Module 5

MODULE 5
AUTHORITIES UNDER THE COMPETITION ACT, 2002

5.1 ESTABLISHMENT AND COMPOSITION OF THE COMPETITION
COMMISSION OF INDIA

Chapter III of the Competition Act,2002 describes in detail the establishment and
composition of the Competition Commission of India (“CCI”). Section 7 to Section 15 of the
Competition Act, 2002 enumerates upon the establishment and composition of the CCI.

5.1.1 Section 7: Establishment of Commission

The CCI is established under Section 7 of the Competition Act 2002. It was established by
the Central Government by a notification to establish a separate regulatory competition
authority as recommended by the Raghavan Committee Report. According to the Act, the
CCI is a body corporate bearing qualities of a company including that of having a perpetual
succession, a common seal and the capacity to sue and be sued. The Head Office of the CCI
shall at such place as the Central Government may deem fit. The Commission can then
establish its offices all around India as and when required. At present, the CCI is only located
in New Delhi.

5.1.2 Section 8: Composition of Commission

The Composition of the CCI is defined more particularly under Section 8 of the Competition
Act, 2002. The CCI shall consist of a Chairperson and a minimum of 2 other members
(maximum 6 members). The Chairperson and the other members should have intricate and
profound knowledge relating to the fields of international trade, economics, business,
commerce, law, finance, accountancy, management, industry, public affairs or competition
matters, including competition law and policy with an experience of minimum 15 years in the
above stated subjects and also as the Central Government thinks it to be fit. The Chairperson
and other members are considered to be the whole-time members of the Commission.

5.1.3 Section 9: Selection Committee for Chairperson and Members of Commission

Under Section 9, the Chairperson and other members shall be appointed by the Central
Government from a list of names of individuals who are fit to become members of the CCI
by the Selection Committee. The Selection Committee consists of the Chief Justice of India
and its nominee who may suggest the name of the Chairperson. While the other members
may be suggested by the Secretary of the Ministry of Corporate Affairs, the Secretary of the
Ministry of Law and Justice and two other experts who have special knowledge and
professional experience in the fields of international trade, economics, business, commerce,
law, finance, accountancy, management, industry, public affairs or competition matters,
including competition law and policy. The term of the Selection Committee and the manner
of selection of the panel may be as prescribed.

5.1.4 Section 10: Term of office of Chairperson and other Members

The term of office of the Chairperson and other members as per Section 10 of the
Competition Act, 2002 is 5 years from the date of take charge of such office (eligible for re-
appointment). The Chairperson shall not be appointed or re-appointed after the age of 67
years and no other member shall be appointed or re-appointed after the age of 65 years.

If the Chairperson or any other member vacates his office according to the conditions
explained under Section 11, then the Chairperson or any other member shall be appointed as
per the provisions mentioned in Section 9 of the Act. The Chairperson and the other members
shall take and subscribe to an oath before assuming charge of such office in the manner
prescribed. In the event that the Chairperson or any other member vacates his office for the
reasons of death or resignation or any other reason, the senior most member shall act as the
Chairperson of the Commission till the time the new Chairperson is not appointed. In the
event, the Chairperson is not able to function because of illness or otherwise, the senior most
member shall act as the Chairperson of the Commission till the time the Chairperson resumes
his/her position.

5.1.5 Section 11: Resignation, removal and suspension of Chairperson and other
members

Under Section 11, the Chairperson or other members can vacate their office by writing a
letter of resignation to the Central Government, provided the Central Government approves
of such resignation by the Chairperson or the member. The Chairperson or the other member

shall hold the office for 3 months till the new appointed Member takes their place in the
Office or the term of their office gets over (whichever is earlier).

The other grounds for the Chairperson and the other Members to vacate their Office are,
when any of the members are termed insolvent, or has engaged in paid employment during
their term of Office, got convicted of an criminal offence involving moral turpitude
according to the Central Government, or has acquired any other financial position which may
affect his functions as a member of the Office, or has abused his position, or become
physically or mentally incapable of being a member of the Office. The member shall only
vacate in the cases of acquiring financial positions or abusing his position when he is being
deemed to be unfit by the Supreme Court.

5.1.6 Section 12: Restriction on employment of Chairperson and other Members in
certain cases

Section 12 restricts members from taking up any office of employment unless it is a statutory
or government body for two years after vacating the office.

5.1.7 Section 13: Administrative powers of Chairperson

Section 13 grants the Chairperson the authority to have administrative powers and delegate
such powers to other Members as the Chairperson deems fit.

5.1.8 Section 14: Salary and allowances and other terms and conditions of service of
Chairperson and other Members

Section 14 describes the salaries of the Chairperson and the other members. The salaries of
the Chairperson and the members shall be such as may be prescribed and should be such that
it shall not cause any disadvantage to the Chairperson and the other Members after taking the
Office.

5.1.9 Section 15: Vacancy, etc. not to invalidate proceedings of Commission

The Proceedings shall not be invalid under Section 15 in case there is any vacancy which
does not directly affect the merits of the case. The Proceedings shall continue without any
problem when there is a vacancy and such vacancy may be filled in due course.5.2
POWERS AND FUNCTIONS OF THE COMPETITION COMMISSION OF INDIA

The Duties, Powers and Functions of the CCI are defined under Chapter IV of the
Competition Act 2002. Section 18 to 40 describe in detail the duties, powers and functions of
the CCI, but under the 2007 Amendment Act Sections 23,24,25, 34,37 and 40 have been
omitted from the Act.

5.2.1 Section 18: Duties of Commission

The main duties of the Commission are to eliminate practices having appreciable adverse
effect on the competition, promote and sustain competition, protect the interests of consumers
and ensure freedom of trade carried on by other participants in India. The Commission may
for discharging its duties have to enter into memorandum of arrangement with the Central
Government.

5.2.2 Section 19: Inquiry into certain agreements and dominant position of enterprise

Section 19 has to be read with Sections 26, 27 and 28 because in matters related to dominant
position, Section 19, 26 27 and 28 provide in detail as to how the Commission should
function when dealing with matters pertaining to dominance and its abuse.

The Commission has the power to inquire into any alleged contravention of provisions
contained in sub-section 1 of section 3 or sub-section 1 of section 4 on its own or if it
receives any information with prescribed fees from any person, consumer, or their association
or trade association or a reference made to it by the Central Government or a State
Government or a Statutory Authority.

§ The Commission while determining if an agreement has an adverse effect on the
Competition in India or not, has to take into consideration the following factors: creation
of barriers to new entrants in the market;

§ driving existing competitors out of the market
§ foreclosure of competition by hindering entry into the market
§ accrual of benefits to consumers
§ improvements in production or distribution of goods or provision of services; or
§ promotion of technical, scientific and economic development by means of production or

distribution of goods or provision of services.

The Commission while inquiring into whether an enterprise enjoys a dominant position or
not, has to look into the following factors:

§ market share of the enterprise

§ size and resources of the enterprise

§ size and importance of the competitors

§ economic power of the enterprise including commercial advantages over competitors

§ vertical integration of the enterprises or sale or service network of such enterprises

§ dependence of consumers on the enterprise

§ monopoly or dominant position whether acquired as a result of any statute or by virtue of

being a Government company or a public sector undertaking or otherwise

§ entry barriers including barriers such as regulatory barriers, financial risk, high

capital cost of entry, marketing entry barriers, technical entry barriers, economies of

scale, high cost of substitutable goods or service for consumers

§ countervailing buying power

§ market structure and size of market

§ social obligations and social costs

§ relative advantage, by way of the contribution to the economic development, by the

enterprise enjoying a dominant position having or likely to have an appreciable adverse

effect on competition

§ any other factor which the Commission may consider relevant for the inquiry

The Commission also has to take due care while determining the relevant geographic market
and the relevant product market.

5.2.3 Section 26: Procedure for inquiry under Section 19

On receipt of a reference from Central Government or State Government or any other
Statutory Authority, if the Commission is of the opinion that there exists a prima facie case, it
shall pass an order under Section 26(1) of the Competition Act, 2002 and accordingly direct
the Director General (DG) to carry out a detailed investigation as to such prima facie opinion.

If the Commission is of the opinion that there exists no prima facie case, it shall pass an order
under Section 26(2) of the Competition Act, 2002 and may accordingly either direct to
continue the investigation or close to it and send a copy of the same to the Central
government or State Government or the Statutory Authority concerned.

The Director General shall furnish his findings as per the period decided by the Commission.

The Commission shall forward a copy of the findings if any party is involved in the case for
that matter.
If the Director General recommends that there are no contraventions to the Act then the
commission can ask for suggestions from the Central Government and State Government to
be provided to the Director General.
After considering the circumstances with the Director General, if the Commission feels that
there is no substance in the case then it shall pass an order to close the case. If the
Commission feels that the case should be investigated further then it may direct the Director
General to carry out further investigations as it may deem fit.
5.2.4 Section 27: Orders by commission into agreements or abuse of dominant positions.
The Commission can pass Orders regarding an enterprise enjoying dominant position.
The Commission can Order an enterprise to discontinue with the agreement or re-enter a new
agreement where the enterprise will not follow a dominant position.
The Commission can impose a penalty of not more than 10 percent of the average turnover
from the last three preceding financial years.
The Commission may direct an enterprise to modify the terms of an agreement till the
commission feels that the enterprise is not in a dominant position.
The Commission may pass any such Order as it deems fit.

5.2.5 Section 28: Division of enterprise enjoying dominant position
The Commission shall pass an order in writing to create a division in an enterprise so that the
enterprise shall not be able to enjoy dominant position.
The Commission shall take effective steps regarding the enterprise’s property, amending
Memorandum of Association or Articles of Association, winding up, or any other steps as the
Commission deems fit.
5.2.6 Section 20: Inquiry into combination by Commission

For better understanding of Section 20 it should be read together with Section 29, 30 and 31.

The Commission can inquire into any action of acquiring control referred to in clause (a) of
Section 5 or merger or amalgamation referred in clause (b) of Section 5 or combination if it
thinks that the proposed combination may cause appreciable adverse effects to the
competition in India. It may inquire on its own within one year of such combination taking
effect. The Commission shall, on receipt of a notice under sub section (2) of Section 6,
inquire that the combination mentioned in the notice, can cause appreciable adverse effect to
the Competition in India.

The Central Government in consultation with the Commission shall enhance or reduce the
basis of the wholesale price index or fluctuations in exchange rate of rupee or foreign
currencies, the value of assets or the value of turnover, for the purposes of that section.

5.2.7 Section 29: Procedure for investigation of combination

If the Commission feels that there is a prima facie case relating to a proposed combination,
which may adversely affect the competition in India then, the Commission shall issue a show
cause notice to the parties and the parties will have thirty days to respond as to why the
investigation be not to taken up by the Commission.

After the response of the parties, the Commission shall call for the report from the Director
General and the report shall be submitted within the time as the Commission may deem fit.

If the Commission is still of the opinion that the combination shall have a prima facie adverse
effect on the competition in India, then the Commission within 7 working days or the receipt
of the DG’s report (whichever is later), shall direct the parties to bring forth the details of the
Combination in front of the public in a manner as the Commission deems fit within 10
working days.

The Commission may allow anybody from the public to file written objections regarding the
proposed transaction within fifteen days to the Commission from the date on which the
information published.

The commission can call for other information as it may deem fit within fifteen working days
after the period stated above gets expired.

The additional information shall be furnished by the Parties in the next fifteen days.

After receipt of all the information the Commission shall take steps to investigate the matter
as per Section 31 of the Act.

5.2.8 Section 31: Orders of Commission on certain combinations

The Commission has the right to pass an order to either stop the combination if it feels that it
can cause AAEC in India. The Commission can also make suitable modifications if it thinks
that such modification shall help in averting the adverse effects to be caused by the proposed
combination.

The Parties can either make the modifications within the specified time or they can provide
information about how the combination shall not create any AAEC in India. The Commission
if after an expiry of two hundred and ten days does not respond to the Parties, then such
combination shall be considered to be not effective to the competition in India.

5.2.9 Section 32: Acts taking place outside India but having an effect on competition in
India

If any acts according to the provisions of this Act are being committed by an enterprise who
is outside India but the actions of such an enterprise is causing AAEC in India, then the
Commission has the right to inquire about such an enterprise in accordance with the
provisions of this Act.

5.2.10 Section 33: Interim Orders

The CCI can pass interim orders such as temporary injunction in the matters relating to
dominant position or combinations. The CCI has the authority under this Act to pass such
interim orders as it may help in reducing the damage which may be caused in the long run
while the case is under investigation by the CCI.

Section 36: Power of Commission to regulate its procedures.

The Commission can regulate its own procedures; however, it has to adhere to the principles
of natural justice while discharging its functions.

The Commission shall have the same powers as vested in a Civil Court under the Civil
Procedure Code 1908 (“CPC”) namely:

§ summoning and enforcing the attendance of any person and examining him on oath;
§ requiring the discovery and production of documents;

§ receiving evidence on affidavit;

§ issuing commissions for the examination of witnesses or documents;

§ requisitioning, subject to the provisions of sections 123 and 124 of the Indian

Evidence Act, 1872 (1 of 1872), any public record or document or copy of such

record or document from any office.

The Commission can also call for experts in the relevant fields of the matter under inquiry in
which the commission shall need assistance.

The Commission can also order any person to furnish any information to the Director
General.

5.2.11 Section 38: Rectification of Orders

The Commission with a view to rectifying any mistake apparent from the record, may make
an amendment on its own motion or when such mistake is brought to notice by any party to
the order.

5.2.12 Section 39: Execution of Orders of Commission imposing monetary Penalty

The Commission can recover the dues or penalty in such manner as may be prescribed from a
person who has failed to pay the dues or penalty.

In certain cases where the Commission feels that it cannot recover the penalty or dues from
the person in that event, the Commission can take necessary actions or help from the
necessary Authority to recover the dues.

5.3 DUTIES OF DIRECTOR GENERAL

Chapter V of the Competition Act, 2002defines in detail, the Duties of the Director General

The Director General has to assist the Commission into investigation of any contravention
that might have taken place.

The Director General shall have all the powers as are conferred upon the Commission under
Section 36 (2) of the Competition Act 2002, that is the Director General has been vested with
the powers of a Civil Court under the Civil Procedure Code (5 of 1908).

5.4 POWERS AND FUNCTIONS OF APPELLATE TRIBUNAL UNDER THE
COMPETITION ACT, 2002

The National Company Law Appellate Tribunal (NCLAT) is the appellate authority in the
Competition Act 2002. Earlier the Competition Appellate Tribunal (COMPAT) was the
Appellate body after the CCI. If the Central Government, State Government, Statutory
Authority or any other person feels that the order passed by the Competition Commission of
India is not in accordance with the Act, then they can file a case before the appellate
authority. Chapter VIII A has been newly introduced the Competition Act 2002 which
describes about the functions and powers of the NCLAT in accordance with the Competition
Act 2002.

The NCLAT can regulate its own procedures as it has to follow the principles of natural
justice while discharging its functions and also it is not bound by the procedures of Civil
Procedure Code 1908 while decreeing upon a competition matter.

5.4.1 Section 53N: Awarding Compensation

The NCLAT can entertain cases relating to compensation filed by any authorityor enterprise
or individual against an enterprise for having committed an action which may have caused
damages to such appellant.

The NCLAT after receiving the case may inquire into allegations mentioned in the suit and
then award compensation which is determined to be realisable from the enterprise for the loss
or damage caused by it.

5.4.2 Section 53O: Procedures and Powers of the Appellate Tribunal

The NCLAT shall have the same powers as vested in a Civil Court under the Civil Procedure
Code 1908 namely:

§ summoning and enforcing the attendance of any person and examining him on oath;

§ requiring the discovery and production of documents;

§ receiving evidence on affidavit;

§ issuing commissions for the examination of witnesses or documents;

§ requisitioning, subject to the provisions of sections 123 and 124 of the Indian

Evidence Act, 1872 (1 of 1872), any public record or document or copy of such

record or document from any office.

§ reviewing its decisions;
§ dismissing a representation for default or deciding it ex-parte;
§ setting aside any order of dismissal of any representation for default
§ or any order passed by it ex parte;
§ any other matter which may be prescribed.

Every proceeding before the Appellate Tribunal shall be deemed to be a judicial proceedings
within the meaning of Sections 193 and 228, and for the purposes of Section 196, of the
Indian Penal Code (45 of 1860) and the Appellate Tribunal shall be deemed to be a civil court
for the purposes of Section 195 and Chapter XXVI of the Code or Criminal Procedure, 1973
(2 of 1974).

5.5 FROM COMPAT TO NCLAT1

As amendments were made in Part XIV of Chapter VI of the Finance Act 2017, the
COMPAT now ceases to exist and the Appellate function has now been transferred to the
NCLAT. Accordingly, the Competition Act 2002 and Companies Act 2013 have also been
amended. Further Section 417A has been introduced which deals with the qualifications,
terms and conditions of service of the Chairperson and Members of the NCLAT. Previously
all the appeals against the CCI would lie with the COMPAT whereas the NCLAT dealt with
inter alia, appeals arising out of the decisions of the matters of Companies Act 2013 and
Insolvency and Bankruptcy Code 2016 relating to the National Company Law Tribunal.


1 http://www.mondaq.com/india/x/599508/Antitrust+Competition/Compat+No+More+NCLAT+Marches+On.