Column: Shackling competition

Jun 05 2014, 01:30 IST
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SummaryCOMPAT’s DLF order not only limits CCI’s jurisdiction over the abuse of dominance, it has broader implications too

The recent order of the Competition Appellate Tribunal (COMPAT), disagreeing with the Competition Commission of India (CCI) but upholding the R630-crore penalty imposed on DLF Limited by CCI for abusive conduct in its apartment-buyers’ agreements (ABAs) for three residential complexes in Gurgaon, raises important issues about the interpretation of the Competition Act. Without meaning any disrespect to COMPAT’s extensively argued order, these issues have broader implications, beyond the DLF case.

First, COMPAT has observed that the Act gives CCI the power to modify only those agreements which are in contravention of Section 3 of the Act (anti-competitive agreements). For contraventions of Section 4 (abuse of dominance—AOD), CCI can only direct the guilty party to discontinue the abuse and impose a penalty. This observation is perplexing given that COMPAT had itself remitted the matter in March 2012 to CCI, and instructed it to specify the extent and manner in which the terms of the impugned agreement should be modified. Thus, apparently, in March 2012, COMPAT held the view that the latter had the power to direct modification to an agreement in an AOD case. When and why this view changed has not been explained by COMPAT; therefore, an air of uncertainty hangs over this issue of law.

Secondly, COMPAT’s narrow interpretation can significantly fetter the powers of CCI. While Section 27(d) specifically allows CCI to modify any agreement under Section 3 of the Act, Sections 27 (e) and (g) give wider powers to CCI to pass “such other orders” as may be warranted. The intent of the Act clearly is to allow the it enough elbow-room in dealing with situations that do not fall squarely within the narrow wordings of the other provisions of the Act. Besides, the COMPAT order misses the economic dynamic of the matter. A one-sided agreement may be the result of an abusive imposition by the dominant party. If CCI finds parts of the agreement to be abusive, it has the power to direct the dominant party to end the said abuse, that is, remove or modify the offending part of the agreement. A practical difficulty could arise, for instance, in cases with only one abusive clause: CCI will be forced to strike down the entire agreement, as opposed to modifying or deleting just the impugned clause. In overseas jurisdictions, dominant parties are often allowed to agree with the competition authority to modify or correct their agreements

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