The Competition Act, 2002 (Competition Act) not only prohibits anti-competitive conduct such as cartelization and abuse of dominance, but it also allows persons to seek damages (compensation) for harm suffered. While the damages provision has been effective for over fifteen years, we are yet to see an award for damages. But that might change, and soon.
In 2023, several substantive provisions of the Competition Act were amended including the provision for awarding damages. Prior to the amendments, a damages claim could be made after a ruling by the Competition Commission of India (CCI) or the National Company Law Appellate Tribunal (NCLAT) that an enterprise has infringed the Competition Act. Post the amendments, a damages claim can now be brought after proceedings before the CCI have been ‘settled’. As settlement orders cannot be appealed, a damages claim, which has to be filed with the NCLAT, can be decided without waiting for a final decision of the Supreme Court of India on merits in case of an appeal. But the claimants will face different challenges.
The 2023 amendments allow parties being investigated to ‘settle’ a proceeding in exchange for fifteen per cent. reduction in penalty. If a settlement offer by a party is accepted by the CCI, then the CCI is no longer required to undertake a detailed inquiry on infringement and can close the proceeding by simply computing the fine to be imposed. In other words, in settlement proceedings, there are no infringement rulings. Damages claims arising from settlement proceedings will have the arduous task of presenting evidence to establish infringement. To do so, access to disclosures made to the CCI will be required.
Any person pursuing a damages claim will face information asymmetry. In India, only the non-confidential version of decisions of the CCI or the NCLAT are in the public domain. Relevant information to establish a causal link between an infringing conduct and harm or to quantify harm, may not even form part of case records. There will be procedural creases when it comes to accessing non-public records, which will need ironing out.
Any disclosure request will have to be specific and reasonable. Rights of parties whose confidential information is sought, must be balanced with effective access to justice. This can be achieved by providing summaries with aggregated data or by allowing third-party experts and legal representatives to have limited access to confidential information through confidentiality rings / clubs. That is not to say that all categories of confidential information must always be disclosed, or some categories of confidential information can never be disclosed. For example, in settlement cases, while the settlement submission itself will be confidential, claimants are likely to want access to the evidence that ‘motivated’ a settlement.
The questions of who can seek damages and how damages can be sought are complex and nuanced. Competitors, trading partners, and end-consumers are typically the entities who are harmed by infringing conduct. However, in cartel cases, a competitor that is not party to a cartel may have benefited from price increases instead of suffering loss. Similarly, in case of vertical restraints, dealers or distributors who acquiesced may not have suffered any demonstrable harm. Direct purchasers can also claim damages for loss of sales resulting from increase in prices (because of overcharges). Indirect purchasers may be able to claim damages for losses suffered where overcharges were passed on.
Having said that, at the heart of a damages claim lies quantification, even in the case of cartels where harm is presumed. To calculate damages, counterfactual analysis or yardstick approach can be relied on, but choosing an overall approach is only scratching the surface. Detailed analysis will have to be undertaken to estimate counterfactual scenarios by employing tools and methodologies such as comparator-based methods, regression analysis, “difference-in-difference” analysis, simulation-based analysis, and cost-based analysis. The methodology and technique that may be best suited for computing damages will depend on the facts of a matter.
As more proceedings get “settled”, we should see an uptick in damages claims in India. While there is procedural uncertainty now, guidance will emerge as the jurisprudence settles.