Centre will have power to supersede CCI, exempt large firms from draft competition bill

The Ministry of Corporate Affairs released the draft of the Digital Competition Bill for consultation on March 12

Like in the case of the Digital Personal Data Protection Act, where the government reserved sweeping powers for itself when it came to providing exemptions, a similar provision has been included in the draft Digital Competition Bill which has now been released for consultation.

The draft bill says that the government can exempt an enterprise from the provisions of the bill in the "interest of Security of the state, for obligation under any treaty" and so on. The government will also have the power to supersede the decisions of the Competition Commission of India.

The bill essentially brings in additional obligations and restrictions for Systematically Significant Digital Enterprises (SSDEs), in a bid to prevent anti-competitive practices. A firm can only be declared as an SSDE if it meets the high thresholds (global turnover, GMV etc) laid down in the bill for three consecutive years.

Additionally it also brings in hefty penalties for firms who are non-compliant to the obligations in the bill.

However, Sec 38 of the bill says that the Central government by notification can "exempt an enterprise from the application of one or more provisions of this Act, the rules or regulations framed thereunder, or any provision thereof, and for such period".

Sec 40 of the bill lays down the powers of the government when it comes to superseding the decisions of the CCI. It says that the Centre can supersede CCI in extraordinary situations such as, if it finds that the regulator is “unable to discharge its functions” etc.

If by notification, the government decides to supersede the CCI, then the chairperson and members of CCI will have to vacate their offices. The government can supersede the CCI only upto a period of 6 months.

"It is settled law that the Executive cannot have unbridled power. The same was held by Supreme Court in Satwant Singh Sawhney vs D Ramarathnam, Assistant Passport Officer, Government of India. On the face of it, the provision appears to promote ease of doing business and would have a positive impact. However, if it is not applied judiciously, we may expect more judicial intervention in the area," said Rohit Jain, managing partner, Singhania & Co.

In the Satwant Singh Sawhney vs D Ramrathnam case, the Supreme Court ruled that the right to freedom of movement is a fundamental right guaranteed under Article 21 of the Constitution of India. The larger takeaway from the judgment was that governmental powers, even those related to regulation and control, are subject to constitutional scrutiny and limitations.

Saksham Malik, senior programmme manager - competition law and policy at The Dialogue said, "The CCI and the Central government have been given significant discretion on various points. In some areas, there are guardrails or parameters in the law which can provide certainty on how this discretion will be utilised...

"However, in certain areas, certain factors, parameters on guardrails will be required. For instance, by relying on the approach followed by Section 54 of the Competition Act, the draft bill mentions that the Central government may exempt certain enterprise or classes of enterprises from the purview of the DCB. However, the factors mentioned in the law, for example and 'public interest', 'sovereign function' are broad and vague. Further guidance on the parameters of this exemption is needed," Malik added.