What the CCI’s draft regulations on commitment and settlement agreements mean

In a move that is expected to help cut down litigation, the Competition Commission of India has issued draft regulations for settlement and commitment, which are expected to help companies found to be indulging in anti-competitive practices.

The draft regulations, once finalised and notified, would help in the implementation of the provisions of the recently passed Competition (Amendment) Act, 2023. The CCI has sought public comments on the draft regulations by September 13.  

The Amendment Act had introduced a 'Settlement & Commitment' framework to reduce litigation and is expected to help technology companies found to be guilty of anti-competitive practices or abuse of their dominant position.  

Draft settlement regulations

The draft settlement regulations would allow a company found to be in breach of the provisions of the Competition Act after inquiry by the Director General of CCI to file a settlement application under which it would correct its behaviour and pay as much as the maximum penalty.  

The settlement application would include full and true disclosure of facts in respect of the alleged contraventions and the findings of the Director General and details of the settlement proposal including as to how the same addresses the alleged contraventions, competition concerns and the manner of implementation and monitoring thereof.  

The application would be considered by the CCI for reaching a decision on whether to accept or reject it. Based on the level of cooperation extended, nature of disclosure made by the Settlement Applicant and the settlement proposal, the Commission can apply a settlement discount and reduce the amount determined under by up to 15 per cent.  

A settlement application shall not be entertained by the Commission if it is made after expiry of 45 days from the receipt of report of the Director General by the settlement applicant, although this timeline may be extended by a period of 30 days. As part of the application, the company would also have to pay a non-refundable fee ranging from Rs 5 lakh to Rs 50 lakh based on its total turnover in India in the preceding financial year. The entire process would have to be completed within 120 days.  

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Draft commitment regulations

Similarly, the draft commitment regulations state that a company found to be indulging in anti-competitive behaviour can file a commitment application. “A Commitment Application shall be filed within 45 days from the receipt of the order passed by the Commission,” said the draft regulation, while listing similar provisions as those for the settlement, including payment of a non-refundable fee. The entire proceeding would have to be done within a 90-day timeframe during which the CCI’s inquiry would be in abeyance.  

Both the settlement and commitment order would be final and binding on the applicant and the CCI may use the information submitted by the applicant against it or such other parties to the inquiry who are not part of the commitment proceedings.  

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Expert view

Experts welcomed the draft rules but said there could be need for some review. Neelambera Sandeepan, Partner at Lakshmikumaran & Sridharan Attorneys, noted that some of the aspects such as a submission on the “gravity and impact of the alleged contravention” require additional guidance to enable parties to provide such an assessment to the CCI. “Additionally, the requirement that the CCI may use the information provided by the parties in proceedings against the parties themselves or third parties could act as a deterrent,” Sandeepan said.
 
Further, the regulations do not provide a right of hearing to the parties before the CCI makes a decision regarding the settlement or commitment proposal. “Given that the proposals would presumably relate to complex business practices and markets, this provision may require a re-look,” Sandeepan said.  

Unnati Agrawal, Partner, INDUSLAW noted that given the short timeline for submission of comments on the draft regulations, it is expected that the government will notify and bring these provisions into effect soon.  

“It appears that providing faster and more efficient way to ensure market correction as well as reducing litigation is a top priority for the government. The biggest benefactor of these provisions will be the Big-Tech companies who have been able to offer commitments in other jurisdictions to address competition law concerns regarding their conduct but have been unable to do so in India so far,” Agrawal said.

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