Competition Commission’s standard to gauge cartelization is in the midst of a quiet change

One could say its early days yet for the current Commission members. But the signs are ominous for consumers.

By Abdullah Hussain 

Is it a good time to be a cartelist?

The numbers would seem to suggest so. After the Competition Commission attained quorum in September 2023, it has dismissed 42 complaints and opened one investigation. Number of final orders finding a contravention – zero.

The year 2023 saw approximately 45 complaints filed, of which save 7-8 complaints, in the remaining orders have been passed. Assuming orders of investigation have been passed in these 7-8 complaints (cartel orders are generally not published), that suggests only 15 – 17 per cent of the complaints have made it past the front door.

According to the Annual Reports of the CCI, from  FY 2009–10 (when the provisions were first enforced) up to 2022–23, the average number of investigations opened each year was 28. As a percentage of the total number of complaints received and suo-motu cases, it is 35 per cent.

Is 2023 an inflection point?

Although the number of dismissals is always greater than the number of investigations opened each year, the 2023 figures are quite a contrast. The latest figures (7-8 investigations) are approximately one-fourth the annual average of the last fourteen years (28), and half in percentage terms. One could say its early days yet for the current Commission members, who are set to be here till 2028. But the signs are ominous for consumers.

Raising the threshold

Another worrying trend is the raising of the bar for complainants at the thresholds. Of the 42 complaints dismissed, the Commission asked for additional information/comments from the complainant on eight occasions prior to dismissing it, holding that the information provided both with the original complaint and the additional information were insufficient.

On four occasions, the opposite party was asked to submit their response to the complaint. The Commission entered into a detailed examination of the arguments on both sides. Requiring a higher standard of proof and entering into a detailed examination at the threshold, makes it much harder for information providers, who don’t have wherewithal or the statutory power to obtain such information. This may result in fewer complaints being filed – the Commission’s primary source of information for anti-competitive conduct.

Reversing a past order

Perhaps the most ominous sign is the latest order dismissing a cartel case. In 2013, complaints were filed alleging several sugar manufacturers had colluded in relation to a tender floated by the three oil PSUs for the supply of ethanol. The investigation (conducted by the investigation wing of the CCI) concluded that the sugar producers had indeed cartelized and rigged the bids. Apart from the closeness in the actual bid prices, quantities offered, and participation patterns at different depots, the conclusion was based on evidence of meetings, emails, and phone call records amongst other things.

In 2018, the Commission members considered the investigation report, heard the parties, and passed a detailed order concluding that the sugar producers had indeed cartelized.

Appeals were filed, and in October 2023, the Appellate Tribunal set aside the 2018 decision based on a procedural irregularity and ordered the Commission to hold a re-hearing. However, this time, based on the very same evidence, the Commission came to a diametrically opposite conclusion. In its order of 22nd July, the Commission held that the same evidence, which in 2018 had led to the conclusion that the sugar producers had cartelized, was insufficient and could not sustain such a conclusion.

Now the Supreme Court has overruled its own decisions from time to time but normally this is on an interpretation of law or a change in social or economic circumstances due to passage of time that may warrant such a shift. But the case before the Commission was merely a re-hearing on the same evidence. This again indicates a shift in the standard of proof required in order to establish a contravention. Preponderance of probabilities may no longer be sufficient.

Combined, this will have a cascading effect on complainants who may feel they have nowhere to go to get redressal, while cartelists may be rubbing their hands with glee.

(The author is a Partner at DSK Legal. His area of expertise is Competition Law.)

Views are personal and do not represent the stand of this publication.