2016 (9) TMI 1679 - HC - Law of Competition

Film Employees Federation faces Competition Commission proceedings for anti-competitive practices after failing to respond

The Kerala HC dismissed a writ petition challenging proceedings by the Competition Commission against petitioners for anti-competitive practices involving ... Involvement in anti-competitive practices - abuse of dominant position - main allegation in Ext.P1 complaint is that a ban has been imposed by the second opposite party namely, the Film Employees Federation of Kerala and its affiliated trade unions - HELD THAT:- The fact that the petitioners have neither filed objections to the report submitted by the Director General nor did not appear before the Commission for the hearing proposed on the report, is not in dispute. It is seen that in the notices issued to the petitioners dated 23.12.2015, it was categorically mentioned that in case the petitioners do not file their objections against the report, it will be presumed that they have nothing to say in the matter and the Commission will proceed with the complaint on that basis, indicating clearly that if they do not establish that the report of the Commission as against them is incorrect, proceedings will be continued against them also as if they have contravened the provisions of the Act. The direction of the Commission in Ext.P3 that the proceedings before the Commission will be continued as if the petitioners have nothing to say in the matter is also, therefore, in order. The materials on record indicate that the proceedings commenced pursuant to the complaint preferred by the second respondent is yet to be over. A final decision on the issue as to whether the opposite parties in the complaint have contravened the provisions of the Act will be rendered by the Commission only when it disposes of the complaint - The scheme of the Act does not contemplate two separate proceedings against the opposite parties as also against the office bearers of the opposite parties who are liable to be proceeded under Section 48 of the Act. The proceedings under the Act, going by its scheme, is a composite one. As such, the guilt, if any, of the persons who come under Section 48 of the Act also needs to be examined simultaneous to the guilt of the opposite parties. Conclusion - The Commission is well within its powers to initiate action against them also under the Act. There is no merit in the writ petition and the same is, accordingly, dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe judgment in question revolves around several core legal issues:Whether the Competition Commission of India (the Commission) acted within its jurisdiction in issuing orders (Exts.P2, P3, and P5) against the petitioners based on the Director General's report.Whether the petitioners, as office bearers of the opposite parties, can be held responsible for anti-competitive practices under the Competition Act, 2002.The validity of the Commission's direction to the petitioners to produce financial documents, specifically income tax returns, and the implications of non-compliance.The procedural correctness of the Commission's actions in proceeding against the petitioners without their participation in the hearings.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Jurisdiction and Validity of Commission's OrdersLegal Framework and Precedents: The Commission's powers are derived from Sections 19 and 26 of the Competition Act, 2002, which empower it to investigate anti-competitive practices and issue necessary directions.Court's Interpretation and Reasoning: The court held that the Commission acted within its jurisdiction as it followed the statutory procedure by directing an investigation upon finding a prima facie case.Key Evidence and Findings: The Director General's report identified the petitioners as responsible for contraventions, justifying the Commission's orders.Application of Law to Facts: The Commission's orders to proceed against the petitioners were deemed appropriate given the prima facie findings against them.Treatment of Competing Arguments: The petitioners argued that proceedings should not continue without establishing the opposite parties' contraventions. The court dismissed this, stating that the Act allows simultaneous proceedings.Conclusions: The Commission's orders were upheld as they were consistent with the statutory framework and procedures.Issue 2: Responsibility of Petitioners under the ActLegal Framework and Precedents: Section 48 of the Act holds individuals in charge of a company liable for contraventions unless they prove lack of knowledge or due diligence.Court's Interpretation and Reasoning: The court emphasized that the liability of office bearers is contingent on their role and responsibility at the time of the contravention.Key Evidence and Findings: The Director General's report implicated the petitioners based on their roles within the opposite parties.Application of Law to Facts: The court found that the Commission was correct in proceeding against the petitioners based on their managerial roles.Treatment of Competing Arguments: The petitioners contended that their liability was dependent on proving the opposite parties' guilt. The court clarified that proceedings could be concurrent.Conclusions: The court concluded that the petitioners could be held responsible under Section 48 if found to be in charge during the contravention.Issue 3: Non-Compliance with Commission's DirectionsLegal Framework and Precedents: Section 43 of the Act penalizes non-compliance with the Commission's directions without reasonable cause.Court's Interpretation and Reasoning: The court noted that the Commission's direction to produce income tax returns was lawful and the petitioners' non-compliance warranted show cause notices.Key Evidence and Findings: The petitioners failed to submit the required documents, leading to the Commission's issuance of Ext.P5 order.Application of Law to Facts: The court found no irregularity in the Commission's actions to ascertain the reasons for non-compliance.Treatment of Competing Arguments: The petitioners argued against the penalty for non-compliance, but the court upheld the Commission's authority to enforce its directions.Conclusions: The court upheld the Commission's actions under Section 43, finding no illegality in Ext.P5 order.Issue 4: Procedural Correctness of Commission's ActionsLegal Framework and Precedents: The procedural framework under the Act allows the Commission to proceed based on available evidence if parties fail to participate.Court's Interpretation and Reasoning: The court found that the Commission's decision to proceed in the absence of the petitioners was justified given their repeated non-appearance.Key Evidence and Findings: The petitioners were informed of the consequences of non-participation, which they ignored.Application of Law to Facts: The court determined that the Commission acted correctly in treating the petitioners' silence as an indication of having nothing to say.Treatment of Competing Arguments: The petitioners' procedural objections were dismissed as they failed to engage with the process.Conclusions: The court concluded that the Commission's procedural actions were in line with the Act's provisions.3. SIGNIFICANT HOLDINGSVerbatim Quotes: 'The Commission is well within its powers to initiate action against them also under the Act.'Core Principles Established: The judgment reinforces the Commission's authority to conduct investigations and proceed against individuals responsible for contraventions, even if they are not directly named in the original complaint.Final Determinations on Each Issue: The court dismissed the writ petition, upholding the Commission's orders and procedural actions as consistent with the Competition Act, 2002.