India: Provision And Regulations Related To Appointment Of The Director General Notified

1. BACKGROUND

1.1. On April 11, 2023, the Competition (Amendment) Act, 2023 ("Amendment Act")¹ received the assent of the Hon'ble President of India and certain provisions of the Amendment Act came into effect on May 18, 2023, after being notified by the Ministry of Corporate Affairs ("MCA").² The Amendment Act empowered the Central Government to bring into force different provisions of the Amendment Act on different dates. Consequently, the MCA, by way of a notification dated July 18, 2023, has brought into force the amended Section 16 ³ of the Competition Act, 2002 ("Act") which gives the Competition Commission of India ("CCI") the power to appoint the Director General ("DG"), with the prior approval of the Central Government. Prior to the Amendment Act, the Central Government had the power to appoint the DG, to assist the Competition Commission of India ("CCI") in various functions.

1.2. Additionally, by way of a separate notification also dated July 18, 2023, the MCA has notified the amendment to the Competition Commission of India (Director General) Recruitment Rules, 2009 ("DG Recruitment Rules").⁴ The Central Government has modified the existing recruitment rules by tweaking the composition of the Search-cum-Selection Committee ("SSC") for the appointment of the DG.

2. IMPLICATIONS OF THE AMENDMENT

2.1 The Amendment Act empowers the CCI to appoint the DG with the prior approval of the Central Government. Thus, in effect, the power to appoint the DG has shifted from the ultimate control of the Central Government to now being exercised by the CCI in consultation with the Central Government.

2.2 The amendment in relation to the appointment of the DG was made pursuant to the recommendation of the Competition Law Review Committee⁵ ("CLRC") which observed that "presently the legislative framework envisages a scenario wherein the DG is appointed by the Central Government and is accountable directly to the Central Government and not to the CCI". It was noted that such a separation between the investigative and other functions of a regulator in an inquisitorial system was not prevalent in certain international competition regulators such as the European Commission as well as in other domestic regulatory bodies. Accordingly, the CLRC recommended that the office of the DG should be formally folded into the CCI as an 'investigation division'.

2.3 Further, the selection process of the DG is clarified by the Competition Commission of India (Director General) Recruitment Amendment Rules, 2023 ("DG Recruitment Amendment Rules") read with Section 16 of the Act. These rules have only altered the internal working of the SSC. Prior to the DG Recruitment Amendment Rules, the chairperson of the SSC was the Secretary of the MCA. However, now, the chairperson of the SSC will be the Chairperson of the CCI.⁶ Additionally, the SSC shall be empowered to devise its own procedure and recommend a panel of up to three names which shall be considered by the CCI to finalise the appointment of the DG after obtaining prior approval of the Central Government.

3. QUICK VIEW

3.1 The amendment to transfer the power to appoint the DG, from the Central Government to the CCI (with prior approval from the Central Government) had raised concerns amongst the stakeholders regarding the arm's length functioning of the DG. However, a balance has been maintained by the legislators as the Central Government can still keep a check on the appointment of the DG and complete autonomy has not been given to the CCI. The DG Recruitment Amendment Rules have also sought to address this potential concern by retaining an expert person of eminence nominated by the Central Government, in the SSC.

3.2 Additionally, it is hoped that the move to appoint the chairperson of the CCI, as the head of the SSC and the overall involvement of the CCI in the appointment procedure of the DG, will streamline and make the antitrust wing of the CCI more effective.

Footnotes

1 Available here: https://egazette.nic.in/WriteReadData/2023/245101.pdf

2 Available here: https://egazette.nic.in/WriteReadData/2023/245953.pdf. Please refer to our earlier alert, available at: https://induslaw.com/publications/pdf/alerts-2023/infolex-alert-competition-amendment-act.pdf

3 Section 12 of the Amendment Act provides that: "In section 16 of the principal act, in sub-section (1), for the words "Central Government may, by notification", the words "Commission may, with the prior approval of the Central Government" shall be substituted." Notification dated, July 18, 2023, available at: http://164.100.47.4/BillsTexts/LSBillTexts/PassedLoksabha/185C_2023_LS_E3312023105854AM.pdf

4 Notification dated July 18, 2023, available at: https://egazette.gov.in/WriteReadData/2023/247428.pdf

5 The CLRC was formulated in 2018 to suggest changes in the Act. It submitted its report to the MCA on July 26, 2019.

6 Earlier, the composition of the SSC was: (i) Secretary of the MCA (Chairman of the SSC); (ii) Chairperson or a Member of the CCI; (iii) expert-person of eminence nominated by the Central Government. Post the DG Recruitment Amendment Rules, the composition of the SSC is: (i) Chairperson of the CCI (Chairman of the SSC); (ii) an officer not below the rank of Joint Secretary of the MCA; (iii) expert-person of eminence nominated by the Central Government

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