Justice for All: Does our competition law overlook natural justice?

How many of you have been informed on buying a new product like an electronic item or an automobile, that the warranty will be invalidated if you get it serviced privately and not from the ‘authorised service network’ of the manufacturer or dealer?  Such conditions imposed on consumers are illegal and a violation of Section 3(4) (c) and 3(4) (d) of the Competition Act, 2002. This law, not widely known to the common man, is meant to prevent practices that have an ‘appreciable adverse effect on competition’, to protect the interests of consumers and to ensure freedom of trade. In what has come to be known as India’s first auto spare parts case, the Competition Commission of India in Shamsher Kataria Vs Honda Siel & Others had specifically directed the parties “not to impose a blanket condition that warranties would be cancelled if the consumer avails the services of any independent repairer.” While “necessary safeguards” were allowed, cancellation of warranty would be permissible “only to the extent that damage has been caused because of faulty repair work outside their authorised network.” 

What about replacement of spare parts? Do you have to get them only from designated outlets or service centres? All that is not bandied as ‘authorised’ is not necessarily spurious. Here again, a restriction on the sale of spare parts over the counter to third parties, citing exclusive distribution agreements, would amount to ‘refusal to deal’ by the Original Equipment Manufacturers, necessitating an inquiry under Section 19(3) of the Competition Act. The unavailability of genuine spare parts, diagnostic tools or technical manuals in the open market, would prevent independent technicians from offering repair and maintenance services to vehicle owners and effectively compete with the authorised dealers. This would be in contravention of Section 4(2)(a)(i),  4(2)(c) and 4(2)(e) of the Act and deemed an imposition of  ‘unfair conditions’, ‘denial of market access’  and an ‘essential facility’ to independent technicians and use of a dominant position by the manufacturers. There are exceptions like Intellectual Property Rights under Section 3(5).  

The Competition Commission of India is vested with inquisitorial, investigative, regulatory, adjudicatory and advisory jurisdiction. And the Act under which it came into existence, gives it sweeping powers to check monopolistic and anti-competition business practices, to give consumers a wide choice and prevent cartels from holding sway over the market. But has this legislation lived up to the statement of objects? A glaring in-built flaw in the statute is the power given to the watchdog body to decide matters without adhering to the principle of natural justice. Under Section 26(2), if the Commission “is of the opinion that there exists no prima facie case, it shall close the matter forthwith and pass such orders as it deems fit.” However, the Supreme Court in Competition Commission of India Vs Steel Authority of India had held that “it is difficult to state as an absolute proposition of law that in all cases, at all stages and in all events the right to notice and hearing is a mandatory requirement of principles of natural justice. Different laws have provided for exclusion of principles of natural justice at different stages, particularly, at the initial stage of the proceedings and such laws have been upheld by this court. 

On the ground, Section 26(2) may work like an enabling provision to pass the buck on to another statutory body – consumer forums. In Subhash Yadav Vs Force Motor Ltd, the Competition Commission ruled that “for the protection of individual consumer interest, there is another statue already in existence known as the Consumer Protection Act.” Ditto in a recent case of  Akhil R.Bhansali Vs Skoda, where the authority rejected the informant’s contention that the opposite party had violated Section 4(2)(b)  of the Competition Act by abusing its dominant position by appointing limited dealers and making spare parts available at only select and exclusive outlets. The Commission held that the allegations, if true, may be a case of “deficiency in after sales service” and dubbed it as “an individual consumer dispute and there is no competition issue involved in the matter.” What appears to have been overlooked is the fact that Section 3 of the Consumer Protection Act makes it clear that it is an additional remedy and not in derogation of any other law. Statutory bodies must rev up and not unwittingly stall their own engine.