Competition Law: Govt Notifies Settlement, Commitment Provisions

The government has notified the provisions relating to settlement and commitment under the competition law, which will enable parties to resolve cases involving anti-competitive vertical agreements and abuse of dominant position, except cartelisation, at different stages of investigation. The Competition Commission of India (CCI) has also notified the regulations pertaining to these provisions.

What are settlement and commitment provisions?

Settlement and commitment are alternative dispute resolution mechanisms that allow parties to offer remedies or modifications to their conduct in order to address the competition concerns raised by the CCI or its investigative arm, the Director General (DG).

Under the notified regulations, a party found in contravention of the Competition Act by the DG can file a settlement application. The CCI will consider the application if it finds that the proposed terms of the settlement are in the public interest and address the alleged contraventions. The CCI may also impose a monetary penalty on the applicant as a condition for settlement.

A party under investigation by the DG can also file a commitment application, offering to voluntarily change its conduct or take other steps to eliminate the competition concerns. The CCI may accept the commitment if it is satisfied that it would restore effective competition in the market and protect the interests of consumers and trade. The CCI may also impose conditions or modifications on the commitment.

Once a settlement or commitment is accepted by the CCI, the investigation or proceedings against the applicant will be closed. However, the CCI may reopen the case if it finds that the applicant has breached the terms of the settlement or commitment, or has provided false or misleading information.

What are the benefits of these provisions?

According to experts, these provisions will enhance CCI’s regulatory process, including swifter market corrections, especially in fast-changing digital markets. They will also reduce litigation costs and delays for both parties and the regulator, and allow more flexibility and certainty in resolving complex cases.

These provisions are also in line with international best practices, as many other jurisdictions have similar mechanisms for resolving competition cases.

How do these provisions work in practice?

To illustrate how these provisions work in practice, let us take an example of a hypothetical case involving an online platform that is accused of abusing its dominant position by imposing unfair terms and conditions on its sellers.

The DG initiates an investigation against the platform and finds that it has contravened Section 4 of the Competition Act, which prohibits abuse of dominant position. The DG submits its report to the CCI, which issues a show cause notice to the platform.

The platform can either contest the findings of the DG and proceed with the regular adjudication process, or opt for one of the alternative dispute resolution mechanisms.

If it chooses to file a settlement application, it has to propose terms of settlement that would address the competition concerns raised by the DG. For example, it may offer to modify its terms and conditions, provide more transparency and choice to its sellers, or pay a monetary penalty.

The CCI will examine the application and decide whether to accept it or not. If it accepts it, it will pass a settlement order that will record the terms of settlement and close the case. The platform will have to comply with the terms of settlement within a specified time period.

If it chooses to file a commitment application, it has to propose commitments that would eliminate or prevent the competition concerns raised by the DG. For example, it may offer to cease or refrain from certain conduct, adopt certain practices or policies, or implement certain measures.

The CCI will examine the application and decide whether to accept it or not. If it accepts it, it will pass a commitment order that will record the commitments and suspend the proceedings. The platform will have to comply with the commitments within a specified time period.

In both cases, if the platform fails to comply with the terms of settlement or commitments, or provides false or misleading information, the CCI may reopen the case and resume the proceedings.

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