CCI to streamline penalty recovery mechanism

The regulator has set up a three-member internal committee to recommend measures to make the recovery process more robust, two persons informed about the development said. CCI to streamline penalty recovery mechanism

Committee to make suggestions on amendment

The committee will make suggestions to amend CCI’s set of regulations on recovery of monetary penalty, which were originally issued in 2011 and amended in 2014 and 2021, said the person, who spoke on the condition of not being named. CCI to streamline penalty recovery mechanism

The move to streamline the penalty recovery proceedings comes at a time the Public Accounts Committee of Parliament is preparing for a performance audit of some of the regulators such as CCI, Sebi and TRAI and the Parliamentary Standing Committee on Finance is examining the funding and track record of CCI and the Serious Fraud Investigation Office. CCI to streamline penalty recovery mechanism

Once the recommendations are ready, CCI is likely to hold public consultation before further modifying the regulations, a second person who is also aware of the development said. CCI to streamline penalty recovery mechanism

CCI said in its annual report for FY23, that in FY22 and FY23, the regulator imposed penalties of  ₹1,336 crore and  ₹2,672 crore, but could recover only about 13% and less than 1% of those, respectively. CCI to streamline penalty recovery mechanism

The panel’s recommendations are expected to help improve recovery. CCI has the power to recover penalties by attaching the movable or immovable property of the entity that defaults on making the payment as ordered. CCI to streamline penalty recovery mechanism

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

Queries emailed to CCI on Friday seeking comments for the story remained unanswered at the time of publishing.

The effectiveness of CCI cannot be solely assessed by the collection of penalties, as the primary objective of it is to correct market behavior and to deter anti-competitive practices, said Sonam Chandwani, managing partner at law firm KS Legal & Associates.

“The inability to recover penalties arises from several challenges, including the absence of a dedicated recovery mechanism and a lack of dissuasive measures. Moreover, companies frequently appeal CCI orders, resulting in prolonged litigation and interim stays granted by appellate bodies, causing delays in penalty payments,” explained Sonam Chandwani, managing partner at law firm KS Legal & Associates.

“To tackle this, the CCI needs specialized units with robust enforcement mechanisms to ensure penalties are collected efficiently. Also, adopting stringent systems and offering flexible payment options could improve the timeliness of recovery and strengthen adherence to CCI’s directives,” said Chandwani.

The government last year introduced several changes to the competition law to make cartels come clean and to make businesses guilty of less serious anti-competitive conduct to opt for settlements as part of efforts to reduce litigation and to achieve quick closure of cases.

After this, CCI rolled out its ‘lesser penalty plus’ regulations in February this year expanding the scope of its scheme meant to encourage cartels to make disclosures and to cooperate with investigation.

Under the modified scheme, the second member of any cartel to blow whistle gets more reduction in penalty if it discloses existence of another cartel. It can also get even up to full waiver of penalty in the case of the second cartel, subject to riders. This expands on the scheme that had been in force allowing for upto 100% waiver for the first cartel member to blow whistle.

As per the regulations for settlement and commitment schemes rolled out in March this year, erring entities can either commit to address the regulator’s concerns around anti-competitive conduct before an investigation is completed or settle it by paying an amount decided by CCI after the investigation. The schemes are expected to help in closing cases quickly and offer certainty to businesses.