SpicyIP Tidbit: Expansion of Investigation by DG in the Auto Spare Parts Case Valid – Madras HC

Read the decision here.

competition-law-antitrust-lawsuitsIn a decision that we had reported on a while ago, the Competition Commission of India, had fined a number of automobile manufacturers for anti-competitive practices in the sale of their spare parts. After the order of the Commission, various auto manufacturers have filed writs in High Courts challenging the order and even the functioning and vires of the Commission itself. The present writ petition however was filed a while ago in 2012 as a challenge to the order of the Commission expanding the investigation into auto manufacturers. To perhaps better understand the context in which the writ was filed consider the history of the Auto Spare parts case before the Commission.

The informant had approached the Commission with allegations of anti-competitive practices by certain automobile manufacturers. The Commission being satisfied that there was a prima facie case, ordered an investigation by the Director General. The Director General on an investigation, placed a report before the Commission stating that these practices were resorted to by a host of other manufacturers as well and was thus ordered to expand its investigation as against these other manufacturers as well. The DG issued notices pursuant to this order to a number of other manufacturers including Hyundai. Hyundai challenged this order of the Commission and the notices by means of writ petitions before the High Court of Madras in 2012. Meanwhile, the CCI continued its proceedings against the originally impleaded automobile manufacturers (Hyundai was not a party here), despite these writs pending before the High Court and passed the order that I had discussed in my previous post on the subject. BMW, being aggrieved with this order, preferred a writ before the Delhi HC, challenging the same orders challenged by Hyundai in their writs and was asked to approach the Madras High Court. These writs were clubbed together and disposed of by a common order.

The petitioners raised three primary contentions attacking the validity of the order and the notices: a. That the information initially received was only as against a few manufacturers and the investigation may not be expanded suo moto by the DG; b. That the Commission had to satisfy itself that there was a prima facie case before allowing an investigation, which in their opinion was not done by the Commission and c. That the DG acted in excess of its jurisdiction.

In dismissing all three contentions of the petitioners, the Court noted that there was no real suo moto investigation by the DG, and that their report had merely referenced the practices by the other automobile manufacturers upon which the Commission had initiated the investigation into these other manufacturers. The Court also referred to the proviso to S.26(1) which allowed the requirement of the prima facie case to be waived in case the new information received was substantially the same as the information already received then the Commission may club this together.

In effect though, the judgement does little to modify the situation of the auto spare parts dispute except one crucial change – it opens up Hyundai to possible proceedings at the Commission. The order of the Commission remains unaffected though.


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