CCI releases draft rules to encourage settlements, minimise litigation

The CCI looks at regulating settlements and commitments related to antitrust and competition law cases. Settlements involve the parties agreeing to a resolution without proceeding to a formal investigation or legal proceedings. This can involve agreeing to specific remedies or actions to rectify the situation. On the other hand, commitments refer to the voluntary undertakings made by businesses under investigation to address competition concerns. If the CCI finds the commitments made by specific businesses satisfactory and in line with competition law objectives, it might decide to close the case without imposing fines or sanctions.

Even though both settlements and commitments have the potential to be more efficient and flexible compared to traditional adversarial legal proceedings, there have been concerns about them — mainly over transparency and the effectiveness of these remedies..

The draft settlement and commitment mechanism is designed to provide a way for parties involved in competition cases to resolve their disputes through negotiated settlements or commitments, rather than going through lengthy and costly litigation processes. This mechanism can help expedite resolution. While the Competition Act was enacted in 2002, the Competition (Amendment) Act, 2023, introduced Sections 48A and 48B to create settlement and commitment mechanisms, respectively.

The draft regulations put out by the CCI aim to lay down the procedure to be followed during commitment and settlement proceedings, including the contents of the application for commitment and settlement along with the fee payable, the pecess to be followed during proceedings, the manner in which the CCI will invite objections and suggestions, and the factors to be considered by the CCI in assessing the commitment and settlement terms.

According to the draft, the CCI will consider multiple factors while assessing the commitments offered by a company. The draft suggests that the nature and extent of the competition concern will be important to judge the extent of commitments and settlements.

The CCI has also noted that the likelihood of the commitments addressing the competition concern, the impact of the commitments on competition and consumers, and the feasibility of monitoring the commitments will be important factors in assessing commitments by big players. The CCI has also said that it can impose a penalty of up to 10 percent of the average turnover of the company for three preceding financial years if the company breaches the commitments. The option of offering a commitment scheme is open to a company only till 45 days after a prima facie order for investigation is passed by the commission.

On the settlement side, the draft regulations also provide for a mechanism which allows parties to settle the matter with the CCI without going through a full-fledged investigation.

According to the new draft regulations, a settlement application can be filed by a party against which the CCI Director General has found a contravention of the Competition Act. However, not all applications can be taken up for settlement. The CCI  has said that it may allow a settlement application if the proposed terms of the settlement are in the public interest.

Even though the settlement amount will vary from case to case, the draft regulations say that CCI may impose a penalty of up to 50 percent of the maximum penalty that could have been imposed if the case had gone through a full investigation and adjudication.

The CCI may also allow a commitment application if it is satisfied that the proposed commitments are sufficient to address the competition concerns arising from the alleged contravention.

According to the draft, the settlement application must be filed within 60 days of receipt of the DG's investigation report. On the other hand, a company has the option to offer a commitment scheme within 45 days of receiving a prima facie order for investigation.

The draft regulations are being seen as a welcome move that brings India closer to a faster and more agile enforcement framework.  However, some experts also believe that some points in the draft need further deliberations.

“A notable inclusion is the clause on providing parties an option to withdraw their applications before a particular stage. (This) is a welcome move and will provide greater autonomy to the parties," Saksham Malik, Program Manager - Competition, The Dialogue, said.

However, Malik said certain themes in the draft regulations require further deliberation.

"For instance, the regulations state that the CCI may use information submitted by the party against said party or other parties that are not part of the proceedings. Clarification on the clause's scope and manner in which this may take effect would be crucial to ensure sufficient incentivisation for parties to opt for the S&C mechanism,” Malik said.

Lawyers working in the competition law space believe that incentives need to be given to use these regulations so that long legal battles can be reduced.

“This is in furtherance of the amendments which received presidential assent in April 2023. The regulations provide for different time periods within which a settlement or commitment application can be made by the defending party. Both these avenues are available only for cases involving vertical restraints or abuse of dominance. Cartels are excluded from the scope. The applications have to be accompanied by an application fee which can range between Rs 5 to Rs 50 lakh depending on the turnover of the defendant. For this regime to be effective and meet its end goal the parties must be incentivised to avail themselves of this facility," explained Anisha Chand, Partner - Competition, Khaitan & Co.