What is the general attitude of business and the authorities to competition compliance?
Since commencing its enforcement mandate in 2009, the Competition Commission of India (CCI) has emerged as one of the most active regulatory authorities in India and has adopted various measures to create awareness among the Indian businesses and legal fraternity. As a part of its advocacy efforts, the CCI publishes guidance material and regularly organises seminars and conferences, and conducts market and sectoral research. The CCI also provides consultations on issues relating to competition law to help businesses understand the scheme of the Competition Act, 2002 (Act) and has recently released a Compliance Manual for Enterprises to promote a culture of competition compliance among various market participants. The enforcement trend over the past nine years also points towards progressive improvement in choice of investigations by the CCI and an increased understanding of competition law issues. The CCI, through its advocacy and enforcement mechanisms has been able to create some level of awareness and deterrence among businesses in various sectors. While the more sophisticated and organised businesses have proactively started to adopt competition compliance programmes, the smaller and less organised businesses still lack complete awareness about the significance of competition law and consequences of non-compliance.
Government compliance programmes
Is there a government-approved standard for compliance programmes in your jurisdiction?
While there is no government approved standard for compliance, the CCI has released a Compliance Manual for Enterprises, which contains a separate chapter on Building a Compliance Framework offering guidance on what a competition compliance programme should contain.
Applicability of compliance programmes
Is the compliance guidance generally applicable or do best practice and obligations depend on a company’s size and the sector of the economy it operates in?
Except for ensuring adherence to the underlying principles of competition law, a competition compliance programme will need to be custom-made for each enterprise, keeping in view the operations, dealings, and the relevant sector, etc, of the enterprise.
If the company has a competition compliance programme in place, does it have any effect on sanctions?
The Act does not contain any provisions dealing with effect of having a compliance programme in place. However, in the event of a scrutiny, the CCI is likely to take into account a sound and effective compliance programme as an indicator of the company’s commitment towards competition compliance. While a compliance programme may not completely exonerate the company and its officers from liability under the Act, but it may have some bearing in quantum of penalty imposed and may also help in avoiding potential claim for compensation.
Implementing a competition compliance programme
Commitment to competition compliance
How does the company demonstrate its commitment to competition compliance?
The CCI through its advocacy tools provides guidance in this regard. Specifically, the Compliance Manual provides detailed guidance on various aspects of competition compliance. It provides an illustrative list of dos and don’ts for executives or employees of any enterprise with respect to their dealings with competitors or trade associations. It recommends that the senior management of enterprises be involved in and committed to the implementation of competition compliance programmes. Further, it recommends constituting a competition compliance committee to drive the compliance agenda in companies.
What are the key features of a compliance programme regarding risk identification?
For active risk identification or management, the Compliance Manual recommends the following activities:
- periodic internal audit of procedures and documents;
- periodic internal audit of commercial agreements or arrangements; and
- a whistle-blower policy to ensure timely escalation and effective resolution of competition law breaches.
What are the key features of a compliance programme regarding risk assessment?
- Determination of relevant product and relevant geographic market;
- determination of the market position or dominance of the enterprise in the relevant market;
- determination of liability exposure in case of a likely scrutiny;
- nature of the records evidencing discussions concerning prices, production, etc, with competing firms or other communication showing conduct that may be considered as abuse of dominance;
- analyse the terms of the agreements to understand the level of exposure from a competition scrutiny perspective;
- internal and external audits and periodic self-assessment to check the effectiveness of the programme; and
- regular interaction with personnel and lawyers of the enterprise, especially during antitrust trainings and special assessments.
What are the key features of a compliance programme regarding risk mitigation?
- Abstinence from any communication with the competitors regarding prices, production, market division, bid participation, etc;
- abstinence from incorporating and enforcing terms in agreements that may be considered as anticompetitive under the Act;
- immediate and complete exit from arrangements that may have already raised or may raise potential cartel concerns, based on advice received from legal counsel;
- disclosure (in appropriate cases) to the CCI of any participation in a cartel-like arrangement, under the guidance of legal counsels;
- periodic review of policies and agreements to ensure compliance with competition law and reduce the risk of a potential scrutiny;
- the marketing, sales or procurement department should liaise with the legal department and or the external counsels to receive timely advice on existing or potential competition concerns; and
- periodical review of the commercial agreements from competition law perspective.
Compliance programme review
What are the key features of a compliance programme regarding review?
As per the Compliance Manual, a periodic review of the compliance programme should be undertaken in order to assess and re-evaluate:
- compliance with policies, procedures, and guidelines through internal and external audits, as well as periodic self-assessments;
- risk assessment processes as may be applicable to new or growing business divisions or emerging areas of competition law risk; and
- effectiveness of the compliance programme, and (the expected results) through ongoing interactions with personnel and lawyers of the enterprise, especially during antitrust training and special assessments.
Dealings with competitors
Arrangements to avoid
What types of arrangements should the company avoid entering into with its competitors?
A company must not enter into arrangements or agreements with competitors (both actual or potential) that are expressly prohibited under section 3(3) of the Act. These include agreements:
- regarding prices that directly or indirectly fix purchase or sale price;
- regarding quantities aimed at limiting or controlling production, supply, markets, technical development and investment;
- regarding market sharing of markets by geographical area, types of goods or services and number of customers; and
- regarding bids (collusive tendering and bid rigging), tenders submitted as a result of joint activity or agreements.
What precautions can be taken to manage competition law risk when the company enters into an arrangement with a competitor?
The scope and nature of the agreement or arrangement should not be as prohibited under section 3(3) of the Act (discussed in response to question 10). For instance, as per the Compliance Manual, one should avoid arrangements in respect of prices or quantities of goods or provision of services.
The communication at different stages such as negotiations, execution, etc, should not contain any language that may suggest anticompetitive objective behind entering into the agreement.
Executives of the parties to the agreement should maintain the engagement with each other strictly within the scope of the agreement (ie, avoid discussions on topics that might be considered objectionable under the Act).
Although, there is no exhaustive list on this aspect on dos and don’ts, there should be abstinence from discussions on the following among the competitors:
- cost of manufacturing products or providing services;
- quantity proposed to be provided;
- credit, sale, purchase, billing terms;
- profits, margins or profitability;
- transportation, cartage, freight, distribution charges (or any other charges incurred in the course of provision of services or production of goods);
- commissions, rebates or surcharges (or any other such monetary terms);
- fares, rates, tariffs or any other direct or indirect charges; and
- any other business sensitive information.
Consultation must take place with in-house counsel or external legal counsels concerning issues on which there is lack of clarity from a competition issue perspective.
What form must behaviour take to constitute a cartel?
Section 3(3) of the Act deals with horizontal agreements, which includes cartels. Section 2(c) of the Act defines ‘cartel’ to include an actual or even an attempted move by way of an agreement among entities) to limit, control or attempt to control the production, distribution, sale, price or trade in goods or provision of services.
The term ‘agreement’ has been defined under section 2(b) of the Act, as any arrangement or understanding or action in concert, notwithstanding that it is in writing, or legally binding. Accordingly, an agreement does not have to be in writing for the purposes of section 3 of the Act, and concerted action would also fall within the scope of section 3(3) of the Act.
The CCI acknowledged that for an agreement to exist there has to be an act in nature of an agreement, understanding or action in concert including existence of an identifiable practice or decision taken by an association of enterprises or persons (Neeraj Malhotra v Deutsche Bank Home Finance and Ors, Case No 5 of 2009).
As of today, there is no case law to suggest that attempts to cartelise or invitation to collude are covered within section 3(3) of the Act.
Under what circumstances can cartels be exempted from sanctions?
The Act does not provide any exemption to cartels, as such. However, the following exemptions or defences are available to horizontal agreements:
- JV efficiency defence: If the agreement has been entered into by way of joint venture, which in turn increases efficiency in production, supply, distribution, storage, acquisition or control of goods and provision of services (Association of Third Party Administrators v General Insurers’ Public Sector Insurance and Ors, Case No 107 of 2013).
- VSA Exemption: As per Notification SO 646 (E) dated 2 March 2016 all vessel sharing agreements of the shipping industry were exempted from the application of the provisions of section 3 of the Act until 1 March 2017. The exemption applied to the carriers of all nationalities operating ships of any nationality from any Indian port, provided that these agreements did not include concerted practices involving price fixing, limiting capacity or sales and allocation of markets or customers. The exemption has been extended for three more months, effective from 21 March 2017, vide Notification SO 950(E) dated 21 March 2017. The exemption was further extended for a period of one year, effective from 20 June 2017 to 19 June 2018.
Currently, in India there is no prior notification regime in place with respect to cartels.
Can the company exchange information with its competitors?
While there are no specific provisions or guidelines regulating exchange of information unlike some other jurisdictions, information exchange between competitors is generally governed by section 3(3) of the Act. Companies can exchange information with its competitors, provided that the information exchange is not for the purposes and result in activities prohibited under section 3(3) of the Act that are presumed to cause an appreciable adverse effect on competition (AAEC). As per precedent, the CCI considers information exchange between competitors that concerns pricing information and provide details of production and dispatch as commercially sensitive. This kind of information facilitates coordination (Builders Association of India v Cement Manufacturers Association and Ors, Case No 29 of 2010). See also question 11.
Cartel leniency programmes
Is a leniency programme available to companies or individuals who participate in a cartel in your jurisdiction?
The provisions related to leniency are contained in Competition Commission of India (Lesser Penalty) Regulations 2009 (Lesser Penalty Regulations) and section 46 of the Act and both individuals and company can avail leniency. These provisions govern the manner and the extent to which the CCI, if satisfied, may grant leniency (viz lesser penalties) to applicants who make full and true disclosure that is vital and who continue to cooperate in relation to the alleged cartel. A vital disclosure means information that enables the CCI to form a prima facie opinion of the existence of a cartel. The quantum of reduction in penalties that may be awarded by the CCI also depends on the time the disclosure is made.
To seek benefit of the Lesser Penalty Regulations, the applicant shall in addition to making a full and true disclosure:
- cease to have further participation in the cartel from the time of disclosure;
- provide vital disclosure;
- provide all relevant information, documents, evidence, as may be required by the CCI;
- cooperate genuinely, fully, continuously and expeditiously throughout the investigation other proceedings before the CCI; and
- not conceal, destroy, manipulate or remove the relevant documents in any manner that may contribute to the establishment of cartel.
The confidentiality provisions require that the identity of the applicant shall not be disclosed by the CCI unless the disclosure is required by law or the applicant has agreed to such disclosure or the applicant has disclosed it publicly. To date, the CCI is known to have invoked the Lesser Penalty Regulations only on one occasion wherein it held the disclosure of the modus operandi of the cartel by the applicant was vital to the case and strengthened the CCI’s investigation, thereby lessening the penalty on the applicant by 75 per cent (cartelisation in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items, Suo Moto Case No. 03 of 2014). The CCI has vide its notification dated 8 August 2017 implemented amendments to the Lesser Penalty Regulations.
The Lesser Penalty Regulations are applicable to the conduct of cartels only and do not extend to other forms of prohibited conduct.
Can the company apply for leniency for itself and its individual officers and employees?
Yes, the company can apply for leniency for itself as well as its individual officers and employees. As per Regulation 3(1A) of the Lesser Penalty Regulations, which clarifies that if an applicant is a company it shall, in its application seeking leniency, also provide the names of the individuals involved in the cartel on its behalf and for whom leniency has been sought. Notably, this provision was introduced by an amendment on 8 August 2017.
Can the company reserve a place in line before a formal leniency application is ready?
As per the Lesser Penalty Regulations, for the grant of lesser penalty, the applicant may either make an application containing all relevant information as prescribed or contact the CCI orally, by fax or email for furnishing information on the existence of a cartel. Upon receiving an application or information for leniency, the CCI marks a ‘priority status’ on such application. Where the priority status has been marked on the basis of information provided orally or through fax or mail the CCI directs the applicant to submit a written application. On failure to submit the required information along with the application within 15 days (or within the extended timeline) from the date of first communication with the CCI, the priority status may be forfeited.
Further, other applicants are not considered until and unless the CCI has evaluated the evidence submitted by the first applicant. Where the benefit of the priority is not granted to the first applicant, subsequent applicants will move up in order of priority for grant of priority status and procedure prescribed for the priority applicant will apply mutatis mutandis.
If the company blows the whistle on other cartels, can it get any benefit?
As per the provisions in section 46 of the Act and the Lesser Penalty Regulations, only a producer, seller, distributor, trader or service provider (basically an entity) included in a cartel may get the benefit of Lesser Penalty Regulations. Thus, an applicant must be a member of the cartel or an individual acting on behalf of a member of the cartel, to apply for leniency. No policy for providing an incentive to a whistle-blower presently exists.
Dealing with commercial partners (suppliers and customers)
What types of vertical arrangements between the company and its suppliers or customers are subject to competition enforcement?
The Act provides an illustrative list of vertical agreements, which if proven to cause AAEC in India, are prohibited (ie, any vertical agreement in respect of, inter alia, provision of services), including (i) tie-in arrangements; (ii) exclusive supply agreements; (iii) exclusive distribution agreements; (iv) refusal to deal; and (v) resale price maintenance, are prohibited under the Act if it is shown that such agreement causes or is likely to cause an AAEC in India.
The jurisprudence regarding vertical agreements has been limited since the CCI has dealt with vertical agreements only in a handful of cases. The CCI ruled on the validity of various clauses in a distribution agreement between Hyundai and its authorised dealers providing some clarity on assessment of vertical agreements. The CCI has noted that a clause requiring an authorised distributor to take prior permission from the original equipment manufacturer (OEM) before taking on a dealership of any other car manufacturer, is not per se anticompetitive. The CCI has differentiated between de jure and de facto exclusivity, recognising that in the absence of de jure exclusivity, it would have to be seen if in practice, exclusivity is imposed. The CCI thereafter, on the basis of the evidence, concluded that no exclusivity was being imposed. The CCI also highlighted the harmful effects of clauses on ‘resale price maintenance’, noting, however, that it was not per se prohibited under the Act. The CCI, however, held that a discount control mechanism implemented by Hyundai through, inter alia, a mystery shopping agency and imposition of a penalty, resulted in AAEC as defined under section 19(3) of the Act, contravening provisions of section 3(4) of the Act. The CCI in its order also accepted objective justifications and legitimate business interests for denial of warranty where CNG kits were installed by a non-authorised dealer as well as use of non-recommended oils or lubricants (Fx Enterprise Solutions India Pvt Ltd v Hyundai Motor India Limited, Case No. 36/2014).
In another case, the erstwhile Competition Appellate Tribunal (COMPAT) concurred with the CCI’s findings that the agreements or letters of intent entered into between the OEMs and the Original Equipment Suppliers (OESs) had clauses that restricted the OESs from supplying spare parts of automobiles directly to the third parties or in the aftermarket (spare parts market), without the consent of the OEMs. Such clauses were as such found to be in contravention of section 3(4)(c) and (d) of the Act and it was found that none of the opposite parties held any valid IPRs for any of their spare parts in India that would attract exemption under section 3(5) of the Act. Moreover, the agreements between the OEMs and their authorised dealers had clauses that restricted the sale of spare parts over the counter to third parties, contravened section 3(4)(c) and (d). The COMPAT also agreed with the CCI that these practices foreclosed the market for repairer services for independent repairers (Nissan Motor India Private Limited v CCI and Ors, Appeal No. 62/2014).
Would the regulatory authority consider the above vertical arrangements per se illegal? If not, how do they analyse and decide on these arrangements?
Section 3(4) of the Act specifically states that vertical agreements mentioned under this provision shall be in contravention of section 3 of the Act if there is an AAEC or likelihood of AAEC. As such the CCI analyses vertical agreements under the rule of reason standard. The CCI in its inquiry under the ‘rule of reason,’ is required to consider all or any of factors under section 19(3) of the Act and would try to strike a balance between the negative (1-3) and positive factors (4-6) AAEC.
Further, objective justifications and legitimate business interest may be provided to justify vertical arrangements and the CCI would take the same into consideration before concluding on the illegality of the agreement. Notably, Indian competition law does not provide for any market share-based threshold or safe harbour for such agreements. However, the CCI in at least one case has recognised that the doctrine of de minimis, it would militate against existence of AAEC (Shri Ghanshyam Das Vij v M/s Bajaj Corp Ltd & Others, Case No. 68/2013). It can be said that in addition to the factors listed in section 19(3) of the Act, objective justifications, legitimate business interests and doctrine of de minimis are also taken into account by the CCI during assessment of vertical arrangements.
Under what circumstances can vertical arrangements be exempted from sanctions?
Section 3(5) of the Act carves out exceptions in favour of the holders of an intellectual property right (IPR) and exporters. Section 3(5)(i), which relates to the IPR exception, enables the holder of the IP right to impose reasonable conditions as may be necessary to protect their IP rights under statues as provided under section 3(5) of the Act. However, as has been noted by the CCI in the Shamsher Kataria case (mentioned above), such restrictions must be ‘reasonable’ in order for them to be eligible for the said exception. The assessment of reasonability of such restrictions is specific to the facts of each case. In the aforementioned case, the CCI in determining whether the agreement falls within the ambit of section 3(5)(i) of the Act, considered whether the requirements of the statutes mentioned under section 3(5) of the Act, granting the IPRs are in fact being satisfied. The COMPAT and the CCI both noted that the IP rights are territorial in nature and unless registered and recognised under the relevant law in India, no protection would be available under section 3(5)(i) of the Act.
Section 3(5)(ii) affords protection to the agreements entered into by exporters provided that such agreement relates exclusively to the production, supply, distribution or control of goods or provision of services of such export.
The CCI’s position in previous cases suggests that vertical arrangements that can be justified on the basis of objective justification or legitimate business interests, such arrangements, are likely to be exempted from sanctions.
How to behave as a market dominant player
Determining dominant market position
Which factors does your jurisdiction apply to determine if the company holds a dominant market position?
In terms of explanation (a) to section 4 of the Act, ‘dominant position’ means ‘a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour.’ Section 19(4) of the Act lists out factors relevant for determining dominance that, inter alia, include market share of the enterprise, size and importance of the competitors, dependence of consumers on the enterprise and entry barriers. As such, there is no presumption of dominant position based on market shares alone (Belaire Owner Association v DLF Limited, Case No. 19/2011). This was emphasised by the CCI in a case wherein the CCI held that a market share of more than 50 per cent cannot be determinant factor for dominance and all factors under section 19 (4) need to be considered. It was further highlighted that high market shares in case of new technologies may be fleeting and the presence of competitive constraints must be considered (Fast Track Call Cab Private Limited and Anr v ANI Technologies Private Limited, Case Nos. 06 and 74 of 2015).
Abuse of dominance
If the company holds a dominant market position, what forms of behaviour constitute abuse of market dominance? Describe any recent cases.
As per section 4(2) of the Act, any of the following conduct by a dominant enterprise would constitute an abuse of dominance:
- directly or indirectly imposing unfair or discriminatory condition or price (including predatory price) in purchase or sale of goods or service.
- limiting or restricting:
- production of goods or services or markets thereof; or
- technical or scientific development relating to goods or services;
- indulging in practices resulting in denial of market access in any manner;
- making conclusion of contracts subject to unrelated supplementary obligations; and
- leveraging (ie, using dominance in one relevant market to enter into or protect another relevant market).
Recently, while assessing the terms of a coal supply agreement between the only coal supplier in India and thermal power producers, etc, the CCI found the forced execution of memoranda of understanding in addition to the contractual arrangements to be indicative of abuse of market power. Conditions such as restriction in supply of indigenous coal by the coal supplier allowed the supplier to dilute its obligation towards supply commitments, in contravention of section 4(2)(a)(i) of the Act (Madhya Pradesh Power Generating Company Limited and Ors v South Eastern Coalfields Limited and Ors, Case Nos. 05, 07, 37 and 44 of 2013).
Under what circumstances can abusing market dominance be exempted from sanctions or excluded from enforcement?
Under the Act, a dominant enterprise may adopt discriminatory condition or price in order to meet the competition. Also, while the Act is silent on any other justifications, the COMPAT (Indian Trade Promotion Organisation v CCI and others, Appeal No. 36 of 2014) as well as the CCI (Shri Saurabh Tripathy v Great Eastern Energy Corporation Ltd, Case No. 63/2014) have, in certain cases recognised existence of commercial reasons that could justify conduct that may be otherwise found to be abusive.
Competition compliance in mergers and acquisitions
Competition authority approval
Does the company need to obtain approval from the competition authority for mergers and acquisitions? Is it mandatory or voluntary to obtain approval before completion?
Section 6 of the Act mandates that any acquisition of control, shares, voting rights or assets (acquisitions) and mergers and amalgamations (collectively referred to as ‘combination(s)’) that cross the jurisdictional thresholds specified in section 5 of the Act must be mandatorily notified to the CCI. The Act adopts a suspensory regime and as such obtaining an approval from the CCI is compulsory.
In case of acquisitions (including hostile acquisitions), it is the responsibility of the acquiring entity to file the details of the proposed transaction with the CCI. In case of a merger or an amalgamation, the parties must file a joint notice.
A notification is required to be filed within sufficient time of:
- passing of a final board proposal in relation to a merger or amalgamation; or
- execution of any binding definitive document or binding agreement conveying the decision to acquire control, shares, voting rights or assets in the case of acquisitions.
A public announcement made regarding acquisitions in terms of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, shall also be deemed to be a document triggering notification to the CCI. The central government, vide notification dated 29 June 2017, exempted parties to a combination from notifying within 30 days of the trigger event until 29 June 2022.
Any acquisitions or mergers or amalgamations that meet any one of the following thresholds as prescribed under section 5 of the Act and subsequent notifications by the central government must be notified to the CCI:
Companies party to a combination
Groups (2 or more enterprises) party to a combination
> 20 billion rupees
> 60 billion rupees
> 80 billion rupees
> 240 billion rupees
In India and outside India (aggregate)
In India and outside India (aggregate)
> 1 billion (including minimum 10 billion rupees (in India)
> 3 billion (including minimum 30 billion rupees in India)
> 4 billion (including minimum 10 billion rupees in India)
> 12 billion (including minimum 30 billion rupees in India)
Note: Approximate current conversation rate US$1= 65 rupees.
In case when a portion, division or business of an enterprise is the subject matter of a combination, then only the value of assets and the turnover attributed to the said portion, division or business shall be relevant for the purposes of calculating the thresholds under the Act. There are no sector specific thresholds applicable in India.
Furthermore, the CCI has exempted notification of certain combinations that, in its view, are ordinarily not likely to cause an AAEC in India. The central government has also exempted enterprises being parties to a combination from notification, where the value of assets being acquired, taken control of, merged or amalgamated is not more than 3.5 billion rupees or has a turnover of more than 1o billion rupees. This exemption is applicable until 27 March 2022.
In line with its ease of doing business policy, the central government in August 2017, exempted all cases of reconstitution, transfer of the whole or any part thereof and amalgamation of nationalised banks from the application of sections 5 and 6 of the Act. This exemption is valid for 10 years (ie, until 30 August 2027). The central government has also exempted regional banks vide its notification dated 10 August 2017 under sub-section (1) of section 23 A of the Regional Rural Banks Act, 1976 from the application of provisions of section 5 and 6 of the Act for a period of five years (ie, until 10 August 2022).
To streamline the consolidation process in the oil and gas sector in India, the central government exempted combinations involving central public-sector enterprises operating in the oil and gas sectors under the Petroleum Act, 1934 and its relevant regulations from the application of the provisions of sections 5 and 6 of the Act. This exemption is applicable for a period of five years (ie, until 22 November 2022).
How long does it normally take to obtain approval?
The CCI is required to assess whether a combination will cause an AAEC in India and pass a prima facie opinion within a period of 30 working days of receipt of the notification. If the CCI is of the opinion that a combination will cause an AAEC in India, it may refer the combination for a detailed investigation, which may extend up to 210 days from the date of filing of the notification. During the review period, the CCI can ask for additional information from the parties, third parties, public stakeholders, customers, suppliers and the time taken by the parties to provide such information is deducted from this review period. As such, the timelines provided by the CCI are not absolute and are subject to clock stops.
In practice, the CCI has cleared most of the combinations notified to it within the initial 30-working day review period itself (excluding clock stops). Combinations that have involved remedial measures (PVR/DT C-2015-07-288; Holcim/Lafarge C-2014/07/190 and Dow/ DuPont C-2016/05/400) have been approved within a period of 8 to 11 months.
There are no fast-track procedures available under the Act or the Competition Commission of India (Procedure in Regard to the Transaction of Business relating to Combinations) Regulations, 2011 (Combination Regulations). However, to aid the central government’s efforts to fine-tune the bankruptcy resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC), CCI has recently approved two resolution plan backed acquisitions in under 15 working days (Ultratech/Binani C-2018/02/558 and RPPL/Binani C-2018/02/557). A quick approval is important for acquisitions emerging from the IBC since a resolution process under the IBC is required to be completed within 180 days.
If the company obtains approval, does it mean the authority has confirmed the terms in the documents will be considered compliant with competition law?
The CCI, while approving a combination, may propose changes to the deal terms. For example, it may require removal of certain restrictive clauses (viz, cooperation clauses) or reducing the duration of non-compete obligations (PVR/DT C-2015-07-288; Advent/MacRitchie C-2015/05/270).
Failure to file
What are the consequences for failure to file, delay in filing and incomplete filing? Have there been any recent cases?
The CCI generally imposes a penalty on either the acquiring entity or both the acquiring entity and the target entity in the cases of non-notification or giving effect to a transaction prior to obtaining CCI’s approval. The CCI imposes these penalties according to the provisions of section 43A of the Act, which contemplates imposition of a penalty of not more than 1 per cent of the turnover or assets of the combination, whichever is higher.
As per Regulation 14 of the Combination Regulations, the CCI can invalidate a combination notice if the notice is not in conformity with the Regulations. Where the information or documents contained in the notice has any defect or is incomplete in any respect, the parties to the combination are asked to remove such defects or furnish the required information or documents within the time specified by the CCI. In practice, the CCI often gives the parties an opportunity to cure any defects in the filings by communicating the same to them. Investigation into the combination is suspended till the defects are rectified.
The CCI has in the recent past, imposed penalties on several parties for non-notification of combinations. In December 2017, the CCI imposed a penalty of 0.5 million rupees on ITC Limited for non-notification of its acquisition of Savlon and Shower to Shower trademarks from Johnson and Johnson Private Limited and Johnson and Johnson Pte Limited. The CCI relied on the explanation to section 5(c) of the Act and held that acquisition even of trademarks will be an acquisition of assets as they provide economic value to their owners.
In January 2017, the CCI imposed a penalty of 2.5 million rupees on Schulke and Mayr GmbH for delayed filing of notice (Schulke/Ethicon C-2015/12/349). However, the CCI is no longer scrutinising belated filings as the 30-day time limit for filing a notification has been suspended until 29 June 2022.
Investigation and settlement
Under which circumstances would the company and its officers or employees need separate legal representation? Do the authorities require separate legal representation during certain types of investigations?
Section 48 of the Act provides for liability of officers or employees of the Company. In a situation where such person is being proceeded against under section 48 of the Act, it may be advisable that such person is represented separately (more so if such person asserts that the contravention was committed without his or her knowledge or that he or she had exercised all due diligence to prevent the commission of the contravention of the Act). The Act, however, does not provide for mandatory separate legal representation for any or certain types of investigations.
For what types of infringement would the regulatory authority launch a dawn raid? Are there any specific procedural rules for dawn raids?
A dawn raid may be conducted for any alleged infringement under the Act.
The Act itself does not set out the any procedural rules for dawn raids. The Director General (DG) may conduct a dawn raid pursuant to its powers under section 41 of the Act read with sections 240 and 240A of the Companies Act, 1956 (equivalent provisions in the new Companies Act, 2013 are sections 217 and 220). Briefly put, where the DG has reason to believe that the relevant books and papers of or relating to a company or body corporate may be destroyed, mutilated, altered, falsified or secreted during the course of investigation, it may make an application to a magistrate First Class for search and seizure. The Magistrate may authorise the DG by issuing a warrant, to enter and search specific places identified in the warrant to inspect or seize books and papers necessary for the purpose of its investigation. The search and seizure have to be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 (CrPC).
Dawn raids are not frequently resorted to in India. In fact, the DG has conducted dawn raids in only two investigations so far. There are no specific rules for digital searches.
What are the company’s rights and obligations during a dawn raid?
The Act does not expressly set out any rights and obligations of a company while a dawn raid is under way. That said, since dawn raids are to be carried out in accordance with the provision of the CrPC, the usual rights of person subject to search and seizure under the CrPC would apply to dawn raids as well. Notably, the rights of an enterprise subject to dawn raid would include: right to ask for the judicial warrant, right to ask for the identity of the person who can conduct the search; right to object to search or seizure of documents protected by attorney-client privilege; and right to object to any search or seizure outside the scope of the warrant.
In terms of section 217 of the Companies Act, 1956, the officer, employees and the agents of an enterprise subject to dawn raid are obliged to cooperate and provide full assistance to the DG during a dawn raid. Importantly, they are bound to preserve and produce to the DG all such books and papers that are in their custody or power.
Is there any mechanism to settle, or to make commitments to regulators, during an investigation?
There exists no mechanism that enables parties to reach settlement with the CCI or make commitments to it during an investigation or inquiry.
What weight will the authorities place on companies implementing or amending a compliance programme in settlement negotiations?
See response to question 32.
Are corporate monitorships used in your jurisdiction?
There is no provision for corporate monitorships under the Act.
Statements of facts
Are agreed statements of facts in a settlement with the authorities automatically admissible as evidence in actions for private damages, including class actions or representative claims?
See response to question 32.
Invoking legal privilege
Can the company or an individual invoke legal privilege or privilege against self-incrimination in an investigation?
The privilege against self-incrimination is not available in the investigations by the DG as the investigation before the DG is not a criminal proceeding. Legal privilege in respect of communication with counsel would be available.
What confidentiality protection is afforded to the company or individual involved in competition investigations?
The Act prohibits the disclosure of information relating to any enterprise obtained by or on behalf of the CCI or the National Company Law Appellate Tribunal without the prior written approval of the said enterprise otherwise than in compliance with or for the purposes of the Act or any other law for the time being in force. Further, a party may through a written request, addressed either to the CCI or the DG, as the case may be, claim for confidential treatment for any document or part thereof, if the disclosure of the document or part thereof would result in revealing of trade secrets or destruction or appreciable diminution of commercial value of any information or can be reasonably expected to cause serious injury to the enterprise. The written request for confidentiality must be accompanied with a statement setting out cogent reasons for such treatment and the time period for which the confidentiality is requested. On the receipt of an application seeking confidential treatment, the CCI or the DG on being satisfied of the reasons, would direct that the document(s) be kept confidential. While determining whether a document merits confidential treatment, the CCI/DG may consider the following factors: (i) extent to which the information is known to public; (ii) extent to which it is known to the employees, suppliers or distributors and others involved in the enterprise’s business; (iii) the measures taken by the enterprise to guard the information; and (iv) the ease or difficulty with which the information could be acquired or duplicated by others.
Further, as per Regulation 6 of the Lesser Penalty Regulations, CCI and the DG are required to maintain confidentiality concerning:
- identity of the applicant of the leniency; and
- information, documents and evidence furnished by the applicant of leniency.
However, these details may be disclosed if the disclosure is required by Law if the applicant has agreed to such disclosure in writing or if there has been a public disclosure by the applicant.
Refusal to cooperate
What are the penalties for refusing to cooperate with the authorities in an investigation?
Act of non-cooperation
Failure to comply, without any reasonable cause, with the orders or directions of the CCI issued under the provisions of the Act.
Fine that may extend up to 100,000 rupees for each day of such continued non-compliance, subject to a maximum of 10 million rupees.
In case of failure to pay aforementioned penalty, the result may be imprisonment for a maximum term of three years or imposition of a maximum fine of 250 million rupees or both, as determined by the Chief Metropolitan Magistrate of Delhi.
Failure to comply, without any reasonable cause with the directions of the CCI issued under sections 36(2) and 36(4) of the Act or the directions issued by the DG under section 41(2) of the Act.
Fine that may extend to 100,000 rupees for each day of such continued non-compliance, subject to a maximum of 10 million rupees.
A person being a party to the combination makes a false statement or omits to state any material particular.
Minimum penalty of 5 million rupees, which may extend up to 10 million rupees.
Any person who is required to furnish any document or information under the Act, provides any document or information knowing the same to be false, or; omits to state any material fact, or wilfully destroys or suppresses any such document.
Fine that may extend up to 10 million rupees.
Is there a duty to notify the regulator of competition infringements?
The Act does not cast a duty to notify the CCI of any infringements under the provisions of the Act.
What are the limitation periods for competition infringements?
The Act does not stipulate any period of limitation for investigating anticompetitive agreements under section 3 or abuse of dominance under section 4 of the Act. However, the CCI cannot initiate any inquiry into a combination after the expiry of one year from the date on which the combination took effect.
Are there any other regulated anticompetitive practices not mentioned above? Provide details.
No, the Act only deals with anticompetitive agreements, abuse of dominance and mergers and acquisitions.
Are there any proposals for competition law reform in your jurisdiction? If yes, what effects will it have on the company’s compliance?
Currently, there are no proposals for competition law reform in India.
Updates and trends
Updates and trends
Updates and trends
In a move to consolidate sectoral tribunals and streamline legal processes, on 26 May 2017 the central government notified that all appeals being heard or to be heard by the COMPAT would be transferred to the National Company Law Appellate Tribunal (NCLAT) along with all appellate functions under the Act. These amendments were brought about under the provisions of Part XIV of Chapter VI of the Finance Act 2017. To simplify the process, the Ministry of Finance notified the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017, which are applicable to NCLAT as well.
While the COMPAT’s constitution was capped at one chairperson and two additional members, the NCLAT may have up to one chairperson and 11 judicial and technical members. Currently, the NCLAT has three benches constituted by chairperson Justice (Retd.) SJ Mukhopadhaya; Member (Technical) Balvinder Singh, Member (Judicial) Justice (Retd.) AIS Cheema and Member (Judicial) Justice (Retd) Bansi Lal Bhat. The NCLAT is yet to pass an order ruling on the substantive issues of competition law as laid down in the Act.
CCI has recently issued a Diagnostic Tool for Procurement Officers, which has been developed to help departments or organisations in reviewing their tender processes with regard to competitiveness and to take appropriate remedial actions. It is aimed at functioning as a practical guide for procurement officials who can use it for review of the public procurement system. The guide has drawn from national and international policy documents, as well as practical experience in cases dealt with by the CCI.