Compensation claims could deter settlements in antitrust cases, legal experts warn

The government last week notified settlement rules

The inclusion of compensation claims in Antitrust settlements may discourage companies from opting for the newly introduced Settlement and Consent norms by the Competition Commission of India (CCI), legal experts said.

While designed to offer resolution without litigation for competition market violations, these norms may inadvertently expose companies to further legal battles through compensation claims they said.

The CCI had last week notified new rules which allowed negotiated settlements in antitrust cases and accepted commitments from businesses for change in their behaviour in order to avoid an investigation. Notably, the introduction of the settlement scheme aims to alleviate the burden of competition cases in judicial forums and improve ease of doing business. However, with compensation claims now in play, legal experts maintained that companies may be hesitant to settle, fearing additional legal entanglements.

Notably, the settlement scheme excludes cartelization cases, leaving room for further discussion on the scope and effectiveness of settlements in Antitrust cases.

Additionally, the CCI has released guidelines for determining turnover or income to calculate penalties, along with a framework for determining the quantum of penalties in cases of anti-competitive practices. These guidelines were incorporated into the Competition Act through legislative amendments introduced last year, alongside the commitment and settlement schemes.

Under the consent and settlement route, companies accused of violating competition norms can resolve matters by paying fines to the Competition Commission of India (CCI) without admitting guilt. However, the rules also stipulate that any violation resolved through settlement can be subject to compensation claims, allowing affected parties to seek damages from the National Company Law Appellate Tribunal (NCLAT).

However, Avaantika Kakkar, partner and head of the Competition Practice at Cyril Amarchand Mangaldas, told Moneycontrol that the purpose of the settlement procedure should be to provide relief from litigation but, the inclusion of compensation claims may accelerate parties towards contentious scenarios rather than offering a quiet resolution. “It would be interesting to see what induces companies to go for settlement versus agitating defence before the CCI and in appeals.” Kakkar added.

“Settlement order passed by the CCI is not appealable before NCLAT. While there is no admission of guilt by the enterprise, the affected parties can apply to NCLAT for compensation or damages.” said Vaibhav Choukse, head of practice, Competition Law at J Sagar & Associates.  “This may be a discouraging factor for the applicant to opt for settlement since they will be exposed to damages or compensation, without an option of appeal.”

Moreover, there's a time disadvantage for companies pursuing the normal legal route. While challenging a CCI order through legal channels can take three to five years, compensation claims can be filed immediately after settling, potentially expediting legal action.