Overview of the Commitment and Settlement Regime
Authored by Zenia Cassinath (Principal Associate)
The commitments and settlements regime, under the Competition Act 2002 (“Act”) (as amended) was brought into force with effect from 6th March 2024. These changes were implemented through the simultaneous enforcement of certain provisions of the Competition Amendment Act, 2023 (“Amendment Act”) by the Central Government and the notification of the Competition Commission of India (Commitment) Regulations, 2024 (“Commitment Regulations”) and the Competition Commission of India (Settlement) Regulations, 2024 (“Settlement Regulations”), collectively “Regulations”. Through these changes, a framework has been set up for the expedited resolution of matters pertaining to abuse of dominance and anti-competitive vertical agreements. This is done by allowing the entities under scrutiny to offer commitments and /or settlements to the Competition Commission of India (“CCI”). Set out below is a brief overview of the Indian commitments and settlements regime pursuant to these changes.
Timelines
As per the Regulations, parties seeking to offer commitments must make their application to the CCI (i) within 45 days from the receipt of CCI’s prima facie order that commences an investigation or (ii) before it receives the investigation report of the CCI’s investigative arm, the Director General (“DG”), whichever is earlier. On the other hand, parties seeking to offer a settlement must make their application to the CCI within 45 days from the receipt of the DG’s investigation report. Notably once an application is placed before the CCI for consideration, the CCI may keep the inquiry against the applicant in abeyance till final decision on the commitment or settlement application is taken.
Contents of an Application
As per the Regulations, applications submitted to the CCI will broadly include information pertaining to (i) the basic corporate information of the applicant; (ii) the CCI’s prima facie findings against the applicant in case of a commitment application or the DG’s findings in case of a settlement application; (iii) disclosures of facts related to the alleged violation and the applicants’ involvement in the same; (iv) particulars of the commitment or settlement being offered along with an explanation of how the remedies offered allay the identified competition concerns; (iv) details of past anti-competitive conduct; (v) a non-confidential summary of the application in the manner prescribed under the Regulations etc.
Further it may be noted that the commitment and settlement applications are to be accompanied by an undertaking pursuant to which the applicant inter alia (i) submits to the jurisdiction of the CCI and its right to initiate proceedings in respect of the alleged contraventions under the Act; (ii) agrees to the CCI’s right to enforce any claim(s) against it arising from or in relation to any violation of the commitment/settlement order; and (iii) waives its right to (a) take legal action against the CCI qua the issues covered in the commitment/settlement order; (b) contest findings of facts and conclusions of law; (c) appeal or review before the National Company Law Appellate Tribunal or other courts; (d) make any plea of limitation or laches for initiating or restoring of the proceedings, if the commitment/settlement applicant violates the commitment/ settlement order.
Process for Adjudication
As per the Regulations, commitment proceedings are to be concluded within a period of 130 working days and settlement proceedings are to be concluded within a period of 180 working days from the date on which the CCI receives a complete commitment/settlement application. Further these Regulations elucidate the process to be followed while reviewing an application which inter alia includes seeking clarifications and additional information from the applicants and inviting objections and suggestions to the commitment or settlement proposals from the DG and/or other third parties if required. Thereafter, once the CCI has assessed the application, it may either (i) approve, (ii) reject after allowing the applicant an opportunity to be heard or (iii) approve the application subject to certain conditions. To this end it may be noted that the CCI has the power to appoint external agencies to oversee and monitor the implementation of the commitments or settlements as the case may be.
Factors Considered by the CCI During its Assessment
As per the Regulations the CCI’s assessment of a commitment or settlement application is to be made having due regard to factors including (i) the nature of conduct, duration and extent of the alleged contraventions; (ii) the extent to which the commitment / settlement terms address the identified competition concerns and the ease with which they can be effectively implemented and monitored; (iii) whether the terms of commitment / settlement make the markets more contestable; (iv) procedural efficiencies, self-executing terms and early correction of market distortions; (v) whether the applicant has previously been found to have contravened any provision of the Act or if there are any pending investigations or inquiries against the applicant or whether it has made any commitment or settlement application(s) previously; and (vi) whether the applicant has already modified its conduct and policies or taken steps to minimize future violations or lapses.
Grounds for Revocation of an Order
An applicant stands to have its commitment / settlement order revoked if (i) it fails to comply with the order passed by the CCI; (ii) it fails to make full and true disclosures during the commitment or settlement proceedings; or (iii) there has been a material change in the facts. Provided that prior to such revocation, the CCI grants the applicant opportunity to be heard. Thereafter, upon revocation of the commitment / settlement order, the CCI can restore and initiate the inquiry or investigation that was kept at abeyance during the proceedings. The Regulations also provide that if a commitment / settlement order is revoked, the applicant will be liable to pay legal costs incurred by the CCI subject to a maximum of INR 1 crore (i.e. apx. USD 120,000).
Settlement Amount
Once a settlement application is made and prior to passing a settlement order, the CCI will communicate a settlement amount that the applicant must accept within 15 days of communication and thereafter, pay within a period of 30 days from acceptance, failing which the settlement application will stand rejected.
Notably, the Settlement Regulations provide a two-step mechanism for the calculation of the settlement amount. First, a ‘base settlement amount’ will be calculated, in accordance with the Penalty Guidelines, which extend up to the maximum penalty prescribed under the Act. Thereafter, a settlement discount of 15% would be applied to the base settlement amount.
Miscellaneous
Effect of a Commitment or Settlement Order: Orders passed by the CCI agreeing to a commitment or settlement proposal are not to be construed as a finding of contravention by the CCI against the applicant. Further, it has been expressly clarified that such proceedings will have no bearing on the other parties to the CCI’s inquiry who are not part of the commitment or settlement proceedings.
Use of Information: In case a commitment or settlement order is revoked, the CCI and DG may rely upon the information and documents submitted by the applicant in the proceedings under the Act. Further facts established against an applicant or admitted in any ongoing or concluded proceeding in India or outside India, with respect to the same cause of action, is deemed to be admitted by the applicant in respect of the proceedings proposed to be closed under the Regulations.
Fees: As per the Regulations, commitment or settlement application is to be accompanied by a non-refundable fee that ranges between INR 2,50,000 to 50,00,000 which is to be determined on the basis of the commitment or settlement applicant’s turnover.
Interim Settlement Protection: The Settlement Regulations have given the CCI the power to issue interim and / or other directions to protect the interest of consumers and / or to maintain / protect competition in the market during the pendency of the settlement application and require the applicant to comply with the same.