Abstract:“Competition is the keen cutting edge of business, always shaving away at costs”-Henry Ford. In this globalized world competition is continuously getting tough, if a business is not at top the competition will automatically kick it out. Competition in a market promotes efficiency and offers wider choices which increases consumer welfare and brings better products/services. However, to avoid competition Cartels come up, Mis Use of dominant positions and various unfair trade practices are followed. To have control over such practice Competition Commission was formed which became fully functional in 2009. On the other hand the mandate of Consumer Protection has been gaining importance since the enactment of Consumer Protection Act 1986. In a country of 125 crore people, the consumer laws and redressal forums have to be strong so as to ensure that the consumers remains the king.
The Competition Laws and Consumer Laws have same motive which is to ensure consumer welfare. However, as an economic regulator which consists of body of experts, one may not see competition commission as a competent authority who can give redressal to aggrieved consumers. In the following paper the authors will present various arguments and case laws to prove that Competition Commission has no role in giving redressal and how indirectly CCI helps consumers and keeps a check on corporate. The first part of the paper will present the difference between competition act and consumers act followed by arguments and conclusion.
- Cartels– A collection of businesses that act together as a single producer and agree to influence prices of certain goods and services.
- Globalized- When a business starts to operate in international scale.
Is Competition Commission and Consumer Disputes Redressal Forum Two Sides of the Samecoin?: In 1991 Indian economy saw a de-regulation; a policy of Liberalization Privatization and Globalization (LPG) was followed. In order to ensure that a consumer remains King Consumer protection act of 1986 was passed. Similarly10th five year plan recognized the need of creating a competitive environment. The planning commission emphasized the need for increased reliance on competitive markets subject to effective regulations therefore Competition Commission was established.
Without a shadow of a doubt one can say that Competition Commission act and Consumer Protection act have a same objective to protect the consumers. However, the issue arises regarding the functioning of two acts. Does Competition Commission address the concerns of consumers? No, Competition Commission has no direct role in addressing the concerns of consumers; it has an indirect role. Competition commission is an economic regulator which was established to prevent practices which can adversely affect a competitive market. This was clearly stated in the case of BrahmDutt vs. UOI, the apex court held that CCI will consist of body of experts and the Chairperson of CCI should be an expert in his field. Let’s take an example to understand who indirectly CCI helps a consumer.
Recently CCI found DLF guilty of abuse of dominance in residential markets of Gurgaon. Therefore a penalty of 630 crore was imposed, this penalty was justified as it was 7% of DLF’s average annual turnover for last three years. Now how is a consumer getting a benefit from such heavy penalties? The huge penalty imposed upon DLF ltd. acted as a deterrent to other big corporates and dominant builders from imposing unfair conditions on individual consumers. Hence, fair competitive practices were promoted in the real estate markets which in turn lead to improvement in consumer welfare and satisfaction.
The Consumer protection act is a comprehensive social welfare legislation which deals with all the aspects of consumer protection in India. It ensures consumer rights are protected in the best possible manner. It provides redressal even to an individual consumer grievance unlike competition commission, as CCI is not a judicial body it is simply a body of experts who regulate market and ensures fair trade. Let’s take an example to get a clear image of functions performed by competition commission act and consumer protection act.
Recently CCI imposed a fine of 2544 crores against fourteen automobile companies. The issue stated when Shamsher Kataria filed a complaint with CCI against Honda, Volkswagen and Fiat alleging that these automobile companies were using anti-competitive methods. The main issue in this complaint was that if a consumer wanted to get a brand new spare part of these three automobile companies then he has to approach an authorized dealer as independent repairers had no access to branded spare parts and technical knowhow pertinent to the brand. Shamsher Kataria found this unfair therefore a complaint was filed with CCI alleging that Honda, Volkswagen and Fiat were restricting spare parts and after sales services supply. CCI ordered a DG investigation against 14 car manufacturers and found them guilty on two grounds. Firstly for entering into anti-competitive agreements with suppliers (Section 3 violation) and abusing dominant position in relevant markets (section 4 violation). A faulty engine, broken drive shaft and a malfunctioning control unit in all such situations a consumer felt forced to go back to authorized dealer and pay the price determined by them. The competition commission got worried about the fact that the consumers were getting locked in with car manufacturers for spare parts and services. Hence, they intervened and imposed a heavy penalty for unfair trade practices.
This order by CCI is considered a landmark decision as it has potential to change the business model of car-manufacturers and benefit consumers. Similar practices were followed in EU, where under block exemption rules the manufacturers were supposed to provide spare parts to independent operator. Even in US several states have introduced right to repair act to remove restrictive practices by automobile manufacturers. Perhaps, it time for car manufacturers in India to remodel their businesses. Let’s take an example of consumer protection act 1986.
In DharamdasPritianivs. HDFC Ergo General insurance company– The complainant had bought a medical insurance policy for the period 2008-09. The complainant was experiencing difficulty in breathing. After a series of test complainant was advised to undergo treatment immediately. Pritiani underwent a treatment called Enhanced external counter pulsation (EECP). The treatment was completed in 45 sittings and a total expense of 1.18 lakh was incurred. Pritiani claimed this amount from his insurance company, however it was rejected on the grounds that this treatment was experimental and was not recognized in its policy. Pritiani argued that the treatment was recognized by US and over 700 hospitals. The case went to Consumer redressal forum, the forum directed HDFC ergo general insurance to pay 1, 18,000 plus 9% interest towards compensation for refunding a policyholders claim. The forum also directed the insurer to pay an additional compensation of Rs 5000 for mental agony.
- Let’s examine the role played by CCI and Consumer Protection forum in helping consumers. In Shamsher Kataria case the complainant complained about unfair practices which were being performed by three automobile companies. It was alleged that these companies were misusing their dominant position in markets.
- In consumer protection case the consumer was being denied his legitimate right. Under Consumer protection act, he had a right to redressal. Therefore he was awarded a legitimate amount and an additional compensation for metal agony was also given.
- In Shamsher Kataria case the consumers gained an indirect advantage as CCIs order acted as a deterrent to other big corporates from imposing unfair trade conditions. The CCIs order will help consumers in long run where as in consumer protection case; consumers got a direct action/remedy which benefitted aggrieved consumer directly. In car manufacturers’ case CCIs main concern was to regulate the automobile market as they were misusing their dominant position where as in HDFC general insurance case the redressal forum was specifically concerned about consumer’s compensation right which was covered under his insurance policy.
Therefore to sum up Competition law aims to ensure competitive practices between different sectors, if not then it will re-establish effective competition in the market which will lead to higher economic efficiency, innovation and consumer satisfaction which will result in availability of various commodities at affordable prices. On the other hand, consumer protection policy addresses the consumers concerns directly. Right to seek redressal, right to consumer education and right against consumer exploitations are guaranteed to consumers in consumer protection act. Competition commission and Consumer Protection redressal forums focuses on different objectives and offer different remedies therefore they cannot be termed as two sides of same coin. However, both aim to promote consumer welfare and fair trade practices.
Does Competition Commission have a Role in Relation to Consumer Protection Redressal Forum? (Arguments)
- Can competition commission perform a redressal function similar to consumer’s redressal forums?: Is Competition Commission an appropriate forum for provides relief/redressal/compensation to aggrieved consumers. The competition commission can provide an interim relief according to section 33of Competition act; however there is a different forum for providing compensation and redressal. The central government under section 53A (1)of competition act had established a competition appellate tribunal whose primary function is to adjudicate on claim for compensation that may arise from the findings of the commission. Further 53N of Competition Act states about awarding compensation, in this section the Central Government/ State Government/ local authority/ any enterprise or any person can make an application to the Appellate Tribunal to adjudicate on claims of for compensation that arises from the findings of competition commission. If the above bodies show that they suffered a legitimate loss/damage then Appellate tribunals will have full authority to pass an order for the recovery of compensation.
The District forums, state commission and other consumer redressal forums give relief by-
- Replacement of Goods.
- Removal of defect and deficiency in the service
- Provides compensation for the loss or injury suffered by consumers.
- Withdrawal of hazardous goods from being offered for sales.
The parliament has granted competition commission powers to impose penalty under section 27. Under section 27(b) the penalty can’t exceed more than 10% of the average turnover for the last three preceding financial years. In cases of cartel CCI has been empowered only to impose a penalty up to three times of its profits for each year of continuance of such cartel or 10% of its turnover for each year of continuance of cartel.
Hence to sum up the parliament granted competition commission power to impose penalties so as to curb the menace of unfair trade and break cartel nexus. India has a population of 125 crore and it’s a huge market due to high population. Different acts have different legislature intent, Competition Appellate Tribunal was made to give compensation to the aggrieved parties/consumers, and it even acts as an appeal forum. Competition Commission was enacted to end the unfair practices of dominant corporates and ensure fair competitive markets which could help consumers in long run. Consumer Protective Redressal Forums were enacted to provide aggrieved consumers their legitimate right and compensate consumers for their injury, replacement of defective products which leads to their welfare.
Every act has some specific boundaries, jurisdiction and legislature intent. One can’t see a consumer court imposing huge penalties on corporates for not following competitive policies on the other hand CCI will never take up individual consumer complaints for getting redressal or compensation. The competent redressal forums for a consumer are Consumer Courts and Competition Appellate Tribunal. The competition commission is simply a body of experts who regulate markets and impose penalties in case of irregularities. They won’t compensate/redress consumers directly as Parliament has not given them authority/power/right to do so. The compensation/redressal rights are embedded in other forums, tribunals and consumer courts. Therefore according to Competition act and Parliaments (law making authority) direction Competition Commission has no direct role in relation to consumer protection redressal forum.
- Can Competition Commission India take up cases which specifically deal with Consumer Grievance?: The competition commission will take up consumer grievance case if there is a competition concern. Whenever an enterprise abuses its dominant position then it will lead to anti-competitive practices as stated in section 4 of Competition act. These practices affects competition and consumers at large, in such situations the Competition commission will take up consumer grievance cases. It’s clear that the main goal of Competition Law is to regulate market, which will benefit consumers. Therefore the consumer grievance cases which do not involve contravention of Competition then the competition commission won’t be a desirable forum for redressal and relief. Following were the consumer grievance cases which CCI ignored to take up due to lack of competition issues.
Subhash Yadav vs. Force Limited & Others.
The informant Shubhash Yadav had purchased an SUV from Tempo Automobiles an authorized dealer. Following were the informant’s allegations-
- The performance of SUV was much below satisfaction and the workshops and service stations of Tempo Automobiles dint assist informant.
- The informant further stated that the force Motor had used Daimler engine in vehicle which is normally used Mercedes SUVs priced at 30 lakhs and above, whereas it has been used in “Force one” vehicle which is being sold at 11.5 Lakh rupees. Due to faulty engine the vehicle suffers from over-heating.
- Lastly, Force Motors limited was providing Vehicles at a very competitive price as compared to similar vehicles of other manufacturers. Thus, it is creating a dominant position in Indian markets and abusing its dominant position by imposing unfair and discriminatory conditions in the purchase and sale of goods.
Decisionby CCI- CCI ordered the closure of case under section 26(2) of the competition act. They stated, a SUVs non-satisfactory claim won’t fall within the four corners of competition act. The commission observed that the aim and object of the act is to prevent the practices having adverse effect on the competition, to promote competition and thereby to protect the interest of consumers.
In a nutshell the purpose of the act is to protect and promote fair competition in the market. However, for the protection of individual consumer interest there is existence of Consumer Protection Act which mainly deals with protection of consumer’s interest against the deficiencies in services or goods being purchased by the buyers from sellers. There is a clear distinction between two statutes, On one hand The consumer protection act 1986 looks after individual consumer grievance against unfair trade practices and deficiency in goods/services where as Competition Law is primarily concerned with ensuring and maintaining free and fair competition in India.
Sanjeev Pandey v. Mahindra & Mahindra.
In this case Sanjeev Pandey filed a case against Mahindra & Mahindra for not delivering vehicle named XUV 500, which the petitioner had booked. Following were his contentions-
- The Mumbai headquartered auto company is delivering the vehicle only in metros and certain states.
- Due to such practices consumers in Rajasthan and other states were forced to buy the vehicle from Delhi, Haryana and Punjab. As a result of which consumers had to pay additional local taxes in Rajasthan. Such practices of Mahindra were hampering and exploiting general consumers.
Decision by CCI- CCI found no prima face case against Mahindra & Mahindra for referring the matter to Director General for investigation. It’s clear from the facts that the informant failed to make out a case under the aegis of the act as that the main grievance of the informant of allegedly not getting delivery of the said vehicle in a specific state cannot be entertained under the act.
The informant mixed the competition act with consumer protection act. Consumers act aimed to protect the interest of individual consumer against the unfair practices being widely prevalent in the market where as competition act aimed to curb anti-competitive practices which had adverse effect on competition. This case lacked the element of competition and abuse of power.
- Does CCI protect consumers in a direct form or indirect way?: The consumer redressal forums address the concerns of consumers directly; does CCI follow the same practice? Let’s take two different cases to understand how consumer concerns are addressed under CCI and Consumer courts.
Hiranandani Hospital Case
The CCI made an important ruling in this case involving a super-specialty hospital in Mumbai. CCI for the first time investigated healthcare sector and imposed huge penalty, in short CCI acted as a quasi-watchdog in Indian healthcare. Follow are some facts-
- The complaint was filed by Ramakant Kini, Kini was a family friend of Mumbai resident Mrs. Manu Jain who according to complaint was refused maternity service by Hiranandani Hospital during 38th week of her pregnancy because she declined to avail the stem cell banking services offered by Cryobanks international India.
- Cryobank International India and Hiranandani hospital had exclusive partnership and nexus.
The investigation division of CCI concluded that Hospital was a dominant player in the field of maternity services in and around the Powai area of Mumbai; the Hospital had abused its dominance by restricting the patient’s choice.
CCI held that such practices violated section 4 of competition act; therefore under section 27 of the act following orders and penalties were passed-
- The agreement between Hiranandani hospital and Cryobank was declared null and void, the hospital was ordered not to enter into a similar agreement with any stem cell bank in future.
- The commission also imposed a penalty of 3, 81, 58,303/-(3.8 crore, 4% of average turnover).
Shivaji Gendeo Chavan V. Chief Director, Wanless Hospital & Others.
- Complainants 18 year old son was suffering from chronic renal failure and was advised renal transplantation. He was admitted in the hospital and dialysis was done for which a venous catheter was introduced in the right thigh and it was kept in a position so that frequent dialysis could be done.
- Due to lack of proper care like frequent dressing and medical attention, this site developed pus formations which lead to A.V fistula. This resulted in gangrene of the right leg.
- In order to save the life of the patient, amputation of the leg was necessary, however the patient died after 20 days.
The case was filed in State commission, the opposite party failed to appear before consumer court. The case was decided in favor of the complainant of the basis of the affidavits filed by the complainant and an experienced doctor had also testified in favor of the complainant. The consumer court order a compensation of 2, 00,000/- to the complainants.
In these two cases relief/redressal was provided to parties in a different manner. The competition commission gave and indirect relief to consumers at large where as Consumer forum gives a direct and clear redressal/compensation to the aggrieved party. Consumer law seeks to help consumers, as it aims to ensure that consumers make an informed choice among the available options in the competitive market. Whereas competition law protects consumers interest in an indirect way, the consumer welfare standards in consumer law is of immense significance to determine the consumer harm in a particular transaction.
In Hiranandani Hospital case competition commissions order dint help the aggrieved consumers directly. The agreement and unfair trade practices by hospital was declared null and void which protected other consumers from being exploited in future. CCIs order served the welfare of consumers at large. However in Shivaji Chavan case the Complainants son died due to lack of proper medical facilities. The aggrieved party went to consumer forum and demanded a compensation for Hospitals casual approach. The consumer court give a direct remedy and paid the party a compensation of 2, 00,000 rs.
To sum up CCIs order benefitted consumers at large in an indirect way where as Consumer courts stressed on direct remedy by addressing individual consumers. The legal architecture of competition act 2002 limits the scope of CCI to address concerns of consumers directly. Due to the act it had to ignore several complaints by home buyers against builders and many other cases. Therefore due to lack of direct action authority power, the CCI cannot address the concerns of consumers directly like Consumer Redressal Forum does and the two cases stated above is a clear proof of this observation.
Conclusion: The two legislatures Competition law and consumer protection are interdependent and different concepts. Both run on their own jurisdiction. Competition law while regulating the competition in the market results in the protection of consumer interest but consumer welfare and its protection cannot be considered as the only goal of competition law. It’s one form/aspect of competition law. The consumer protection act 1986 did not cover the complaint against Restrictive trade practices and there were no redressal provisions in the act. However after 1993 amendment the jurisdiction of the act was extended and redressal provisions were included.
It’s true that CCI has addressed the issue of protecting consumer’sright; however CCI has always kept its priority in Competition. Competition concerns arise in the context of Business to Business (B2B) dealings rather than in Business to Consumers (B2C) dealings, even though consumers are generally the ultimate victims of anti-competitive conduct. The CCI is mandate to address competition concerns by regulating the conduct in B2B dealings, which thereby benefits consumers. In contrast, consumer courts address consumer issues directly by settling disputes between business and consumers. The two differ in terms of the process, procedures and evidentiary standards. In short an economic market regulator can’t be a redressal forum for aggrieved consumers.
By: Shashank Pant & Anish Ohlan, Students (4th year) B.B.A L.L.B (2011-16) University of Petroleum & Energy Studies, Dehradun
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