Competition in peril? Challenges faced by the CCI

The Competition Commission of India (CCI) is facing an unprecedented crisis with leadership vacancies, regulatory delays and judicial challenges that are crippling its ability to enforce fair competition in the market. Let’s look at these in detail.

Staffing woes and adjudication delays

Since 2014-15, the Commission has never been at full capacity. Its highest strength was 133 - or 67 per cent of its sanctioned capacity - in 2016-17 and 2018-19. The budget of the Commission is ₹51 crore, which hasn’t increased since the last financial year.

On October 25, 2022, the then Chairperson of the CCI Ashok Kumar Gupta retried upon attaining the age of 65 years, leaving the post vacant. The Central government failed to fill this vacancy for almost 7 months. Eventually, the Commission had to invoke the ‘doctrine of necessity’, which allows carrying out certain activities which are not permitted in the normal course, and began approving combination cases.

This shortfall has led to delayed case resolutions, with high-profile investigations against tech giants like Google and Apple dragging on for years. Against Google, CCI has initiated investigation on 3 occasions - on 22/06/2021, on 07/01/2022 and on 15/03/2024. All of these cases await final orders. Worst of all is the Apple case, wherein the CCI ordered investigation on 31/12/2021, nearly 3 years ago. As per media reports, the Director General, the investigative arm of the CCI, submitted two reports in this case - one in 2022 and another in July 2024 - both of which found that Apple had exploited its dominant position in the market for app stores on its iOS operating system. The reports had to be recalled in August 2024, due to Apple claiming that its commercial secrets were disclosed to opponents, including Tinder-owner Match. This is expected to further delay the final disposal of the case.

The Commission has passed only one Section 26(1) order (order of investigation into an enterprise on basis of a prima facie analysis) since October 2022, and zero Section 27 orders (finding of contravention against an enterprise). Notably, Alliance of Digital India Foundation (ADIF), the informant in CCI’s last Section 27 order, has claimed that directions issued by the CCI in the order have been allegedly violated by Google. ADIF has filed several applications before the CCI in this regard, all pending adjudication. The situation reached a tipping point when the Finance Minister had to intervene, reviewing the CCI’s performance due to concerns over non-adjudication.

The average number of days taken to dispose of a combination notice has also increased from 17 in 2020-21 and 2021-22, to 21 in 2022-23. The last dawn raid was almost 2 years ago, in December 2022.

Monetary penalties: A toothless tiger?

Enforcing monetary penalties remains another area where the CCI has struggled. Since 2011, the Commission has imposed penalties totalling ₹18,351.64 crore, but has only managed to collect a paltry ₹425 crore, just 2.3% of the total. The lack of a mandatory penalty deposit before appealing a CCI order has encouraged companies to challenge penalties with impunity. Even if the Commission’s decision is upheld by the National Company Law Appellate Tribunal (NCLAT), the matter is often remanded to the CCI for re-computation of penalty. During 2022-23, the NCLAT disposed of 160 appeals against 44 orders of the Commission. Out of these 160 appeals, 145 were disallowed and out of the disallowed, 79 appeals were remanded to the CCI for re-computation/review of penalty.

Under the current law, the NCLAT may require an appellant to deposit 10% of the penalty imposed by the CCI as a condition for hearing an appeal. This practice stems from the Supreme Court's ruling in Ultratech Cement Ltd v. Competition Commission of India, where the Court held that requiring a partial deposit is appropriate as an interim measure, given that monetary penalties are rarely overturned. In Himmatlal Agrawal v. Competition Commission of India, the Supreme Court further clarified that while the NCLAT can impose this condition, it must be linked to the stay of the penalty order, ensuring that the appellant's right to appeal is preserved without undue financial burden.

The Competition Amendment Act, 2023 addresses this by mandating that appellants must deposit 25% of the penalty before their appeal is considered. Additionally, newly framed penalty guidelines empower the CCI to impose penalties of up to 30% of the relevant turnover, base penalties on 'global turnover' in certain cases, and levy higher penalties if it deems the calculated amount insufficient to serve as a deterrent. These provisions are expected to strengthen the CCI’s authority and enhance its ability to enforce compliance.

Ex-ante provisions: Too much control?

India's Digital Competition Bill (DCB), introduced in February 2024, represents a significant step towards regulating the country’s rapidly evolving digital markets. However, it has sparked mixed reactions, especially among regulators and major tech companies. A primary concern is that the six core principles laid out in the DCB are not tailored to specific Core Digital Services (CDS), making them broader than similar provisions in the EU's Digital Markets Act (DMA). For instance, the DCB's restrictions on tying or bundling services extend beyond digital products, potentially causing a surge in cases before the CCI once the Bill is enacted.

Moreover, the DCB arrives at a time when India still lacks a comprehensive National Competition Policy (NCP), a framework crucial for fostering a culture of competition across various sectors. A draft NCP was prepared in 2011, but has yet to be implemented. The absence of an NCP has left the CCI overburdened, struggling to balance its expanding role in digital market regulation with other responsibilities. The Supreme Court, in the 2018 case of CCI v. Bharti Airtel Ltd. and Ors, emphasised the importance of an NCP for enhancing market efficiency and employment. Despite this, a clear roadmap for the policy's implementation remains elusive, further complicating the CCI's ability to effectively manage the growing demands placed on it.

Judicial pushback and jurisdictional challenges

In addition to internal challenges, the CCI has faced significant pushback from higher courts, which have increasingly limited its jurisdiction. Last year, in July, the Delhi High Court in Telefonaktiebolaget LM Ericsson v. CCI held that since patent law is governed by a special legislation and the Patents Act is a complete code in itself and is capable of dealing with licence violations, violations under the Patent Act would be dealt with by the Patent Controller.

In April 2024, the Madras High Court in MRF v. CCI mandated that third parties should be notified and given a chance to contest their inclusion in the investigation, requiring the CCI to issue a “speaking order”. This ruling could significantly delay CCI proceedings by adding procedural burdens and exacerbate already prolonged investigation timelines, without necessarily enhancing the substantive rights of the parties involved.

Lastly, in August 2024, the Delhi High Court in JCB v. CCI, further restricting the jurisdiction of the CCI, held that IPR disputes should not be unnecessarily converted to competition disputes and allegations of ‘predatory litigation’ when the matter is pending before High Courts and other commercial courts should be discouraged.

The CCI’s journey has been a complex one, and the need for a comprehensive National Competition Policy, adequate staffing and timely adjudication of cases is more critical than ever. The Competition Amendment Act and the proposed regulations would ease CCI’s path on paper, but the Commission, being a government body and not a court, is bound to keep stakeholders on their toes.

Varun Singh is a Research Associate at Competition Advisory Services India LLP, New Delhi.

These are the author's personal views and do not reflect the views of the enterprise to which he belongs, or Bar & Bench Publication.