2019 will mark a decade since the notification of the anti-trust provisions (anti-competitive agreements and abuse of dominant position) of the Competition Act, 2002 ('Act') on 20 May 2009. During this time, the Competition Commission of India ('CCI') has been a pro-active regulator, and as on December 2018, the public enforcement of the law has resulted in the imposition of an aggregate penalty of around INR 14,000 Crores by the CCI for violation of the anti-trust provisions of the Act.
The Act, however, also provides for private enforcement of competition law (i.e. compensation claims for antitrust breaches). Nevertheless, these provisions have remained underutilized, with the courts yet to pronounce a ruling. In mature jurisdictions, the private enforcement of competition law is an equally formidable deterrent to anti-competitive conduct as public enforcement. Compensation claims arising out of anti-competitive conduct typically eclipse the penalty imposed by the competition regulator. The law in India is expected to follow a similar pattern, as evidenced by the compensation applications presently pending before the Appellate Tribunal. For example, whereas the penalty imposed by the CCI on the National Stock Exchange for abusing its dominant position in the currency derivative (CD) segment1 is around INR 55.5 Crore, the compensation claim filed by the Informant, MCX Stock Exchange is in the region of INR 588 Crore.2
The underutilization of the compensation provisions can be attributable to the scheme of the Act itself. The Act envisages a follow-on compensation claim i.e. a compensation claim can be filed only after a finding by the CCI or the Appellate Tribunal that the provisions of the Act have been contravened.
In the vast majority of cases where the CCI has found a contravention, the parties have disputed the CCI's findings in the Appellate Tribunal or the Supreme Court thereafter. Since these cases have not achieved final determination, most compensation applications before the Appellate Tribunal have been stayed.
Regardless, the private enforcement of the Act is poised to take-off in 2019, particularly on the back of the orders passed by the CCI in 2018 under the CCI (Lesser Penalty) Regulations, 2009 ('Leniency Regime'). Orders passed under the Leniency Regime are unique in the sense that the parties expressly admit to the anti-competitive conduct in lieu of lesser penalty. In such cases, compensation claims may be adjudicated immediately by the Appellate Tribunal, since the anti-competitive conduct has been explicitly admitted by the parties.
The provisions relating to compensation claims in India are as follows:
Who can file a compensation claim?
The right to compensation under Section 53 N of the Act3 is recognized for any natural or legal person- consumers, undertakings and public authorities (including the State and Central Government) alike- regardless of the existence of a direct contractual relationship with the infringing enterprise.
Section 53N of the Act envisages both an individual claim for damages, as well as 'class action' claims i.e. a class or group of people with a common grievance (e.g. an industry body or a consumer body). The class action provisions enable claimants to join hands to seek compensatory relief from the infringing enterprises, where the individual value of the claim is low.
A compensation claim is made by way of an application to the Appellate Tribunal (National Company Law Appellate Tribunal), which has original jurisdiction over compensation claims.
Quantification of damages-demonstrating loss
Under Section 53 N of the Act, an applicant is entitled to any loss or damages "shown to have been suffered". Arguably, the legislation places an obligation on the applicant to demonstrate and quantify the loss caused by anti-competitive conduct, despite the difficulty in accurately quantifying the loss. Since the compensation provisions of the Act are yet to be tested in a court of law, there remains a lack of clarity in the quantification of losses caused due to anti-competitive conduct.
Nevertheless, certain kinds of loss are easier to compute than others. For instance a compensation claim arising out of a higher price (overcharge) attributable to a price-fixing cartel, can be reasonably proved, if the following conditions are met: (i) the applicant/claimant has purchased the cartelized good/service either directly or indirectly; and (ii) it paid a higher price (overcharge) for such purposes.
The simplest approach to estimating what the prices would have been in the absence of the cartel is to assume that they would have been the same as the prices before and after the cartel. Suppose, a cartel existed for a 5 year period, during which period the prices were 5 percent higher than the preceding and succeeding years. Then, it can be reasonably assumed that the cartel increased the price by 5 percent.
The CCI's order dated 19 April 2018 in the dry cell battery cartel4 observed that the cartel resulted in about a sixty percent increase of dry cell batteries between FY 09-10 to FY 16-17. Therefore, prima facie, the overcharge of sixty percent along with interest can possibly be claimed as compensation by any consumer including institutional buyers.
Anti-competitive conduct not only harms final consumers but also cause significant damage to the economy. It can lead to higher prices for the final consumers and may drive competitors out of the market altogether. The effective enforcement of the compensation provisions, will not only act as a serious deterrent to anti-competitive conduct but also remedy the damage caused due to anti-competitive conduct.
However, the general ambiguity of the enabling legislation, especially with respect proving loss, is likely to blunt the effective enforcement of the private action regime in India. Therefore, in order to ensure effective enforcement, it may be prudent to enact rules/regulations, by borrowing the lessons learned from enforcement in mature jurisdictions.
* Anand is a lawyer with the Competition Law Practice Group at Vaish Associates Advocates.
3. (i) the Central Government; (ii) the State Government; (iii) local authority; (iv) any enterprise; or (v) any person can file a claim for damages under Section 53 N
4. Suo Moto Case No. 02/2016, Paragraph 6.5 available at: https://www.cci.gov.in/sites/default/files/Suo_Moto_02_of_2016.pdf
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