The Per Se Turn At The CCI: Constitutional Questions And Business Risks

The Competition Commission of India ("CCI"), in a string of recent decisions and enforcement approaches has increasingly invoked a per se mindset when dealing with certain categories of agreements. Proponents say the per se stance is necessary to deter inherently wrong conduct while critics argue that it risks producing rigid and arbitrary outcomes by rather short-sighted economic analysis and by treating an adverse presumption as conclusive. The debate is not merely an academic one. It has implications on constitutional guarantees of equality and affects enforcement risks and decision making for entities.

Per se versus Rule of Reason

Competition law historically deploys two analytical tools to evaluate restraints on competition. The per se rule treats certain classes of restraints like cartels, market allocation agreements, bid rigging as unlawful per se without the need for a detailed inquiry into market structure or actual impact. The rule of reason approach requires a fact sensitive economic assessment wherein the tribunal examines market definition, market power, motive and other factors before finding illegality.

Section 3 of the Competition Act, 2002 ("Act") reflects this dichotomy. Section 3(3) of the Act lists forms of agreements that are presumed to have an appreciable adverse effect on competition ("AAEC") while other sub-sections permit a broader AAEC analysis. That statute, thus, codifies to an extent both approaches wherein some practices attract an adverse presumption per se while others require AAEC demonstration. Commentators and courts have long debated the ambit of Section 3(3) and its interplay with economic contexts.

CCI's Recent Application

The CCI's enforcement posture in cartel investigations has often started from a position that certain evidentiary patterns like parallel bids, identical price points, meeting evidence or sudden market-wide shifts are strong indicia of collusion. Where such indicia exist, the CCI has been wiling to proceed assertively under Section 3(3) at times treating the proof burden as lighter than in complex rule of reason inquiries.

Critics including several recent commentaries, caution that this approach risks transforming Section 3(3) into a de facto per se rule that may dilute procedural safeguards. The constitutional concern arises primarily under Article 14 of the Constitution wherein administrative action must be rational, non-arbitrary and supported by reasoned analysis. A rigid presumption of collusion without the opportunity for meaningful rebuttal may in effect invert the burden of proof and undermine equality before law. The issue therefore is not only economic but institutional, how far can an expert regulator rely on presumptions without eroding the due process guarantees that are a fundamental part of administrative adjudication.

Key Judicial Developments

Two Supreme Court decisions frame the contemporary landscape. Excel Crop Care case¹ of 2017 clarified that context matters. The Court instructed regulators and tribunals to examine market context and the reasons for parallel behaviour before attributing collusion. If parallelism flows from market realities like existence of oligopoly, common cost shocks, synchronised incentives and the like, it may not always be on account of an anti-competitive agreement. It was further reinforced that an effects-based analysis in cases where market structure plausibly explains entities' conduct is imperative. In Rajasthan Cylinders and Containers Limited v. Union of India², a nuanced counterpoint was presented. The case involved alleged bid-rigging by LPG cylinder manufacturers. The Court upheld CCI's findings of collusion but also emphasised the need for concrete evidence, it reduced penalties in some instances where the evidence did not uniformly establish guilt. This case is significant because it shows the Court's willingness to sustain CCI's findings in cartel cases where the record demonstrates coordinated conduct while simultaneously insisting on evidentiary rigor. The decision thereby supports both stern enforcement against cartels and demands precise fact finding.

Together, the Supreme Court's attempt to balance is indicated. Section 3(3) captures the inherently suspected conduct but the CCI and courts must still subject alleged violations to careful evidentiary analysis rather than an implied condemnation.

Constitutional Analysis

Three constitutional concerns arise when a regulator adopts rather strongly a presumption-based approach.

1. Equality and Non-Arbitrariness: Article 14 of the Constitution prohibits arbitrary State action and requires equality of treatment. If CCI treats certain commercial patterns as prima facie confirmations without apt inquiry, similarly situated defendants may suffer unequal treatment depending on evidentiary acquisition and investigatory choices The remedy is rigorous reasoning and consistent standards applied across cases. The Supreme Court's scrutiny in the Rajasthan Cylinders case illustrates that the judiciary will step in where enforcement blends into arbitrariness.
2. Due Process and Reasoned Findings: Administrative action must be reasoned. A regulator that announces a blanket per se posture risks producing findings that are insufficiently considered particularly where entities can point to pro-competitive justifications or plausible non-collusive explanations for parallel conduct.
3. Rebuttable versus Irrebuttable Presumptions: Constitutional jurisprudence disfavours irrebuttable presumptions that eliminate parties' opportunities to rebut State assertions. The Act uses a rebuttable presumption approach in practice. CCI's role is to test evidence and permit defense. Concerns surface when CCI's investigational posture or public statements connote irrefutability which could potentially attract constitutional scrutiny.

Practical Implications for Businesses

Whether the CCI's approach is ultimately characterised as per se or rule of reason, companies face immediate risks. Risk detection and document hygiene are intertwined. Cartel investigations are often built on procurement records, bidding patterns, correspondence and the like. Entities must implement document retention and e-discovery protocols as absence thereof is frequently considered decisive. Further, being aware of how the economy works and assembling respective analysis early is necessary. Showing how industry structure, common inputs, capacity constraints or regulatory/commercial shocks explain parallel pricing and other triggers. Internal compliance programs wherein compliance measures must include clear cartel policies, training for sales/procurement teams on forbidden conduct and the like. Putting forward a litigation stance with respect to any inquiry is important. If the CCI launches an inquiry, consider whether to cooperate and avail mitigation benefits for leniency or contest jurisdictional or procedural lapses. For companies with weak evidence exposure, early engagement and offering cooperation with leniency applications where relevant can reduce penalties.

Conclusion

The CCI's vigorous enforcement posture is essential in a market economy where cartels and collusion can inflict widespread harm. Yet the constitutional guardrails of equality, reasoned administration and procedural fairness require that per se presumptions not become mechanical shortcuts to liability. The task for business counsels is dual, preparing robust compliance and economic defenses and continuing to press for reasoned, transparent enforcement that respects both the letter of Section 3(3) and an evaluative posture.

For entities, the practical message is clear, assume that CCI will investigate aggressively but also know that legal and economic arguments remain powerful tools to rebut presumptions. For policymakers, the challenge is to calibrate the CCI's toolkit so that per se presumptions deter wrongdoings without undercutting fairness and reasoned adjudication.

Footnotes

1. (2017) 8 SCC 47

2. (2018) 16 SCC 610

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