Commitment Regulations: An Avenue For Quicker Market Correction?

In a bid to ensure quicker market correction of anti-competitive conduct, the Competition Commission of India has released a draft of the procedure to be followed during commitment proceedings under the Competition Act.

As a part of the recent amendments to the Act, a provision for filing a commitment application was introduced so that any entity against whom an investigation for anti-competitive conduct has been initiated can offer commitments to address the competition concerns.

Under the proposed regulations, any entity that has been accused of anti-competitive behaviour and is the subject of an investigation can submit an application to the CCI containing information about their commitments and how they will deal with the alleged violations and competition concerns.

It must be noted that these regulations will not cover cartels and will be available only for anti-competitive vertical agreements and abuse of dominance cases.

In a nutshell, the draft regulations have a lot of commonalities with the commitment provisions of foreign jurisdictions such as the EU and the U.K. They envisage that guilt will not be presumed while agreeing to the commitments offered, penalties will not be prescribed, and instead only behavioural changes will be touted, and there will be a provision for monitoring these commitments via independent agencies if required.

In the EU, between 2005 and 2019, more than 50% of cases were disposed of by rendering remedial commitments binding upon the parties. For commitment regulations to be successful in India, it is reasonable to consider how foreign jurisdictions have dealt with commitment regulations.

The EU has a consultative process, and deliberations between an applicant and the European Commission start from the get-go of the commitment process. There are several meetings, and draft commitments are normally discussed with the relevant case team. This consultative process is not specifically identified in the draft regulations, Aman Singh Sethi, partner at Shardul Amarchand Mangaldas, told BQ Prime.

The current draft regulations envisage the submission of an application, the CCI's consideration of the application, and the subsequent communication of whether or not the CCI is satisfied. Thereafter, the applicant must file a revised application, which may or may not be accepted.

Experience with CCI's merger control cases shows that consultative and forthcoming engagement as a part of the formal process results in meaningful and workable outcomes, Sethi said.

According to one of the proposed regulations, the commission will be permitted to use the information provided by a commitment applicant against it.

The purpose of introducing a commitment regime is to ensure a speedy market correction. A provision that allows the information provided by a commitment applicant to be used against it will become a deterrent for parties to come forward and report a contravention and defeat the very purpose of this mechanism, Ela Bali, partner at JSA, told BQ Prime.

However, if a party is disclosing something that is damaging to the market, then the CCI should have the right to use it against it in order to discharge its duty, said Avimukt Dar, partner at IndusLaw.

A commitment application will be required to be filed within 45 days from the date of the initiation of the investigation. This time period can be extended by another 30 days if the competition regulator is satisfied that there was sufficient cause for the delay.

This would exclude all the cases that are currently under investigation but for which the DG report has not yet been finalised within the scope of the regulations. The CCI should consider a sunset mechanism to allow parties currently under investigation to explore the benefits of the regime, said Deeksha Manchanda, partner at Chandiok and Mahajan.