POST-INVESTIGATION FAIRNESS IN COMPETITION LAW: THE CASE FOR A CALIBRATED NOTICE OF DISAGREEMENT UNDER SECTION 26(9)
Keywords: Notice, Adverse Finding, Natural Justice.
ARTICLESCOMPETITION LAW2026
Aaransha Shankar and Ujjwal Gupta are 3rd year B.A. LLB (Hons.) students at Dr. Ram Manohar Lohiya National Law University, Lucknow
9/13/20268 min read
Introduction
If the Director General (“DG”) clears a company and the Competition Commission of India (“CCI” or “the Commission”) later goes ahead with imposing liability, should the Commission first reveal the reasons for their disagreement? Essentially, this query has become a focal point of Indian competition law following the Competition (Amendment) Act 2023, which brought in Section 26(9) and requires the CCI, upon completion of the investigation or further inquiry under Section 26(7) or 26(8), to issue a show-cause notice before passing a final order closing the matter or an order under Section 27. The amendment goes back to the Competition Law Review Committee, which suggested that a “statement of charges” model be implemented in order to increase the degree of transparency and bring Indian practice in line with other regulators such as SEBI and competition authorities in the EU and UK. This was intended to make the procedure at the post-investigation stage less arbitrary and help clarify whether the case is ending in a closure or a penalty.
Against this background, the blog focuses on the role of notice of disagreement under Section 26(9) of the Competition Act by, firstly, examining the statutory structure and its procedural gaps in cases of divergence between the DG and the CCI; secondly, drawing comparative insights from global competition regimes about how such divergences are resolved; and finally, proposing targeted reforms to address these gaps.
Legal Analysis
Section 26 of the Competition Act, 2002 provides for a staged inquiry mechanism in matters where a case under Section 19 is made out. A “case under Section 19” deals with the information, inquiry references, or complaints regarding anti-competitive agreements and dominant position of enterprise that warrant examination by the CCI. At the initial stage, the CCI forms a prima facie opinion under Section 26(1) whether the allegations require investigation. If the CCI finds sufficient ground for conducting investigation, then it directs the DG to conduct an investigation under Section 26(3). Upon completion of the investigation, the DG submits a report to the CCI, copies of which are furnished to the concerned parties for filing their objections and submissions. Sections 26(7) and 26(8) further empower the CCI to conduct additional inquiry if it thinks that such inquiry is necessary. This framework reflects a deliberate separation between investigation and adjudication that while the DG functions as the investigative arm of the CCI, the Commission is not bound by the DG's conclusions and retains the final authority to determine whether a contravention has occurred.
The Competition (Amendment) Act, 2023 inserted sub-clause (9) within the framework of Section 26. Section 26(9) contemplates two distinct outcomes, that is, closure of proceedings when no contravention is found and initiation of penal action under Section 27 where contravention is found. The proviso of the section reads that before passing such order, the CCI shall issue a show-cause notice indicating the contraventions alleged to have been committed and grant a reasonable opportunity of hearing. At first glance, a show-cause notice appears to be a statutory mechanism intended to inform parties of the alleged contraventions and provide them an opportunity of hearing. However, the Supreme Court (“SC”) in CCI v. Kerala Film Exhibitors Federation expanded the content of such notice by holding that where the CCI departs from a DG report and records a finding of contravention, the notice must also disclose the new findings on which the CCI disagrees with the DG's conclusions. The same concept had been recognised by the Competition Appellate Tribunal in the case of Interglobe Aviation v. The Secretary, CCI. The significance of this ruling lies in the fact that it transforms the nature of the statutory show-cause notice. The notice is no longer confined to communicating the proposed action; it must also explain the basis of the Commission's disagreement with its investigative arm. Therefore, the show-cause notice performs the function of a notice of disagreement by revealing the reasons for divergence and enabling the affected party to effectively respond to the case it ultimately has to meet.
The challenges in the current framework stem from both procedural ambiguity and institutional imbalance within the scheme of the Act. The statutory scheme under Section 26(9), permits two principle divergence scenarios, that is, first where the DG finds contravention and CCI proceeds towards penalty triggering the statutory requirement of show-cause notice and second is where the DG finds contravention and CCI disagrees. It is this latter category of cases that brings the central issue into focus, that is, whether, and to what extent, the principles of natural justice given under Section 36(1) of the Act require the CCI to issue a show-cause notice when it proposes to depart from the DG's findings. It was emphasised by the SC in the case of CCI v. Steel Authority of India that recording reasons is essential to ensure transparency and fairness. However, the legal framework and judicial precedents fail to address the converse situation where the DG finds a contravention but the CCI disagrees and exonerates the enterprise, raising a fairness concern as the informant, having relied on the DG's findings, is not informed of the reasons for the CCI's disagreement before the proceedings are closed. As a result, the informant is deprived of an opportunity to address the basis on which the CCI proposes to reject the DG's conclusions. In such cases, the informant is prejudiced rather than the exonerated enterprise by the absence of a notice of disagreement. Moreover, the opportunity for post-decisional appeal under Section 53B does not, by itself, resolve this concern. Section 53B permits an appeal against an order of the CCI to the Appellate Tribunal, including an order under Section 26(9), which was expressly made appealable through the Competition (Amendment) Act, 2023. The two remedies operate at different stages and a post-decisional remedy does not substitute a pre-decisional opportunity to address the CCI’s proposed departure. Additionally, the informant would have to bear heavy litigation costs, procedural burdens and delays in case of an appeal which can addressed at the outset through a pre-decisional hearing under Section 36(1).
This concern is further compounded by issues of institutional balance, that is, the DG, as a specialised investigative authority under Section 16, undertakes detailed fact-finding, and a departure from its conclusions without adequate disclosure on the part of CCI, risks reducing its role to a mere formality, amplifying the CCI’s adjudicatory dominance. Thus, the unresolved tension between procedural fairness and institutional efficiency requires an approach that would balance transparency with effective enforcement.
Comparative Analysis
In the European Union, although there isn’t a formal “notice of disagreement” with an investigative report, the procedural safeguard is implemented by a Statement of Objections (“SO”). The European Commission must set out, in a clear manner, its preliminary findings and the evidence supporting them to the parties before a final decision is taken. Most importantly, if the Commission intends to change its position significantly or to base its decision on a new theory of harm, it has to issue a supplementary SO. This is to prevent companies from being condemned on the basis of reasoning that was never disclosed to them. Therefore, the SO effectively provides a pre-decisional notice of disagreement, even though no such terminology is used. However, it should be noted that this protective measure only works when the Commission raises an adverse case. If the Commission decides not to proceed or narrows its case, it is not required to give an SO, as the result is in favour of the parties.
Likewise, in the United Kingdom, the Competition and Markets Authority employs a Statement of Objections-type system, whereby the authority must reveal its provisional case in full detail. Should there be a significant change in the theory, facts, or evidence, another notice is issued. The focus is on procedural fairness when an adverse decision is made, so that parties have the opportunity to reply to the authority’s real reasoning before a final infringement decision is taken. When the authority decides not to pursue an infringement or drop its case, it either ends the investigation or releases a non-infringement ruling, with no obligation whatsoever to inform the parties in advance of an internal disagreement.
Unlike other countries, South Africa has a very different system, where the Competition Commission does the investigation, and the Competition Tribunal makes the decision through a de novo hearing. In this way, when there are differences between investigation and decision, they are resolved through a full adversarial hearing, where the parties can argue the facts and the law in real time. Therefore, a formal notice of disagreement is not necessary, as the concept of procedural fairness is built into the very nature of the adjudicatory system.
India’s institutional structure differs from the comparative models. For one, India does not have a Statement of Objections procedure like the EU and the UK. Besides, it does not offer a de novo hearing in front of a separate adjudicatory body as South Africa does. Instead, the DG is the investigative arm of the CCI, and the Commission is the ultimate decision-maker. That means, when the CCI disagrees with a positive DG report, it amounts to an internal disagreement. But, comparative experience shows that procedural safeguards are necessary when an authority is intending to take an adverse stance without first giving the affected party an opportunity to respond, and not merely because the authority is disagreeing with the investigator. In the EU and the UK, additional notice is given when the authority relies on adverse findings or reasoning. In South Africa, the matter is settled by a full adversarial hearing.
Collectively, the foreign regime supports an additional safeguard only in a situation where the Commission intends to make an adverse finding, even with a favourable DG report, and the party has not been given a chance to address the basis of that finding. Thus, while foreign regimes secure fairness in cases involving adverse findings, they leave unresolved the procedural concerns that arise when investigative conclusions are rejected without first allowing affected stakeholders to address the basis of such disagreement.
The Way Forward
Firstly, a potential solution is to specifically indicate that a notice of disagreement is mandatory in all the situations, when the CCI departs from the findings of the DG, irrespective of whether a penalty is imposed or not. This mandate can be inserted under Section 26 by adding an explanation after the proviso of Section 26(9) which mentions that the CCI shall issue a show-cause notice indicating the contraventions. This would uphold the principles of natural justice by ensuring that affected parties are informed of the reasons for the CCI's disagreement and are given an opportunity to respond before a final decision is reached.
To implement this, the CCI should adopt a structured disclosure model that specifies the points of divergence from the DG's report, the evidence relying upon which the different opinion is reached, and the reasons for its proposed opinion. Such standardisation would grant the parties the right to “legitimate reasons” and would contribute to procedural certainty. It would also underscore the institutional importance of the DG's investigation through an express reference to the DG's findings and an explanation for any deviation from the findings. It would facilitate the consideration of the specialised fact-finding role of the DG rather than diminish it to a mere ticking of the procedural box.
Critics might argue that the requirement to include such a notice in every case where there is a divergence and a structured disclosure model would create an additional process and slow the process of competition enforcement. But efficiency must not be at the expense of fairness. By slowing down a little at least, the parties know why the CCI is disagreeing with its own investigative arm and has the opportunity to respond. A little delay would be worth if it means the ultimate justice will be done.
Moreover, the proviso to Section 26(9) should be construed to further the principles of natural justice. The proviso should explicitly recognise a show cause notice in situations where penal consequences are attached; the rationale of the same is equally applicable in situations where the CCI disagrees with the fact finding done by the DG.
One of the issues that would be considered significant is the fact that in all divergence cases the proviso would require a notice of disagreement, whereas in other jurisdictions, for example, the EU and UK, enhanced disclosure is limited to cases where an adverse finding is made. However, comparative practice should be used as guidance and not as a hindrance. Natural justice is the backbone of the Indian legal system and it is not possible to introduce unfairness in order to improve efficiency to match international standards.
Conclusion
To answer the question of a notice of disagreement in Section 26(9), an efficient and fair balance has to be achieved. The paper departs from comparative analysis, however, and advances that natural justice cannot be sacrificed simply in order to ensure the speedy disposal. If the CCI has a difference of opinion with findings of the DG, the parties affected by the difference should be notified of the reasons for the difference and should be given a chance to respond. Such process could be a little slower, but justice must not be sacrificed for efficiency. India can raise the bar for procedural fairness in the divergence by requiring a notice of divergence in all cases of divergence, thereby enhancing the legitimacy of its competition law system.