Suo Moto Addition of 3rd Parties by the DG under Indian Competition Law – Need for Taming the Investigative Beast? (Part I)
by Kabir Singh
The scope of the Director General’s (DG) powers, the investigative wing of the Competition Commission of India (CCI), has been a burning debate since the enactment of the Competition Act, 2002 (Competition Act). In particular, the matter of addition of third parties which had not been initially mentioned in the Prima Face order passed by the CCI, to an ongoing anti-competitive investigation has taken the lead on unresolved legal knots in the Indian competition law regime. This is the case, as the Prima Facie order is precisely what forms the basis of an anti-competitive investigation, and adding third parties not initially mentioned in the same may constitute as exceeding the limits of the DG’s investigatory powers. Hence, this contentious issue has led to a wave of litigations across Indian courts.
This article addresses this legal conundrum and examines the limits of the DG’s powers with respect to the addition of third parties. Part I of the article begins by providing the readers with an overview of the legal sections which sanction the DG’s investigatory powers. It then proceeds to examine the landmark Supreme Court (SC) judgment of Excel Crop Care Ltd. v. Competition Commission of India (Excel), a watershed case outlining the scope of the DG’s investigatory powers. Part II of the article delves into conflicting contemporary High Court judgments, penned post-Excel, on the limits and manner of addition of third parties by the DG. The last section concludes by proposing a mechanism for restraining suo moto addition of third parties to an investigation by the DG while noting the danger of granting unfettered power of third-party addition to the DG and addressing the same.
The Legislative Scheme & Basis of DG’s Investigatory Powers
According to Section 19(1) of the Competition Act, anyone may provide information pertaining to anti-competitive actions conducted by an enterprise to the CCI. Upon the receipt of the said information (also by its own violation or by a reference from the government), the CCI, under Section 26, may issue a Prima Facie Order (PF Order) to the DG for further investigation, only if it believes that there exists a prima facie case of anti competitive practices.
Hence, since the DG may only begin its investigation after the issuance of the PF Order, it may be inferred that the latter forms the basis of the former’s investigation. Typically, a PF Order sets out the circumstances of the case, the alleged violated provisions of the Competition Act and the enterprises involved in the anti-competitive practices. A plain reading of the legislation would lead to the conclusion that the scope of the DG’s investigation is bound only to the parties mentioned in the PF Order, since the same forms the basis of the DG’s investigation.
However, such a bare reading of the Competition Act ignores the possibility of the DG uncovering more facts while investigating, such as additional parties involved or additional contraventions of the Act by the concerned parties. Thus, this leads to the question of whether the DG is allowed to go beyond the original PF Order in the course of its investigation. Moreover, if the answer to the question is yes, to what extent?
The Supreme Court’s Ruling in Excel: Expansionist Approach towards DG’s Investigatory Powers
The above question was finally answered to a large extent by the SC in May 2017, in the landmark judgment of Excel Crop Care Ltd. v. Competition Commission of India. In 2011, the CCI passed a PF Order for the investigation of cartelisation by manufacturers of Aluminium Phosphide tablets (ALP Manufacturers), with respect to conduct of price fixing in a 2009 tender issued by the Food Corporation of India (FCI). The DG, in its investigative report concluded that the ALP Manufacturers did cartelise. Additionally, the DG also investigated cartelisation by the ALP Manufacturers in another tender floated by the FCI in 2011, despite there being no mention of the same in the initial PF Order passed.
The ALP Manufacturers challenged the findings of the DG with respect to the 2011 tender, on the basis of the same being beyond the scope of the PF Order. The challenge was defeated by the CCI, which gave the rationale that since the PF Order was not event specific, the DG was free to investigate the 2011 tender. They appealed against the CCI’s decision in the Competition Appellate Tribunal (COMPAT), which once again ruled in favour of the CCI. The matter was finally heard by the SC, which held that the DG was within its scope of power while investigating the 2011 tender, as it is the DG’s purpose to investigate all the necessary evidence. It was ruled that if any new facts were uncovered by the DG in the course of its investigation, the DG has the power to investigate the same.
Hence, the judgment affirmed the wide scope of the DG’s investigatory powers. However, it is important for us to point that Excel did not give any general guiding principles regarding the extent of the DG’s powers. Hence, different angles and forms of the limits of the DG’s power have been analysed by High Courts across the nation. The power to add third parties to an ongoing investigation, not initially mentioned in the PF Order is one such debated form of the DG’s power.
The SC in Excel answered our initial question of whether the DG is allowed to go beyond the original PF Order in the course of its investigation. However, the answer to the second question of the extent of the DG’s power is more complex, and is yet to be answered by the Apex Court. While the question has been addressed by a few High Courts, a detailed examination of the judgments reveals certain discrepancies. Hence, Part II explores High Court judgments on addition of third parties by the DG and attempts to resolve the conflicting jurisprudence.
Comments