Should T-Series challenge the constitutionality of the CCI?

A few weeks ago Shan had carried this interesting post on a complaint made by HT Media to the Competition Commission of India (CCI) against the Super Cassettes Industries Ltd (SCIL) a.k.a. T-Series. HT Media owns several radio stations, which want to play the music owned by SCIL and both parties are unable to agree on the rate of a reasonable royalty. 
The essence of the complaint, as reported by Mint (which is owned by HT Media), is that T-Series, which allegedly secures the rights to about 80%-90% of all new film music, is not following the 2% royalty ruling of the Copyright Board and is instead charging the same old rates of Rs. 660 per needle hour, which is 4 times higher than the 2% royalty rate. Usually in cases of ‘abuse of dominant position’, involving the withholding of an ‘essential facility’ such as intellectual property, the only remedy provided by a competition watchdog is a compulsory licence. Examples of this can be found in the E.U. cases of McGill or even the IMS case. In India the power to grant CLs very clearly vests in the Copyright Board because as explained in Shan’s earlier post, the Supreme Court has already held that demanding an abnormally high royalty rate is the equivalent of denial of licence and that the same could be grounds for requesting the Copyright Board to grant a licence. Moreover the issue of the Copyright Board is already sub-judice before the Delhi High Court. What exactly then is HT Media trying to achieve through this complaint to the CCI? 
I’m guessing that the only remedy thus available to HT Media, is the possibility of the CCI penalizing T-Series for the alleged abuse of its dominant position. In a trigger happy decision a few months ago, the CCI fined DLF Ltd. a sum of Rs. 600 crores for abuse of its dominant position It’s my guess that HT Media is hoping to use the threat of a similar penalty against T-Series to force it into a quick and easy settlement on a reasonable royalty rate. 
The Constitutionality of the CCI: Regardless of the end-result of this dispute, I would briefly like to discuss whether T-Series could and should challenge the constitutionality of the CCI in light of the NCLT judgment of the Supreme Court. 
Those of you familiar with the CCI’s history must already know that it has faced one constitutional challenge before the Supreme Court in the case of Brahm Dutt v. Union of India (2005). The petitioner, in that case, had challenged the appointment process for the CCI on the ground that it was a judicial body and that there had to be some form of judicial consultation during the appointment process. Although the Central Government opposed the petition, it eventually proposed an amendment to ensure judicial consultation during the appointment process. The Supreme Court eventually disposed the petition, keeping open all questions on constitutionality. 
Now although the CCI is not in blatant violation of the ‘Separation of Powers’ doctrine I do think there is a fit case to challenge the constitutionality of the minimum qualifications required to be appointed as a member of the CCI. 
As of now S. 8(2) of the Competition Act allows for persons with the following qualifications to be appointed to the CCI: “who has special knowledge of, and such professional experience of not less than fifteen years in, international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs or competition matters, including competition law and policy, which in the opinion of the Central Government, may be useful to the Commission.” What does that mean in reality? In reality it means that the CCI is packed with ex-bureaucrats. Here’s a list of the CCI members and their experience in the Government: 
(i) Ashok Chawla, Chairperson of CCI: Former Finance Secretary, Government of India (IAS); 

(ii) H.C. Gupta, Member CCI: Former Coal Secretary, Government of India (IAS); 

(iii) R. Prasad, Member CCI: Former Chairperson of the Central Board of Direct Taxes, Government of India (IRS); 

(iv) S.N. Dhingra, Member CCI: Former Judge of the Delhi High Court; 

(v) Dr. Geeta Gouri, Member CCI: An economist (To be confirmed); 

(vi) Anurag Goel, Member CCI: Former Secretary, Ministry of Corporate Affairs, Government of India (IAS); 

(vii) M.L.Tayal, Member CCI: Principal Secretary to the Chief Minister of Haryana (IAS); 
As is obvious from above, at least 5 of the 7 members appointed to the CCI are ex-bureaucrats belonging to either the IAS or the IRS cadre. 
In its NCLT judgment, a Constitution Bench of the Supreme Court, apart from discussing the separation of power issues, also discussed the minimum qualifications to hold a judicial office. In pertinent part the Supreme Court held that judicial offices could be held only by advocates or judges who have the relevant experience in the practice of law. After all, the Constitution requires even District Judges to have at least 7 years of experience as an advocate. In pertinent part he Supreme Court stated the following: 
As far as the Technical Members are concerned, the officer should be of at least Secretary Level officer with known competence and integrity. Reducing the standards, or qualifications for appointment will result in loss of confidence in the Tribunals. We hasten to add that our intention is not to say that the persons of Joint Secretary level are not competent. Even persons of Under Secretary level may be competent to discharge the functions. There may be brilliant and competent people even working as Section Officers or Upper Division Clerks but that does not mean that they can be appointed as Members. Competence is different from experience, maturity and status required for the post. As, for example, for the post of a Judge of the High Court, 10 years’ practice as an Advocate is prescribed. There may be Advocates who even with 4 or 5 years’ experience, may be more brilliant than Advocates with 10 years’ standing. Still, it is not competence alone but various other factors which make a person suitable. Therefore, when the legislature substitutes the Judges of the High Court with Members of the Tribunal, the standards applicable should be as nearly as equal in the case of High Court Judges. That means only Secretary Level officers (that is those who were Secretaries or Additional Secretaries) with specialized knowledge and skills can be appointed as Technical Members of the Tribunal. 
The Court then went on to say: 
There is an erroneous assumption that company law matters require certain specialized skills which are lacking in Judges. There is also an equally erroneous assumption that members of the civil services, (either a Group-A officer or Joint Secretary level civil servant who had never handled any company disputes) will have the judicial experience or expertise in company law to be appointed either as Judicial Member or Technical Member. 
(i) Only Judges and Advocates can be considered for appointment as Judicial Members of the Tribunal. Only the High Court Judges, or Judges who have served in the rank of a District Judge for at least five years or a person who has practiced as a Lawyer for ten years can be considered for appointment as a Judicial Member. Persons who have held a Group A or equivalent post under the Central or State Government with experience in the Indian Company Law Service (Legal Branch) and Indian Legal Service (Grade-1) cannot be considered for appointment as judicial members as provided in sub-section 2(c) and (d) of Section 10FD. The expertise in Company Law service or Indian Legal service will at best enable them to be considered for appointment as technical members. 
The practice of having experts as Technical Members is suited to areas which require the assistance of professional experts, qualified in medicine, engineering, and architecture etc. 
The fact that the Competition Commission is a judicial body has already been conceded by the Central Government when it proposed before the Supreme Court an amendment to the appointment process for members of the CCI to ensure that there was judicial consultation. Now if the Government has conceded that the CCI is a judicial forum it should ensure that the forum is staffed with either lawyers or judges who have studied and practiced law or at the very least qualified with a LLB degree. How is an IAS officer qualified to decide a complex competition law issue? 
I don’t think competition law is an area which requires technical members, it requires judicial members. After all it’s all question of law. Any technical input that is required can be given by either through the Director General or through an expert witness. What’s the need for having technical people sitting on the bench? The legal definition of ‘anti-competitive’ and the economics definition of ‘anti- competitive’ need not be the same and thus the need for lawyers not accountants and economists as members of the CCI. 
If T-Series is looking at stalling proceedings before the CCI and also dragging HT Media through some expensive litigation before the Supreme Court it should file a writ petition challenging the constitutionality of the present qualification criteria for members of the CCI.

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5 thoughts on “Should T-Series challenge the constitutionality of the CCI?”

  1. Prashant,

    While I don’t want to comment on your thought process on the challenge, I want to know what makes you think that CCI was trigger happy in the DHL case?

    The reasoning is there in the Order and also the fact that Forums like CCI are possibly the only forums today where a dominant player like DHL can be actually made to see its reality… individual court actions would be too long.


  2. Hi Prashant,

    Whereas I agree with the gist of your post against the appointment of current or retired IAS officers as CCI members, I respectfully disagree with your view that competition law is an area that does not require technical members. Having had seen the working of the competition regulators in the US, South Africa, and the UK, as well as having interned at CCI, I can say with some confidence that technical expertise is essential for CCI Members. Even within the realm of law, competition law is a highly specialized field, and I have seen the best general legal minds get it wrong. I agree with you that they must be jurists, but just that is not enough. They need to competition lawyers or judges. Of course, IAS officers are rather worse, but all I am saying is that judicial members are not enough. The DG or expert witnesses are another matter, and I dont think they can replace the Members.


  3. Hi SP,

    What would be your exact definition of the term ‘technical expertise’? Is it law or economics? And does India have the people right now to qualify within your definition of ‘technical expertise’?


  4. There are bureaucrats and bureaucrats; I am one who is not qualified to be a member of CCI, but there are others with the right experience who are. Second, and more basic, few members of the legal profession in India understand the nature of regulation; regulatory bodies are set up to regulate, not adjudicate; they exercise powers delegated by the executive and, though there is place for judges on such bodies it would be a disaster if they were to be manned mainly by judges. The Copyright Board is, by contrast, not a regulatory but a quasi-judicial bodies which should consist of judges. Jagdish Sagar

  5. Hi Mr. Sagar,

    As per my understanding, the CCI is a judicial tribunal and not a regulator. It is hearing disputes between two private parties and rendering judgment.

    It is not like the Federal Trade Commission in the U.S., which is a pure regulator. The FTC does not have adjudicatory powers, it can only sue before district courts.

    I’m all for having bureaucrats on traditional regulators such as the TRAI.

    But you will surely agree with me that the primary qualification for getting onto a tribunal should be a basic law degree and some practical experience. As the saying goes – the life of law is not logic but experience.


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