Introduction
“Competition Law” and “Consumer law” are inextricably linked together by their common objective of ‘consumer welfare’. This is said because competition law deals with supply-side distortions of the market that reduce consumer choice and consumer law complements it by correcting demand-side distortions. While the former ensures that consumers have the widest amplitude of choices of goods and services at the lowest possible prices, the latter reduces information asymmetry between buyers and sellers and ensures that consumers make informed decisions. Thus, the nexus between consumer and competition law is axiomatic from the interrelated and closely knitted idea of “consumer sovereignty” which is the bedrock concern of both laws.
This is also recognized in the mechanism established in jurisdictions like the United States of America and Australia where the Federal Trade Commission and Australian Competition and Consumer Commission (ACCC), respectively, deal with matters pertaining to both competition law and consumer law. Even in India, before the enactment of the Competition Act, 2002, and Consumer Protection Act, 2019, the Monopolies and Restrictive Trade Practices Commission (MRTP) was the only body which had a dual mandate to deal with both anti-competitive and anti-consumer practices. It was only later that the Competition Commission and Consumer Forum were vested with independent jurisdictions to deal with competition and consumer law disputes respectively. Further, the wedge between the adjudicatory bodies was primarily drawn to reduce the burden of cases on the MRTP. However, in decoupling the adjudicatory forum for consumer and competition law issues, the synergy between them was considerably reduced despite their common objective of ‘consumer welfare’.
In the contemporary commercialised world, which is witnessing a pervasive proliferation of e-commerce and digital technology, unilateral conduct by market players might present itself as unfair trade practices in consumer courts but might have underlying competition law issues. Therefore, the current isolation in which the Consumer Courts and the Competition Commission operate might lead to non-correction of market failures at the appropriate time and thus impinge on ‘consumer welfare’.
The current blog delves into improving the synergy between the Competition Commission of India (CCI) and Consumer Courts by allowing Consumer Courts to make a reference to the CCI by amending Section 19(1) of the Competition Act, 2002 (“Competition Act”). Currently, under Section 19(1)(b), only the Central Government, State Government or a statutory authority can make a reference respectively to the Commission. Since Consumer forums established under the Consumer Protection Act do not fall within the ambit of Section 19(1) of the Competition Act, they cannot currently refer a case to the CCI. Further, till such a recommendation is fructified, the blog recommends that the Central Consumer Protection Authority (CCPA), which is the ‘statutory authority’ under the Consumer Protection Act, 2019, (“Consumer Act”) play a proactive role by referring cases to CCI where there are underlings of a broader competition law issue so that there is an effective intervention of the market regulator.
Improving Synergy between the Competition Commission and the Consumer Forum
In contemporary markets, the pace of technological revolution often surpasses that of the law to regulate these digital tools. This might lead to a time lag in the regulation of emerging markets and also in the competition law enforcement in these markets. In the time taken by Competition authorities to fully discern the nature and intricacies of such markets, the market players’ exploitative practices might show up as a case of unfair trade practice by a vigilant consumer in the Consumer forums. Further, it becomes important to scrutinize if such exploitative conduct is a result of exclusionary unilateral conduct of the kind mentioned in Section 4 of the Competition Act, which is the sole prerogative of the CCI only. The CCI currently imposes exorbitant fees to the tune of Rs.5000 for filing an information under Section 19(1) of the Competition Act for individuals. This might disincentivize individuals from approaching the CCI even in cases where the exploitative practices of the market players are a result of abuse of its dominant position. This is further bolstered by the absence of provisions that enable the CCI to provide compensation to the aggrieved individuals. They can only claim such compensation by making an application to the Appellate Tribunal under Section 53N of the Competition Act. This procedure for claiming compensation along with the high fees to file an information makes it too onerous for individual complainants to approach the CCI especially when a better alternative in the form of Consumer Court exists. However, market distortions cannot be remedied by the application of consumer laws, which deal with failures internal to the consumer, or inside the head (‘consumer law failure’), as only competition law is equipped to deal with failures external to the consumer (`competition law failure'), i.e., outside the consumer's head.
For instance, in the case of Sanjeev Pandey v Mahendra & Mahendra & Ors, the CCI differentiated between the “aims and objectives” of the consumer law and competition law. It observed that when exploitative practices are carried on by a market player that is not ‘dominant’, the same squarely falls within the jurisdiction of Consumer courts. Therefore, competition law’s jurisdiction can only be invoked when there is an agreement between the market players for anti-competitive conduct or when a dominant player’s conduct is exploitative. In other cases, where the unfair practices are a result of, among other things, information asymmetry, unequal bargaining power or false and misleading advertisement, Consumer fora has the jurisdiction.
Thus, it becomes important that the Consumer Courts have the option to refer a case to the CCI under Section 19(1) for investigation where it believes that the impugned exploitative practice of the firm is a result of it functioning independently of the competitive forces in the market. The need for such a provision can also be inferred from the case of the Belaire Owners Association v. DLF (“DLF” case). In this case, the complainants were a group of apartment allottees who had entered into a standard form contract with DLF whose terms and conditions were found to be unfair and heavily in favour of its drafter i.e. DLF. Further, DLF was also found to be a dominant player in the relevant market of ‘high-end residential apartments in Gurgaon’.
The CCI held that the complainants had no option but to adhere to the terms of the contract as the market was characterised by asymmetry of information and high switching costs. This exploitative practice of DLF, wherein it imposed arbitrary conditions on the apartment buyers which consequently affected their rights, was held as a ‘market failure’ that distorted the competition in the market. Since deception of consumers is a secondary concern because it is a consequence of ‘adverse competitive effects’ which is the primary concern in an antitrust case as opposed to a consumer case that focuses on the unfair practice. Thus, if the distortion in the market in cases like the DLF been corrected had the complainants chosen to exercise their discretion and file a consumer complaint rather than antitrust information is a question that remains to be answered.
In India, before the Google v. CCI case (“Google” case), a ‘form over effect’ approach was followed for cases of abuse of dominance under Section 4 of the Competition Act 2002. However, the Hon’ble National Company Law Appellate Tribunal, in the Google case, held that to prove abuse of dominance under Section 4, effect-based analysis is required to be carried out. Further, with the proliferation of digital technology, the unilateral conduct of such firms does not necessarily fall within the rigours of clauses a-e of Section 4(2) of the Competition Act 2002. Therefore, consumer forums may encounter cases of ‘unfair practices’ that are in effect cases of exploitation through exclusionary conduct by the firms which are not covered by the strict rigours of Section 4 of the Competition Act. These conducts can still be investigated through an ‘effect-based analysis’ on the competitive process. In such cases, where the consumer courts fathom the market to only be corrected by antitrust enforcement, the powers to refer to the CCI would help improve the synergy between the courts and ensure that they collectively work towards their goal of consumer welfare.
In the alternative, till an amendment that accords power to the consumer courts to refer cases to the CCI is introduced in the Competition Act, the Central Consumer Protection Authority (CCPA) as the statutory authority under the Consumer Protection Act, should play a proactive role. CCPA could do this by referring cases to the CCI when consumer cases, in its opinion, have underlying Competition law issues.
Recommendations and Conclusions
Since consumer law provides for an in-personam remedy and competition law remedies are in-rem, if the facts of the case demand market correction, only an in-rem remedy would suffice and action under consumer laws would not be able to rectify the market failures. Further, the Consumer Protection Act is primarily concerned with the nature of consumer transactions and the effective exercise of consumer choice. At the same time, the Competition Act deals with behavioural and structural problems in the market. Therefore, it becomes important that where consumer courts encounter cases with structural issues in the market leading to exploitation of the consumers by the market players, they have the power to make a reference to the Competition Commission. Further, when two Acts with complementary goals are made to work in individual silos, the onus is shifted on the general public to approach the correct forum for the required remedy as per the facts of the case. However, this is unfair to the consumers and therefore it becomes necessary that the synergy between the two public forums be improved in a manner that is recommended in the current article.
This Article has been authored by Malak Sheth, Junior Editor, and Aditi Saxena, Assistant Editor at RSRR. This blog is a part of the RSRR Editor’s Column Series.