2015 (3) TMI 1149 - HC - Law of Competition

Court Upholds Competition Inquiry, Dismisses Forgery Complaint; Settlement Must Align with Public Interest.

The Tamil Nadu Film Exhibitors Association Versus Competition Commission Of India and others

The court dismissed the challenge to the Competition Commission of India's (CCI) order directing an investigation into alleged anti-competitive practices, ... Competition Commission of India - whether it is possible, in the context of the scheme of the Competition Act, 2002, for two adversaries to reach a settlement, thereby closing the doors for an investigation or inquiry? - Held that:- It is clear that a settlement is possible both in the European Union and in the United States to the extent indicated above. To some extent, the obligations imposed by the World Trade Organisations upon its member countries, are the same. In such circumstances, we do not see any reason as to why the Scheme of the Competition Act, 2002 should be taken to prohibit any settlement, especially when the scope of Section 27 of the Act is very wide, conferring jurisdiction upon the Commission to pass residuary orders. Hence, our answer to the first question is that it is possible within the framework and scheme of the Competition Act, 2002, to allow settlements and compromises to be reached between parties, provided the Commission is of the considered view that such settlements and compromises (1) would not lead to the continuance of Anti-Competitive Practices (2) would not allow the abuse of dominant position to continue and (3) would not be prejudicial to the interest of consumers or to the freedom of trade. Whether this court can record a memorandum of settlement like the one that the parties have reached in this case - Held that:- In the case on hand, the Director General of the Competition Commission of India has already completed the investigation and filed a report. In Chapter 8 of the Report, the Director General has concluded that the practices and conduct of the appellant are restrictive in nature to control the film exhibition business. This conclusion has been reached only on the ground that the appellant limited and controlled the exhibition of movies as well as innovative use of technology in the exhibition of feature films in the territory of Tamil Nadu, unless its own directions are obeyed. It is also pointed out in the Report that the appellant was guilty of violation of the provisions of Section 3(3) (b) read with Section 3(1) of the Act. The Director General has placed on record that in yet another case, initiated at the instance of Reliance Big Entertainment (Private) Limited, the appellant was imposed with a penalty. The investigation Report of the Director General not only concludes that the appellant is guilty of violation of the provisions of the Act relating to Anti-Competitive Practices, but also points out that it is the second instance of such nature. Therefore, we are of the considered view that the appellant should file the memorandum of compromise/settlement before the Competition Commission itself so that the Commission will be in a better position to appreciate whether the same could be accepted with or without modifications. In view of the above, the writ appeals are disposed of permitting the appellants to file the Memorandum of Compromise/Settlement entered into between them and the second respondent, before the Competition Commission. Upon the parties filing the Memorandum, the Competition Commission may look into the same in the context of what we have indicated above and pass appropriate orders either rejecting the compromise or accepting the same with or without modifications. The Commission may bear in mind that if in the light of the compromise, any further proceeding would only be an exercise in futility, the same shall not be undergone just for the purpose of completion of formalities. Issues involved:1. Legality of the Competition Commission of India's order directing an investigation.2. Request for police action on a complaint alleging forgery.3. Jurisdiction and authority of the High Court to record a settlement in the context of the Competition Act, 2002.Issue-wise detailed analysis:1. Legality of the Competition Commission of India's order directing an investigation:The appellant, Tamil Nadu Film Exhibitors Association, challenged the Competition Commission of India's (CCI) order dated 16.01.2013, which directed an investigation into an alleged anti-competitive practice. The second respondent, a film producer, had filed a complaint with the CCI, claiming that a resolution by the Tamil Nadu Theatre Owners Association to ban films released via DTH violated Section 3(3)(b) of the Competition Act, 2002. The CCI, after examining the complaint, found a prima facie case and ordered an investigation by the Director General.The appellant argued against the CCI's jurisdiction and the validity of the investigation order. However, the court noted that the CCI's role is not to adjudicate private disputes but to examine broader anti-competitive practices and abuses of dominant positions. The court emphasized that the CCI's inquiry is of public interest and not merely a resolution of private disputes. Therefore, the challenge to the CCI's order was dismissed, and the investigation was allowed to proceed.2. Request for police action on a complaint alleging forgery:The appellant also sought a mandamus directing the Commissioner of Police to act on a complaint alleging that the second respondent's complaint to the CCI was based on a forged document. The appellant's writ petition for this request was dismissed by the learned single Judge, and the appellant appealed against this dismissal. The court observed that the appellant and the second respondent had reached a settlement, wherein the appellant agreed to withdraw the police complaint, and the second respondent agreed to withdraw the complaint before the CCI. Despite this settlement, the CCI's investigation continued, as it was not merely a private dispute but involved public interest issues.3. Jurisdiction and authority of the High Court to record a settlement in the context of the Competition Act, 2002:The court examined whether it could record the settlement between the parties in light of the Competition Act, 2002. The court analyzed the historical background and the scheme of the Competition Act, noting that the Act addresses anti-competitive agreements, abuse of dominant positions, and combinations. The court highlighted that the CCI's inquiries are not limited to resolving private disputes but aim to eliminate practices that adversely affect competition, protect consumer interests, and ensure freedom of trade.The court concluded that the Competition Act, 2002, allows settlements and compromises between parties, provided the CCI scrutinizes such settlements to ensure they do not perpetuate anti-competitive practices, abuse of dominant positions, or harm public interest. The court referenced similar provisions in the European Union and the United States, where settlements in anti-trust cases are permitted under certain conditions.Given the CCI's wide powers and the public interest nature of its inquiries, the court decided that it would not record the settlement itself but directed the appellant to file the settlement memo before the CCI. The CCI was instructed to examine the settlement in light of the court's observations and decide whether to accept or reject it with or without modifications. The court emphasized that any further proceedings should not be pursued merely for formality if they would be futile in light of the settlement.Conclusion:The writ appeals were disposed of with directions for the appellant to file the settlement memo before the CCI. The CCI was to scrutinize the settlement and pass appropriate orders. The court emphasized the importance of the CCI's role in examining anti-competitive practices and protecting public interest. Consequently, connected miscellaneous petitions were closed, and there was no order as to costs.