India: The Supreme Court Of India And Delhi High Court Clarify The Scope Of CCI's Jurisdiction

1. INTRODUCTION

The Supreme Court of India ("SC") and Delhi High Court ("DHC") by way of separate orders dated June 15, 2023¹ and June 2, 2023² , respectively, have thrown light on the interpretation and scope of an 'enterprise' for the applicability of the Competition Act, 2002 ("Act"). The SC has now clarified that legal status of the entity in itself does not exempt it from the applicability of the Act, and the activities of a State monopoly will fall within the Competition Commission of India's ("CCI") jurisdiction. However, the DHC has held that a limited exemption is available to enterprises performing regulatory functions pursuant to a statute.

2. OVERVIEW OF THE SC AND DHC ORDERS

The SC and DHC, in separate cases, were seized with interpreting the scope of an 'enterprise' under Section 2(h) of the Act. The DHC dealt with the applicability of the Act to a statutory body like the Institute of Chartered Accountants of India ("ICAI")³ in relation to providing Continuing Professional Education ("CPE") by holding and organizing such CPE seminars, exclusively. Similarly, the SC dealt with the applicability of the Act to a State monopoly and government company like Coal India Limited ("CIL") and its subsidiaries in relation to its pricing and production practices.

2.1 The DHC order

A writ petition was filed by the ICAI before the DHC, challenging the CCI's order dated February 28, 2014.⁴ In its order, the CCI had observed that ICAI performs regulatory functions (such as prescribing educational qualification, maintenance of status and standard of professional qualification) as well as commercial and economic activities (such as organizing CPE seminars and publication of books), and drew a distinction between them. The CCI held that ICAI will be an 'enterprise' under Section 2(h) of the Act in relation to its economic and non-regulatory activities. Accordingly, the CCI passed an investigation order against ICAI for allegedly abusing its dominant position in the market for organizing recognized CPE seminars in India.

At the outset, the DHC noted that the Act defines 'enterprise' in wide terms. It includes a person and a department of the government, which is engaged in all activities except activities relatable to the sovereign functions of the government.⁵ Thus, it can be inferred that even a statutory body, which is engaged in any of the activities that are not relatable to sovereign functions, would fall within the definition of the term 'enterprise'.

The DHC observed that ICAI is, (i) a 'person' within the meaning of Section 2(l) of the Act; and (ii) a 'statutory body' within the meaning of Section 2(w) of the Act. Further, given that the activities of ICAI (such as regulating a profession) cannot be termed as sovereign functions of government, the DHC observed that ICAI will be considered as an 'enterprise' within the meaning of Section 2(h) of the Act. Thus, the DHC departed from the CCI's approach of drawing a distinction between ICAI's activities and categorically held ICAI to be an 'enterprise' under Section 2(h) of the Act, even if it carries out certain regulatory functions.

The DHC also observed that the CCI is not a super-regulator and does not have power to review the decisions taken by other regulators while discharging their regulatory functions under the respective statutes. The legislative intent of the Act is to empower the CCI to regulate markets and does not extend to review of regulatory functions performed by statutory bodies, which does not have an actual effect on the market. Thus, while the grievance of the informant⁶ related to ICAI's decisions to organize CPE seminars (albeit exclusively), such decision was taken by ICAI as a regulator and not as a service provider. As the CCI does not have the power to address grievance regarding arbitrary action by a statutory authority, the DHC held that the CCI cannot have jurisdiction.

2.2 The SC order

Interestingly, two weeks after the DHC order, the SC dismissed a civil appeal filed by CIL⁷ challenging the order of the Competition Appellate Tribunal ("COMPAT") dated December 9, 2016.⁸ The COMPAT had upheld the CCI's order dated October 27, 2014,⁹ which had held that CIL (through its subsidiaries) contravened the provisions of the Act by engaging in differential pricing and limiting production.

At the outset, the SC observed that the government departments and State monopolies are expressly covered within the meaning of 'enterprise' under Section 2(h) of the Act. CIL is a government company (as defined in the Companies Act, 1956) which is engaged in activities relating to production, storage, supply, distribution and control of coal, in India. Further, in response to an argument made by CIL, the SC observed that there is nothing in the Act which excludes a State monopoly that is set up to achieve the goals in Article 39(b) of the Constitution of India.¹⁰ Thus, a State monopoly which is being run through the medium of a government company will fall within the purview of the Act. Further, the SC observed that the legislative intent to include government companies, public sector companies and bodies formulated under a statute, within the ambit of the Act is clear from a bare reading of Section 19(4)(g) of the Act which provides that 'monopoly' or 'dominant position', whether acquired as a result of any statute or by virtue of being a government company or a public sector undertaking ("PSU") or otherwise, is a relevant factor to assess the dominant position of an enterprise. Therefore, the SC rejected the argument that a State monopoly like CIL is not covered under the purview of the Act and held that CIL is an 'enterprise' within the meaning of Section 2(h) of the Act.

3. QUICK VIEW

The SC and DHC orders are landmark rulings for clarifying the scope and applicability of the Act and will go a long way in the development of competition law jurisprudence in India.

It is commendable that the SC has upheld the principles of fairness and competitive neutrality under the Act by treating private enterprises and public enterprises alike. Thus, the SC has sent a strong signal that the judiciary is committed to promote competition and protect consumers not only from private enterprises but also from government enterprises. This ruling gains prominence especially when news reports suggest that an inter-ministerial panel is likely to recommended that government platforms or gatekeepers¹¹ may be excluded from the Digital Competition Bill, which would lead to an uneven playing field by creating new exemptions.¹²

It is also interesting to note that while the DHC categorically held ICAI to be an enterprise even in relation to its regulatory functions, it took a purposive interpretation and carved out a limited exemption from applicability of the Act for decisions taken by other regulators while discharging their statutory regulatory functions. Although the reasoning of the DHC appears sound at first glance, given that such an exemption may not have been contemplated by the initial scheme of the Act, it remains to be seen whether the SC will uphold this interpretation.

Footnotes

1. Civil Appeal No. 2845 of 2017, Coal India Limited and others v. Competition Commission of India and others, order dated June 15, 2023, available at: https://main.sci.gov.in/supremecourt/2017/5094/5094_2017_6_1501_44710_Order_15-Jun-2023.pdf.

2. Writ petition No. 2815 of 2014, Institute of Chartered Accountants of India v. Competition Commission of India and others, order dated June 2, 2023.

3. ICAI was established by the Central Government under the Chartered Accountants Act, 1949.

4. Case No. 93 of 2013, Mr. Arun Anandagiri v. The Institute of Chartered Accountants of India, order dated February 28, 2014, available at: https://www.cci.gov.in/antitrust/orders/details/266/0.

5. Sovereign functions include, all activities carried on by the departments of the Central Government, dealing with atomic energy, currency, defence and space.

6. The informant, a qualified chartered accountant, alleged that the CPE policy of the ICAI is discriminatory and does not allow any other organization to provide the service of organizing CPE seminars.

7. CIL operated multiple coal mines pursuant to the provisions of Coal Mines (Nationalization) Act, 1973.

8. Appeal No. 80 of 2014, Coal India Limited and others v. Competition Commission of India and others, order dated December 9, 2016.

9. Case No. 11 of 2012, M/s Sai Wardha Power Company Ltd. v. M/s Western Coalfields Ltd. & Coal India Limited, order dated October 27, 2014, available at: https://www.cci.gov.in/antitrust/orders/details/741/0 . The CCI had directed CIL and its subsidiaries to cease and desist from indulging in anti-competitive practices and make necessary modifications to its agreements.

10. Article 39(b) of the Constitution of India provides that: "The State shall, in particular, direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.

11. Such as Indian Railway Catering and Tourism Corporation and Unique Identification Authority of India.

12. Digital competition bill to exempt government's gatekeepers, Article dated June 9, 2023, available at: https://www.cnbctv18.com/india/digitalcompetition-bill-to-exempt-governments-gatekeepers-data-protection-bill-ministry-corporate-affairs-amazon-flipkart-16898601.htm.

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