
product C, then penalty may be imposed only on the turnover of product C, because,
according to the Supreme Court, penalty on turnover of all the products will amount to
destroying the enterprise. On the other hand, if enterprise Y produces only product C, the
penalty shall be imposed on its turnover of entire production but then it shall not be
destructive according to the Court. (b) If enterprise X in the aforementioned illustration
produces product C in a small quantity in comparison to product A and B, will penalty on the
turnover of product C have deterrent effect? It is suggested that it would be far better if the
question whether the penalty should be imposed on the entire product or only on the relevant

product should be left to the discretion of the court. The question should be decided on the
consideration whether penalty on entire production or on relevant product will have deterrent
effect.

8.4.2 Mohit Manglani v M/s Flipkart India Pvt. Ltd.

The Commission, in this case, has probed whether certain resale price arrangements between
manufacturers and e-retailers violate competition norms. The Informant filed a complaint
under Section 19(1) against various e-portals alleging violation of Section 4 of the Act. It was
alleged that the e-commerce websites had been indulging in anti-competitive practices in the
nature of ‘exclusive agreements’ with sellers of goods and services. Such practices left the
consumer with no option in regard to terms of purchase and price of the goods and services.
The consumers were left with no alternatives but to purchase the product as per the terms set
by these websites or not purchase the product at all. It was also stated that each e-portal i.e.
the Opposite Party had 100% market share for the product in which it is exclusively dealing
and which in turn leads to dominance. It was further contented that the relevant market has to
be defined in context of a particular product in question and the dominance be seen
accordingly.

The main issue for consideration was, whether the practice of entering into exclusive
agreement for sale and purchase of goods by way of e-commerce is violating the provisions
of Section 3(1), 3(4) (b) & (c) and Section 4(a) (i), 4(b) (i) and 4(b) (ii) of the Competition
Act, 2002 and have an appreciable adverse effect on competition (AAEC) in India.

The Commission observed that online distribution channel by the e-commerce websites
provide an opportunity to the consumer to compare the price as well as the pros and cons of
the product. Also, it provides the option of delivery right at their convenience. Therefore, it
does not appear that the exclusive arrangement between manufactures and e-portals lead to
appreciable adverse effect on competition in the market.

The Commission further observed that every product of opposite parties cannot be considered
as a relevant market in itself, therefore, it was stated in the order that, e-portal acts as a
separate relevant product market or as a sub-segment of the market for distribution. Further, it
does not appear that because of these exclusive agreements any of the existing players in the

retail market are getting adversely affected, rather with new e-portals entering into the
market, competition seems to be growing.

8.4.3 Shamsher Kataria v Honda Siel Cars India Ltd.
Information was filed against the original equipment manufacturers (OEM) for violating
Section 3 (4) and Section 4 of the Competition Act, 2002 for entering into agreements with
original equipment suppliers (OES) and authorized dealers, for restricting free availability of
auto spare parts in the market and imposing unfair prices. It was also alleged that OEMs were
not providing technological information, diagnostic tools and software programs to
independent repairers that are required to maintain, service and repair such automobiles. This
led to imposition of unfair and discriminatory conditions and amounts to denial of market
access.
The DG in his report, identified three separate relevant markets viz. primary market,
aftermarket and after sale service of repair and maintenance. The commission inquired into
the anti-competitive agreements and abuse of dominance by OES.

The Commission noted that there was no interchangeability and compatibility between spare
parts of one brand/model of car and spare parts of another brand/model, thereby taking away
customers choice to switch. OEMs strength in the market enabled it to affect the competitors
in the secondary market, thereby limiting the options available to the consumer to their
detriment. It gave OEMs position of strength and, therefore, a position of dominance.

Further, the OEMs restricted the availability of the diagnostic tools and repair manuals etc.
which was required to effectively carry out the maintenance procedure. Such practice
amounted to denial of market access under Section 4 (2)(c) of the Competition Act, 2002.
OEMs were also found guilty of leveraging under Section 4 (2)(e) by using dominance in the
market of sale of spare parts for protecting the relevant market of after sale service and
repairing.

Vertical agreements between OEMs and OESs had restrictions on OESs from supplying spare
parts in the independent after market without the approval of the OEMs thereby amounting to
violation under Section 3(4)(c) and 3(4)(d) of the Competition Act, 2002. .

8.4.4 Automobiles Dealers Association v. Global Automobiles Limited & Anr.

Automobile Dealers Association (“Informant”) and Global Automobiles Limited (“Global
Automobiles”) executed a Letter of Intent (“LOI”), in terms of which Informant had agreed
to be the exclusive dealer for Global Automobiles, a private limited company engaged in the
business of manufacture and sale of two wheelers. As per the LOI, services rendered were to
be as per the standard stipulated by Global Automobiles and materially as per Clause 6, the
showroom was to be used exclusively for products of Global Automobiles. Informant could
not deal in goods of other manufacturers. Informant submitted that the LOI prevented
Informant from dealing with other two-wheeler manufacturers. The Informant alleged that the
LOI was violative of Section 3 (4) of the Act and further, that Global Automobiles held
dominant position and abused the same. Global Automobiles in their reply however
submitted that there had been a recent change in management and while it was making
endeavours to ascertain grievances of dealers, it justified exclusive dealership clauses. Global
Automobiles submitted that since sales and marketing in automobiles was technical, it
required specialized knowledge and hence such stipulations in the LOI were therefore
required to better service customers.

Commission found that a prima facie case had been made and passed an Order directing the
DG to conduct an investigation. The DG in his report (“Global Automobile Report”), noted
that clauses in the LOI were restrictive. The DG further concluded that such restrictive
clauses had the effect of creating barriers to new entrants and would further place restrictions
on supply and price of the product in the relevant market. The DG also observed that the LOI
placed the Informant in a disadvantageous position vis-à-vis Global Automobiles by placing
exit barriers on its dealers. Thus, the DG concluded that the restrictive clauses were causing
appreciable adverse effect on competition. However, the DG noted, on the basis of the
records of Global Automobiles and other market participants, that only 611 units of two
wheelers were dispatched by Global Automobiles in the recent past, it was not a member of
Society of Indian Automobile Manufacturers and its financials were not comparable to
established manufacturers such as Hero Honda, Bajaj and TVS. Hence the DG noted that it
could not be said that Global Automobiles had abused or even had a dominant position.

The Commission, on a plain reading of the clauses of the LOI, concurred with the findings of
the DG that the clauses were restrictive. However, the Commission noted that, even though
the individual clauses were restrictive in terms of Section 3 (4) of the Act, the DG Report and

the allegations of the Informant did not substantiate that there was appreciable adverse effect
on competition.

8.4.5 Fast track call cab Pvt. Ltd and Meru Travels Solutions Pvt. Ltd. V. ANI
Technologies Pvt. Ltd.

The present case relates to the dispute between two radio taxi service providers (namely Fast
Track Call Cab Pvt. Ltd. and Meru Travel Solutions Pvt. Ltd.) and Ola (ANI Technologies
Pvt. Ltd.), which is an app-based taxi aggregator. The informants essentially alleged inter
alia contravention of Section 4 of the Competition Act, 2002, i.e. abuse of dominant position.

The Commission in its prima facie order stated that Ola held a dominant position in the
market for ‘Radio Taxi services in the city of Bengaluru’ and that it was abusing its dominant
position. In furtherance of this, the Commission clubbed the information in both cases
together and ordered the Director General (DG) to investigate.

The DG analysed the Indian taxi industry in general and that of Bengaluru in particular. In
order to define the relevant product market, the DG considered Ola’s contention that the
company was merely a technology company and an ‘aggregator of taxis’, and was not in the
business of radio taxis, unlike Meru, Mega, Easy Cabs, etc. Due to the inherent difference in
business models, Ola indicated that it merely connected drivers with prospective consumers
and did not own the cabs itself. The DG delineated the relevant product market as market for
radio taxi services. Furthermore, the DG restricted the relevant geographic market to the city
of Bengaluru. The rationale was that transport being a state subject, taxi regulations and
schemes differed from state to state and city to city.

To ascertain whether Ola was dominant in the relevant market, the DG assessed market
dominance of Ola from June 2012 to September 2015. The market share analysis was based
on number of trips (monthly and annually) and total fleet size and active fleet size. Based on
the aforementioned analysis, the DG concluded that Ola was not able to hold its market share
for a reasonable period of time, hence indicating that it could not be a dominant player in the
market.

While determining the relevant market, the Commission acknowledged that although Ola
acted as a platform operating in the radio taxi service market, it would still be considered to
be a part of the same relevant market as other players operating under the asset-owned model.
The rationale being that irrespective of the business model, the services offered and rendered
were that of radio taxis. The relevant product market was thus held to be market for radio taxi
services. The Commission also agreed with the DGs analysis of the relevant geographic
market and resultantly held that the relevant market would be market for radio taxi services in
Bengaluru”.

Assessing the issue of dominance, the Commission laid down the reasoning by stating that
though the operators under the platform-based model provided the same product/service (taxi
services), the technology enabled them to expand the market at both ends (i.e. the consumer
and driver base) immensely.
Hence, considering the facts:
(1) the competitive process in the relevant market was unfolding;
(2) the market was growing rapidly;
(3) effective entry had taken place thereby leading to gradual decline in Ola’s market share;
(4) entry barriers were not insurmountable;
(5) countervailing market forces that constrained the behaviour of Ola existed; and
(6) the nature of competition was dynamic, the Commission held that Ola’s dominance in the
relevant market was unsubstantiated.

Hence, the Commission felt that there was a statutory compulsion of non-intervention in the
present case vis-à-vis pricing strategy of Ola as it was held to be a non-dominant player.
Thus, the Commission was hesitant to interfere as the market had not yet fully developed.
The Commission feared that interference at this stage would disturb the market dynamics and
also pose a risk of prescribing sub-optimal solution to a nascent market situation.

8.4.6 CCI V SAIL [Competition Commission of India v Steel Authority of India Limited
(2010) SCC 744]
In the present case, CCI filed an appeal to the Supreme Court against the order of the tribunal
in the case of Steel Authority of India Ltd. v. Jindal Steel and Power Ltd. Jindal Steel had
filed a complaint against SAIL for anti-competitive practices and abusive behaviour by

entering into an exclusive supply agreement with the Indian Railways. CCI issued notice to
SAIL to furnish certain information within two weeks but SAIL requested for an extension of
time upto six weeks to file such information. CCI denied the request for extension of time
and came to the conclusion that a prima facie case exists and directed the DG to conduct an
investigation under Section 26(1) of the Act. SAIL challenged CCI’s order before the tribunal
on grounds of non-granting of extension time and forming an opinion as to the existence of a
prima facie case without having adequate information. It also contended that the requirement
of recording reasons was also not met. The tribunal held that even a direction to inquire was
appealable under Section 53A(1) of the Act. CCI should have given adequate opportunity to
SAIL before directing the matter for investigation to the DG. It also held that CCI was neither
a necessary party nor a proper party in appeals filed by an aggrieved party before the tribunal
and therefore SAIL’s action of not impleading CCI as a party was correct. Not recording
reasons for declining grant of extension was found to be violative principles of natural
justice.

Supreme Court: CCI approached the Hon’ble Supreme Court against the above order passed
by the tribunal. The Court framed six main issues:

§ Whether the direction passed by the Commission u/s. 26(1) of the Act while forming
prima facie opinion would be appealable u/s/ 53A(1) of the Act?

§ What is the scope of the power vested with Commission u/s. 26(10 of the Act and
whether parties including the informant and other affected parties are entitled to notice at
the stage of formation of prima facie opinion?

§ Whether the Commission would be necessary or at least a proper party in proceedings
before the Tribunal?

§ At what stage and in what manner the Commission can exercise its powers u/s 33 of the
Act while passing interim orders?

§ Whether it is obligatory for the Commission to record reasons while forming prima facie
opinion?

§ What directions, if any, need to be issued by the Court for ensuring proper compliance of
the procedural requirements while keeping in mind the scheme and object of the Act?

Issue (i): The Court noted that right to appeal is a substantive right which derives its
legitimacy from the operation of law or statute. If the Statute does not provide for an appeal,
the Court cannot presume such right. The direction to cause an investigation into a matter is

passed under Section 26(1) of the Act does not determine any right or obligation of the
parties to the lis. It does not find mention in Section 53A(1) of the Act and hence, the Court
found that such orders would not be appealable under the Competition Act, 2002.

Issue (ii) and (v): The Court noted that the exclusion of principles of natural justice (PNJ) is a
well-known concept and the legislature has the competence to enact such laws. Whether the
exclusion of application of PNJ would vitiate the entire proceedings would depend upon the
nature and facts of every case in the light of the Act or Rules and Regulation applicable to the
case. The Court, then, read into various provisions of the Act and the Competition
Commission of India (General) Regulations, 2009 in order to determine the nature of
functions of the Commission under various provisions. The Court found that at the face of it,
the exercise of power u/s. 26(1) of the Act while forming prima facie opinion is inquisitorial
and regulatory. It held that while forming prima facie opinion, the Commission does not
condemn anyone. This function is not adjudicatory in nature but merely administrative. This
function is in the nature of preparatory measures in contrast to the decision making process
and hence right of notice of hearing is not contemplated u/s. 26(1) of the Act.
On the issue of reasons to be recorded at the stage of forming prima facie opinion, the Court
held that the Commission must express its mind in no uncertain terms that it is of the view
that prima facie case exists. Such opinion should be formed on the basis of the records,
including the information furnished and reference made to the Commission. The reasons may
not be in detail but there must be minimum reasons substantiating the view of the
Commission.

Issue (iii): The Court reiterated the settled position of law relating necessary party and proper
party. A necessary party is one without whom no order can be made effectively whereas a
proper party is one in whose absence an effective order can be made but whose presence is
necessary for a complete and final decision on the question involved in the proceeding.
Applying the principle of dominus litus, the Court then noted that in cases where the
Commission initiates a proceedings suo moto it shall be the proper party. In all other
proceedings it shall be a necessary party.

Issue (iv): On powers of the Commission u/s. 33, the Court noted in following terms:
“During an inquiry and where the Commission is satisfied that the act is in contravention of
the provisions stated in Section 33 of the Act, it may issue an order temporarily restraining
the party from carrying on such act, until the conclusion of such inquiry or until further

orders without giving notice to such party, where it deems it necessary. This power has to be
exercised by the Commission sparingly and under compelling and exceptional circumstances.
The Commission, while recording a reasoned order inter alia should : (a) record its
satisfaction (which has to be of much higher degree than formation of a prima facie view
under Section 26(1) of the Act) in clear terms that an act in contravention of the stated
provisions has been committed and continues to be committed or is about to be committed;
(b) It is necessary to issue order of restraint and (c) from the record before the Commission, it
is apparent that there is every likelihood of the party to the lis, suffering irreparable and
irretrievable damage or there is definite apprehension that it would have adverse effect on
competition in the market.

Issue (vi): One of the major outcomes of the case relates to the Court’s recognition and
affirmation of the expeditious disposal of complaints filed before the Commission. The Court
found this to be a fit case to issue certain guidelines in the larger interest of the justice
administration.

8.4.7 JIO ORDER (CCI v. Bharti Airtel Limited and Ors6)

Reliance Jio Infocomm Ltd. (RJIL) filed information before CCI alleging anti-competitive
agreement having been formed by Bharti Airtel, Vodafone India and Idea Cellular. CCI
passed an order on April 21, 2017 holding a view that prima facie case exists and directed the
DG to cause investigation in the case. The aggrieved parties filed writ petition before the
Bombay High Court on the ground that CCI did not have jurisdiction in the matter. The High
Court quashed CCI’s order for the lack of jurisdiction. Since the telecom sector is governed
by different Acts and Regulations, the questions in dispute are to be settled by TDSAT
(Telecom Disputes Settlement and Appellate Tribunal). The High Court held that the issues
arising out of contract agreements and related issues are to be settled by the authority under
the TRAI Act in the first instance and unless these issues are decided, no proceedings under
the Competition Act can be initiated. It’s premature for CCI to assume jurisdiction for want
of determination such issues which fall within the domain of TRAI Act.

6 Civil Appeal No(s). 11843 of 2018.

CCI and RJIL filed special leave petitions before the Hon’ble Supreme Court. The court, in
the instant appeal, recognized the need of defining the scope of the powers of CCI pertaining
to telecom sector vis-à-vis the scope of powers of TRAI. The Court framed three main issues.

§ Jurisdiction of the CCI: The Court discussed the scope of Competition Act in detail,
recognizing the importance of “relevant market” and the notion of ‘power over the
market’ which is the key to analyse many competitive issues. In the present case, the
‘relevant market’ was defined to be the telecom market, which is also regulated by the
statutory regime contained under the TRAI Act. TRAI not only exercises
control/supervision over the telecom service providers but is also supposed to provide
guidance to the telecom market. The present matter had already been raised by RJIL
before TRAI for settlement of the dispute. Since TRAI is constituted as an expert body
which specifically governs the telecom sector, the dispute is to be decided by the TRAI in
the first instance. TRAI, being a specialised sectoral regulator and also armed with
sufficient power to ensure fair, non-discriminatory and competitive market in the telecom
sector, is better suited to decide these issues. CCI can only enquire at a later stage as to
whether violation of the provisions of TRAI Act amounts to ‘abuse of dominance’ or
‘anti-competitive agreements’. Not only TRAI is better equipped to deal with these
jurisdictional aspects, there may also be a possibility of TRAI and CCI arriving at
conflicting views. However, TRAI does not have the exclusive jurisdiction to deal with
matters involving anti-competitive practices to the exclusion of CCI altogether because of
the reason that the matter pertains to telecom sector. It is only the CCI which is
empowered to deal with issues relating to anti-competitive practices as CCI is a special
statute in itself.

§ Whether the writ petitions filed before the Bombay High Court were maintainable? : The
Court discussed CCI v SAIL in which it was held that an order under section 26(1) of the
Act is an administrative order and not a quasi-judicial order. However, even if the order is
administrative in nature, the question raised in writ petitions touched upon the very
jurisdiction of CCI. The writ petition was held maintainable when jurisdictional issues
were raised.

8.4.8 GOOGLE INC. V. CCI [Google Inc. & Ors. v. Competition Commission of India
W.P. (C) No. 7084/2014]

Information was filed before CCI alleging that Google Inc. has abused its dominant position
in the Internet advertising space by promoting its vertical searches like YouTube, Google
Maps etc. It was alleged that these vertical services appear predominantly on the search result
page irrespective of their relevance or popularity. In April, 2014, CCI framed a prima facie
opinion and ordered the DG to investigate into the allegations under Section 26(1) of the Act.
Google filed an application before the CCI for recall of its order directing DG to conduct an
investigation for not providing them an opportunity of being heard. This was rejected on the
ground that the Commission lacks jurisdiction to entertain any such application. CCI held that
it was of the prima facie view that a case for investigation was made out and, in any event,
the power of review was not conferred upon the CCI under the Act and therefore it was
impermissible in law for an authority to review/recall its orders.

Writ petition was filed before the Delhi High Court where the main issue was whether an
administrative body had inherent powers to review or recall its order passed under Section
26(1) in the absence of any specific provisions in the Competition Act, 2002. The
Commission argued that with the deletion of Section 37 of the Act, the power of review had
been taken away. The scheme of the Act does not permit reviews or recalls of the orders. CCI
argued that applicability of Section 26(1) is at a preparatory stage and therefore not
appealable.

The power exercised by CCI under Section 26(1) is administrative in nature as has been held
in the case of CCI v SAIL. A decision taken in exercise of administrative powers can be
reviewed / recalled by the person / authority taking the said decision even in the absence of
any specific power in that regard. The only question is, whether the said rule is not applicable
to decisions taken, though in exercise of administrative power, but conferred under a statute.

The ancillary question is, whether there is anything in the statute which indicates that an
order under Section 26(1) ought not to be reviewed / recalled.

The Delhi High Court held that power to recall exists irrespective of whether jurisdiction
being exercised is judicial, quasi-judicial or administrative. The Court further held that even

in the absence of any specific provision, the CCI is capable of review/recalling its order under
Section 26(1) for the following reasons:

§ Before passing an order under Section 26(1) of the Act, CCI is to satisfy itself that a
prima facie case exists of contravention of Section 3 or 4 of the Act. Without framing
such an opinion, no investigation by the DG can be ordered to be made. However, while
forming such an opinion, as per SAIL, CCI is not mandated to hear the person/enterprise
referred/informed against.

§ The statute does not provide any remedy to a person / enterprise, who / which without
being afforded any opportunity, has by an order / direction under Section 26(1) been
ordered / directed to be investigated against / into. Though COMPAT has been created as
an appellate forum against the orders of CCI but its appellate jurisdiction is circumscribed
by Section 53A of the Competition Act and no appeal is prescribed against the order of
CCI under Section 26(1) of the Act. The said person / enterprise, in the absence of any
remedy, has but to allow itself to be subjected to and participate in the investigation. (C)
The DG, during the course of such investigation, by virtue of Section 41(2) read with
Section 36(2) of the Act has the same powers as are vested in a Civil Court under the
Code of Civil Procedure, 1908, while trying a suit in respect of, (i) summoning and
enforcing the attendance of any person and examining him on oath, (ii) requiring the
discovery and production of documents, (iii) receiving evidence on affidavit, (iv) issuing
commissions for the examination of witnesses and documents, and (v) requisitioning
public records or documents from any public office. The DG is further empowered by
Section 41(3) read with Sections 240 and 240A of the Companies Act, 1956 to keep in its
custody any books and papers of the person/enterprise investigated against / into for a
period of six months and to examine any person on oath relating to the affairs of the
person/enterprise being investigated against / into and all officers, employees and agents
of such person/enterprise are also obliged to preserve all books and papers which are in
their custody and power.

§ The powers of the DG during such investigation are far more sweeping and wider than
the power of investigation conferred on the Police under the Code of Criminal Procedure.
While the Police has no power to record evidence on oath, DG has been vested with such
a power. Thus, while in investigation by Police under the Cr.P.C, the rule of audi alteram
partem does not apply, there is no such embargo on the DG, CCI.

§ The investigation by the DG ordered by the CCI thus stands on a different pedestal from a
show cause notice, the scope of judicial review whereof, though lies, is very limited and
from investigation/inquiry pursuant to an FIR by the Police which in some cases has been
held to be not causing any prejudice and thus furnishing no cause of action for a challenge
thereto. investigation by the DG under the Competition Act commences not merely on the
receipt of reference/information but only after CCI has formed a prima facie opinion of
violation of the provisions of the Act having been committed.

§ Supreme Court, in SAIL v CCI held that the function discharged by CCI while forming a
prima facie opinion under Section 26(1) is inquisitorial/regulatory/ administrative in
nature. Once, petitions under Article 226 for quashing of investigation under the Cr.P.C
have been held to be maintainable, on the same parity a petition under Article 226 would
also be maintainable against an order/direction of the CCI of investigation under Section
26(1) particularly when the powers of the DG, CCI of investigation are far wider that the
powers of Police of investigation under the Cr.P.C.

§ Deletion of Section 37 of the Competition Act as it stood prior to the amendment with
effect from 12th October, 2007 cannot be a conclusive indication of the legislature having
intended to divest the CCI of the power of review or an argument to contend that the
power of review if found to be existing in the CCI de hors Section 37 has been taken
away by deletion of Section 37.

§ This is not to be understood as conveying that in every case in which CCI has ordered
investigation without hearing the person / enterprise complained / referred against, such
person/enterprise would have a right to apply for review / recall of that order. Such a
power though found to exist, has to be sparingly exercised and it should be ensured that
the reasons which prevailed with the Supreme Court in SAIL v. CCI for negating a right
of hearing to a person (at the stage of passing a Section 26(1) order) be not subverted.