In what could be music to the ears of Big Tech, the Standing Committee of Finance wants the Competition Commission of India (CCI) to in all earnest adopt “effects doctrine” in adjudication of Competition cases. 

By this, this Parliamentary Panel wants CCI to use effect based tests to show that a particular business practice or behaviour of an enterprise has had an anti-competitive effect on the market. 

The Panel headed by Jayant Sinha wants CCI to test the “actual effect” and not come to conclusion from the intent behind the actions of the corporate enterprise concerned.

In a competition case, an effect-based test may be used to evaluate whether a company’s conduct has harmed competition by, for example, reducing the number of competitors in the market or increasing prices for consumers.

WHAT IS EFFECTS DOCTRINE?

The “effect doctrine” is a principle in competition law that focuses on the effects of a particular business practice or behaviour, rather than the intent behind it. This doctrine is used to determine whether a company has engaged in anti-competitive conduct that harms competition in the marketplace. 

Under the effect doctrine, a company’s actions may be deemed anti-competitive if they have the effect of significantly reducing competition, even if the company did not intend to harm competition. For example, if a company with a dominant market share engages in predatory pricing, it may be found to be in violation of competition law under the effect doctrine, even if it did not intend to harm its competitors.

PANEL REPORT

The recommendation to adopt “effects doctrine” in adjudication of Competition cases is forming part of the Standing Committee report on the Competition (amendment) Bill, 2022 , which was introduced in Lok Sabha on August 5, sources said. The Panel report, which was adopted on December 8, will soon be tabled in Parliament. This is the first set of substantial amendments being moved by the government to the Competition Act 2002 since the year 2007. 

DEATH OF COMPETITION LAW?

Meanwhile, this Panel recommendation — if accepted by government — could be a tricky situation for CCI as so far it has gone by the “likely effect” and not the actual effect of business practice.

If effects tests are there and need to be followed, then Competition law is dead as CCI will never be able to show the actual effects in market but can at most only show potential effects, sources added.

So far CCI had refrained from looking at “actual effect” of the anti competitive conduct but went about adjudication on the basis of intent behind the actions or behaviour. 

The fact that CCI never favoured “actual effect” test is reflected in some of its recent orders against Big Tech companies, sources said.

The CCI contention has been that “effect test” is not required and if “you as a dominant player do anything that it is unfair —whether it actually results or likely results ( in anti-competitive effect) is immaterial”, they said.

JUDICIAL MEMBER 

The Standing Committee on Finance has also recommended that a judicial member be appointed in the CCI, sources said. Interestingly, the Competition Law Reforms Committee (CLRC) had not recommended such an appointment. 

Currently, the CCI has only two members and none are from judicial background.  In 2018, the Cabinet decided it will not appoint anyone other than the Chairman and three members. With CCI now imposing huge penalties in recent days, there is a feeling within the Standing Committee that there should be proper application of mind before the penalties are levied. 

The Parliamentary Panel also wants the government to ensure the legal framework around competition law allows use of intellectual property rights ( IPR) as a defence in case of abuse of dominant position.