Khushi Bansal and Parnika Agarwal are 4th year student at Symbiosis Law School Noida
Keywords: Competition Law, ADR, JCB Case
Introduction
Have you ever thought of settlement of conflicts in rem without going to the courts?
Outside Court Settlement or Alternative Dispute Resolution (‘ADR’)(as is widely known) refers to the settlement of disputes privately, without going to the courts. This substitute is being widely used and relied on in the civil disputes, which are in personam pursuant to Section 89 of the Code of Civil Procedure. This provision entails mandatory reference to ADR if the elements of settlement exists. The same was further strengthened in the case of Salem Advocates Bar Association v. Union of India, the apex court categorically bestowed the responsibility on the courts to resort to ADR to bring a halt to litigation at an early stage. From all the mechanisms available under S.89, arbitration and mediation stands at the forefront.
Having dealt with this aspect, it is pertinent to understand the scope of alternative settlements in the anti-trust arena which remains a contentious issue. This is primarily because competition law issues are considered to affect the public at large and therefore, tribunal and in this case the ‘Competition Commission of India’ (‘CCI’) is the appropriate forum to resolve the disputes to cater to larger public interest. This approach was given a turn-around with the recent decision of the Supreme Court (‘SC’) in the case of CCI v. JCB India Limited & Ors.(‘JCB’) wherein the court upheld the private settlement of a decade long dispute between JCB and Bull Machines Private Limited (‘BMPL’).
It is interesting to note that Settlement and Commitment Mechanisms which are introduced vide Sections 48A and 48B also provide a way to alternatively and effectively resolve disputes, however, the distinct feature was the involvement of the commission in all cases. This can be differentiated from the aforementioned ruling of the SC in the manner that this was entirely private. Now, this has sparked a debate and may face unforeseen challenges when implemented.
Arbitrality of Competition law Dispute
As we have already discussed that arbitration is the most popular mechanism of ADR, it becomes essential to understand what all disputes can be resolved through arbitration and in order to know this, ‘Arbitrability’ plays a crucial factor. Arbitrability simply means “whether the dispute is capable of being settled by arbitration or not”. In the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Limited, the SC has laid down that rights in rem are not arbitrable whereas those in personam must go to arbitral tribunal, if they can be resolved in that manner. Through this analogy, Competition Law disputes cannot be resolved through arbitration.
In the international context, historically, the courts were of the opinion that competition law issues cannot be resolved via arbitration because public policy issues are being involved, and they are often fact intensive and beyond the expertise of an arbitrator. Specifically, in the United States of America (‘USA’), in the case of Applied Digital Technology Inc. v. Continental Casualty Co., the court applied the doctrine of ‘American Safety’ anti-trust issues are non-arbitrable. Thereafter, in Cobb v. Lewis court held that “anti-trust issues are non-arbitrable unless the arbitration agreement is negotiated after the dispute arises.”
Thereafter, came an entire revolution in the regime of competition law regime with the coming up of Mitsubishi Motor Corp. v. Soler Chrysler Plymouth(‘Mitsubishi’),SC held that if a valid arbitration clause is mentioned in the agreement containing an anti-trust concern, it will be a valid and such a dispute can be submitted to arbitration. Besides, the Court motivated its decision on the grounds that the Arbitral Tribunal had competence to hear and already decided to consider the antitrust claims. Lastly, the Court maintained that for the enforcement of award, national courts will play a crucial part. This is famously known as the ‘SECOND LOOK DOCTRINE’.
In a rather similar backdrop, the European Union (‘EU’) did not have provisions with respect to arbitrability of anti-trust issues, however it was in 1999 in the case of Eco Swiss China Time Ltd. v. Benetton International NV, it was held that arbitral tribunal has the power to hear matters on competition law, subject to arbitrability by the courts.
The first Indian case to push the limits of arbitration of competition law is Union of India v. Competition Commission of India. In this case, the parties who had entered into a concession agreement with the Ministry of Railways lodged a complaint with the CCI, alleging that the Railway Board (‘RB’) was abusing its dominant position by imposing increased charges. The RB challenged the jurisdiction of the CCI because of a pre-existing arbitration contract between the parties. However, the court held that the CCI had jurisdiction to hear the matter on the ground that an Arbitral Tribunal does not have the specialized capacity of preparing an investigation report, which is being expressly required to adjudge the dispute. Finally, it was held that such disputes are not arbitrable because of lack of expertise. But the question is, “Whether India can align with the pivoted approach taken by USA or EU?” This shall be answered in the upcoming sections.
Philippines is another nation where this approach is developing. In Philippines, despite public policy considerations in the anti-trust regime as explained by the case of Philippines in Emeterio Cui v. Arellano University by its apex court; arbitration could be used for solving private competition disputes. The courts should retain some form of review over arbitral awards to ensure that such awards do not contravene the competition law in line with the “second-look doctrine” iterated in the Mitsubishi case. This would remain in keeping with international trends while protecting the integrity of Philippine competition law.
Settlement and Commitment Regime: A Paradigm Shift
The amendment act of 2023 inserted Section 48A, permitting settlements and commitments in certain cases. Thus, Indian Competition law has started matching efficiency interplay with its global counterparts, especially with the EU.The new mechanism aims at rapid resolution, minimal litigation, and facilitation of compliance without prolonged adjudication.
Commitments and settlements are voluntary remedies given to the parties before a competition authority. They are used by these authorities in an informal dispute resolution process for supervisory actions arising from alleged violations of competition law without resorting to formal enforcement proceedings or litigation. Although their aim and spirit are the same-they are nevertheless two different mechanisms.
Commitments can be broader undertakings by the parties towards the issues identified by the competition authorities. Under this, parties may even voluntarily propose alternative courses of action, or other remedial measures and corrective actions to rectify their anti-competitive conduct. They essentially pledge to undertake corrective measures and not to engage in any such conduct. Commitment can be resorted to between the parties after CCI has passed an order under Section 26(1) and before Director General (‘DG’) investigation has been ordered. The relevant authority can accept such commitments and monitor compliance by the defaulting entity.
The Settlement Regulations are meant for enterprises against whom the DG has found violations of the provisions of the Act after detailed investigations. These Regulations grant such parties a way to ‘settle’ with the CCI and avoid further inquiry and hearings and other proceedings before the CCI and avoid a heavy penalty while also saving on further litigation expenses. This can take place at any time before the final order and post the submission of DG’s report. The introduction of this settlement mechanism signifies a shift towards a more flexible regulatory approach.
Role of Mediation between the Parties: Analysis of the JCB v. CCI Case
In the case of JCB India Ltd. v. Competition Commission of India, the Delhi High Court (‘DHC’) gave effect to an out-of-court compromise arrived at by JCB and Bull Machines, marking a landmark moment in our anti-trust jurisprudence. The court categorically highlighted the role of mediation and the need for CCI to give it its due importance. It states that if the proceedings of CCI are to continue, they would defeat the very purpose of alternate dispute resolution, etc. Such continued proceedings, after the avenues for settlement between the parties, would continue hanging like the “Sword of Damocles” over the heads of both parties and would prejudice the business and commercial interest of parties who have resolved to settle their commercial disputes. The DHC has also expanded the rationale of settlement of private in-personam disputes to cover even closing the in-rem disputes in the competition law forum before CCI.
Although, according to the Mediation Act, 2023 it is explicitly stated that any investigation, inquiry or proceeding under the Act, including proceedings before the Director General under the Act, shall be excluded from mediation. Therefore, in technical terms, since in the competition jurisprudence, the DG acts as an investigative arm, such matters cannot be resorted through mediation. However, the DHC has not examined the rationale for the Mediation Act, 2023 in its exemptions to regulatory matters while stating that regulatory bodies such as the CCI should honour the outcome of mediation and respect anything that the parties settle upon.
More importantly, this ruling of the DHC was appealed by the commission before the apex court and in the case of CCI v. JCB India Limited & Ors., while disallowing the leave to CCI to appeal; SC upheld the mediation proceedings undertaken by the two parties. Now, in accordance with Article 141 of the Indian Constitution, judgement pronounced by the SC binds all the subordinate authorities, meaning thereby that this shall also be binding on the CCI and the commission now has no option but to not give effect to its original order.
The decision has sparked intense debates and discussions on whether such settlements compromise can actually form a part of our regime and what future does it hold in the times to come. While the critics allege that allowing private settlements in competition matters creates room for firms to escape regulatory scrutiny; the proponents are of the opinion that there is an increase in efficiency, reduction in litigation costs, and ultimately it provides a quicker resolution.
Way Forward
The recent Supreme Court ruling in CCI v. JCB India Limited & Ors. has explored the unexplored in its true sense. This precedent raises a crucial question of whether privately settled competition matters will be in opposition to regulatory oversight or will it enhance efficiency at all ends. The critics, as mentioned above, insists that private settlements will escape regulatory scrutiny, while proponents discuss low litigation expenses and speedy resolution of cases. Reconciling this disparity of opinions seems to be a great challenge.
While the introduction the commitment and settlement regime in the Competition Act, 2002 through the 2023 amendment provides a structured settlement and commitment mechanism, these provisions still would require CCI’s involvement. The ruling in JCB’s case is however, a purely private settlement approach raising the need for a regulator’s clarifying rule in the future.
In our opinion, to better align alternative dispute resolution with competition law enforcement, India could explore a two-tier mechanism in which:
- First, there could be private settlements in competition cases, but with CCI must have the last resort to comprehensively review such agreements.
- Secondly, mediation and arbitration are to be expressly recognized to handle competition disputes that are primarily in personam (e.g. – when Jio entered the market, it was providing internet services free of cost which affected revenue of other competitors but there was no harm to the market/consumers at large). Conversely, matters in rem (e.g. – Cartel cases which are considered to be the most serious violations of competition law) must remain with CCI having proper jurisdiction and exclusive authority to resolve.
This structure could provide a level-playing field to the businesses with respect to alternate resolving mechanisms that are capable of efficacious dispute resolution vis-à-vis providing the CCI a proper role in guaranteeing that the overall purpose of competition law is achieved in India.
Both the EU and the United States have adopted rather similar models which imposes stringent regulatory scrutiny while providing structured ADR mechanisms. Articles 9 and 10 of Regulation 1/2003 are the procedures for settlement and commitment respectively, proving that the can be a co-existence of negotiated settlements alongside regulatory oversight in the EU. In the United States, the ruling in Mitsubishi Motor Corp. v. Soler Chrysler Plymouth, similarly recognizes that arbitration may provide an avenue for competition disputes but will still leave a supervisory role to the national courts. Such models afford India great contextual footing in developing an appropriate architectural solution for protecting revolutionary integrity with efficiency and resolution.
Conclusion
The development of competition law in India is at a critical juncture, as it attempts to establish a balance between traditional regulatory control and alternative dispute resolution techniques. The JCB verdict has created opportunities for private settlements in competition cases, and the 2023 amendment includes settlement and commitment mechanisms. However, the problem lies in ensuring that efficiency does not come at the cost of regulatory oversight. A structured method, where private settlements are permitted but subject to CCI’s review, could be the middle ground. Drawing from global examples like the EU and USA, India can build a system that favours rapid resolutions without weakening the objectives of competition law. As the legal landscape continues to evolve, a well-calibrated system will be vital to creating a fair and competitive market while ensuring disputes are addressed in a manner that preserves both commercial interests and public welfare.