Competition Commission of India and its power to review decisions of statutory bodies

The Delhi High Court, in its recent judgment in Institute of Chartered Accountants of India v. The Competition Commission of India, ruled that decisions made by regulators while carrying out their regulatory activities within their statutory powers are not susceptible to scrutiny by the Competition Commission of India (CCI).

It held that CCI’s authority was restricted to market regulation and did not extend to reviewing judgments made by statutory regulators in the exercise of their statutory powers. As a result, the Court set aside an investigation launched by the competition watchdog against the Institute of Chartered Accountants of India (ICAI).

While allowing the ICAI’s plea, the Court rejected the CCI's assertion that it could compel an organisation or firm to outsource its functions. The Court ruled that ICAI's decision to create the Continuing Professional Education (CPE) programme to ensure professional standards could not be regarded an abuse of its dominant position.

Economic activity and need for an open market

The observations relate to an order issued by the CCI on February 28, 2014, instructing the Director General to launch an investigation into the matter relating to the ICAI’s CPE programme. The CPE programme, which allows ICAI members to retain required professional competence while also ensuring high quality and standards of professional services rendered, requires a Chartered Accountant to commit certain hours over a three-year rolling period to attend CPE seminars and workshops in order to keep abreast of innovations in their area. The ICAI conducts the educational programme for structured CPE credits either in-house or through its organs.

An informant testified that the ICAI should allow its members to receive CPE credits by attending seminars organised by other groups or entities of their choice and interests. This caused the Commission to develop a preliminary view that the ICAI was imposing an entry barrier for other market actors by administering the CPE programme, either directly or through its organs. However, the Delhi High Court was not persuaded by this rationale.

The Court, while noting that the CPE programme was an education course offered by ICAI and that it was not interchangeable with any other agency's services, held that the ICAI, as a statutory body, was endowed with the authority to administer the programme for the purpose of upholding professional standards. Further observing that the CPE curriculum was not unsupervised, the Court held that the CCI could not compel a statutory body to outsource tasks performed in the fulfilment of its statutory duties, even if they come within the scope of an ‘economic activity’. The Court also underlined that it would be incorrect to assume that if any activity fits under the wide concept of economic activity, an open market must be created for it.

Scope of CCI’s power to order investigation

A regulator is generally empowered to exercise its statutory powers and discharge its statutory functions of regulating the specialized field for which it is so empowered. No other statutory authority is permitted to interfere with the decision of such a regulator, unless specifically permitted by a statute. According to Justice Vibhu Bakhru of the Delhi High Court, the Competition Act, 2002 does not allow the CCI to operate as an appellate court or a grievance redressal cell against decisions made by statutory regulators in the exercise of statutory powers that were not related to trade or commerce.

The Court further emphasised that the CCI’s power does not extend to “addressing any grievance regarding arbitrary action by any statutory authority.” Thus, the scope of the CCI's power to order investigation, the Court held, was limited to only those sectors of economic activity that had an influence on the market that involves companies participating in trade and commerce. It observed:

“A statutory body may in course of its functions, also make decisions which involve trade and commerce. As an illustration, the concerned body may purchase equipment and consumables or avail services of professionals. There is no cavil that any decision in this regard may, if it falls foul of the provisions of the Competition Act, be examined by the CCI.”

In other words, the CCI, as a ‘market regulator,’ is only empowered to examine economic functions/activities that have an actual effect on the market rather than a hypothetical market created solely to examine such economic functions/activities. This is further made clear by the fact that the general functions of ICAI, even if they were to be considered economic by the CCI, could not be forced to be outsourced. In terms of Section 15(2)(e) of the Chartered Accountant Act, 1949, ICAI has the power to recognize foreign qualification and training for the purposes of enrolment. The discretion to recognize certain foreign qualifications is also vested with ICAI. Plainly, this would not be subject to any review by the CCI. Per contra, if a particular function of a statutory regulator is judged to be a ‘business’ unrelated to its regulatory responsibilities, its action may be subject to CCI scrutiny without necessarily being found anti-competitive upon inquiry.

The Delhi High Court also observed that the ICAI met the criteria of a statutory authority under clause (w) of Section 2 of the Competition Act, 2002. As a statutory body charged with making decisions regarding the conduct of the CPE programme for enrolling as a Chartered Accountant as well as maintaining the profession's standards, the ICAI's decisions in this regard could not be reviewed by the CCI. Such rulings would thus have no application in any trade or commerce market.

Conclusion

In ICAI v. CCI, the CCI had expressed a prima facie view that the decision of ICAI to restrict organising CPE seminars to itself and its organisations was, prima facie, arbitrary. This was on the premise that there was a market for conducting structured CPE programmes, which was required to be regulated by the CCI as a market regulator. However, as the Delhi High Court would go on to note, there was no other institute which was providing any verifiable training other than ICAI. The structured programme was conducted only by ICAI and its organs and there was no other body or institution, which is engaged in the activity of providing professional training to acquire the classification of a chartered accountant or for the continuing education programme. The Court observed:

“There is no market for organising CPE seminars, workshop or conferences. As noticed above, ICAI is charged with the function of maintaining professional standards and it conducts the educational program for structured CPE Credits, in-house or through its organs. Thus, in essence, the Informant seeks that the said function be outsourced. Such outsourcing would create a market as the other entities would be entitled to participate as market players in that market…

...This Court is unable to accept that all decisions made by authorities, which have any relation to economic activities, are liable to be subject matter of investigation by the CCI on the ground that they are prima facie arbitrary notwithstanding that the same are not relevant to any market which involves entities engaged in trade or commerce.”

The Delhi High Court’s decision is in stark contrast to the decision of the Court of Justice of the European Union (ECJ) in Ordem dos Técnicos Oficiais de Contas v. Autoridade da Concorrência. In this case, it was held that the EU Competition Rules prohibited a professional association from implementing a mandatory training system that eliminates competition in a significant portion of the relevant market and imposed discriminatory conditions to the detriment of the association's competitors. In that case, the restrictions contained in the subject regulation went beyond what was necessary to ensure the quality of services provided by chartered accountants, and thus the restrictions were found not to be covered by the exemptions set out in Article 101(3) of the Treaty on Functioning of European Union.

As the Delhi High Court noted, the said decision of the ECJ was rendered in the context where the professional association in question was not the only professional body in the wider market and where both the professional association and other higher educational establishments were authorised to provide the training. In the case of the ICAI, however, a structured programme was conducted only by ICAI and its organs. As such, there was no relevant market for providing verifiable training.

Saai Sudharsan Sathiyamoorthy is an advocate practicing at the Madras High Court and can be reached at saaisudharsans@gmail.com.