CCI to streamline penalty recovery mechanism to force reluctant defaulters

Rave News

NEW DELHI: Faced with the low recovery rate of penalties for anti-competitive conduct, the Competition Commission of India (CCI) has started exploring ways to improve recovery efficiency.

Two people familiar with the matter said the regulator has established a three-person internal committee to recommend measures to make the recovery process more robust.

The committee recommends changes

The person, who asked not to be named, said the committee will come up with recommendations to amend the CCI’s fine recovery regulations, which were first issued in 2011 and revised in 2014 and 2021.

The move to streamline fine recovery procedures comes at a time when the Parliament’s Public Accounts Committee is preparing to conduct performance audits of some regulators such as CCI, Sebi and TRAI, while the Parliament’s Standing Committee on Finance is reviewing funding and track records. office.

Another person aware of the development said that once the recommendations are ready, the CCI may hold public consultations before further amending the regulations.

In its annual report for FY23, CCI said that in FY22 and FY23, the regulator imposed the following penalties: $1,336 Crores and Rs. $2,672 crore, but only about 13% and less than 1% of it can be recovered.

The panel’s recommendations are expected to help improve the recovery. The CCI has the power to recover fines by seizing the movable or immovable property of an entity that fails to pay as ordered.

But companies tend to challenge it before the National Company Law Appellate Tribunal (NCLAT) or the Supreme Court.

We sought comment from the CCI via email on Friday for this report, but received no response by the time of going to press.

Sonam Chandwani, managing partner at KS Legal & Associates, said the effectiveness of the CCI cannot be assessed solely through the imposition of penalties as its main objective is to correct market conduct and deter anti-competitive practices.

“The inability to recover fines is due to several challenges, including lack of dedicated recovery mechanism and lack of dissuasion measures. Additionally, companies frequently appeal against CCI orders, leading to prolonged proceedings and appellate authorities granting temporary stays, leading to delays in payment of fines .

“To address this issue, the CCI requires dedicated units and strong enforcement mechanisms to ensure effective collection of penalties. Additionally, adopting a stringent system and providing flexible payment options can improve the timeliness of recovery and enhance compliance with CCI directives ,” Chandwani said.

The government made several changes to competition law last year to bring the truth about cartels to light and give companies guilty of less serious anti-competitive behavior the option of settlement, as part of efforts to reduce litigation and achieve speedy resolution of cases.

Since then, the CCI has expanded the scope of its program by introducing “lighter penalties plus” provisions in February this year, aiming to encourage cartels to disclose information and cooperate with investigations.

Under the revised scheme, the second whistleblowing member of any cartel who discloses the existence of another cartel will receive increased penalty relief. In the case of a second cartel, it can even waive the fine entirely, subject to additional conditions. This expands a scheme already in effect, allowing the first cartel member to report to receive immunity of up to 100%.

Under the provisions of the settlement and undertaking scheme introduced in March this year, erring entities can undertake to address the regulator’s concerns about anti-competitive conduct before the investigation is completed, or they can pay an amount decided by the CCI after the investigation. The plans are expected to help resolve cases quickly and provide certainty to businesses.

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