General

General attitudes

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. The CCI’s strong and effective enforcement mechanisms, coupled with focused advocacy initiatives, have contributed to an increased awareness among businesses regarding competition law and created a progressively increasing culture of compliance. The enforcement trend over the past 10 years also points towards an increased level of awareness and deterrence among businesses in various sectors. The recent increase in the number of leniency applications serves as a good indicator of the increasing effectiveness of the authority.

However, while more sophisticated and organised businesses have proactively started to adopt competition compliance programmes, smaller and less organised businesses still lack complete awareness of the significance of competition law and the consequences of non-compliance. To address the gaps in awareness, the CCI, as part of its advocacy initiatives, publishes guidance material and regularly organises seminars, conferences and road shows, and conducts market and sectoral research. In order to reach out to a larger section of businesses, the CCI has also released short videos and radio advertisements explaining the concepts of bid rigging, abuse of dominance and anti­competitive agreements.

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 company size and the sector of the economy in which it operates?

As stated above, there is no government-approved standard for compliance. The Compliance Manual for Enterprises issued by the CCI does not distinguish between the sector or the size of the enterprise. That said, companies may adopt custom-made compliance programmes, keeping in mind the sector in which they operate, their operations and dealings.

If the company has a competition compliance programme in place, does it have any effect on sanctions?

The Competition Act 2002 (the Act) does not contain any provisions dealing with the effects of having a compliance programme in place. However, in the event of scrutiny, the CCI is likely to consider 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, it may have some bearing on the penalty imposed and may also help in avoiding potential claims for compensation. The CCI can also direct repeat offenders to conduct competition-awareness programmes (M/S Crown Theatres v Kerala Film Exhibitors Federation, Case No. 16/2014).

Implementing a competition compliance programme

Commitment to competition compliance

How does a 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 and 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.

Risk identification

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.
Risk-assessment

What are the key features of a compliance programme regarding risk-assessment?

For risk assessment, the Compliance Manual recommends the following activities:

  • determination of the relevant product and relevant geographical market;
  • determination of the market position or dominance of the enterprise in the relevant market;
  • determination of liability exposure in case of scrutiny;
  • nature of the records evidencing discussions concerning prices, production, etc, with competing firms, or other communication showing conduct that may be considered as an abuse of dominance;
  • analysis of the terms of 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 training and special assessments.
Risk-mitigation

What are the key features of a compliance programme regarding risk-mitigation?

For risk mitigation, the Compliance Manual recommends the following activities:

  • abstinence from any communication with 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 potential scrutiny;
  • the marketing, sales or procurement department should liaise with the legal department and external counsels to receive timely advice on existing or potential competition concerns; and
  • periodical review of the commercial agreements from a 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-assessment;
  • risk-assessment processes as may be applicable to new or growing business divisions or emerging areas of competition law risk; and
  • the 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.

Dealing 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 the purchase or sale price;
  • regarding quantities aimed at limiting or controlling production, supply, markets, technical development or investment;
  • regarding 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.

Pertinently, such agreements are presumed to cause an appreciable adverse effect on competition (AAEC) and, unless proven otherwise, are prohibited under the Act.

However, a company is not prohibited from entering into agreements by way of joint ventures with competitors if such an agreement increases efficiency in the production, supply, distribution, storage, acquisition or control of goods or provision of services.

Suggested precautions

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 with a competitor should not fall within the scope of the agreements listed in section 3(3)(a) to section 3(3)(d) of the Act (as discussed in question 10). For instance, as per the Compliance Manual, enterprises should avoid arrangements with competitors in respect of prices, 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.

Where competitors have entered into an agreement not prohibited under the Act - for example, a joint research and development agreement - the engagement between the competitors should be strictly restricted to the scope of such an agreement. In other words, a valid arrangement should not be used as a platform for anticompetitive conduct or objectives prohibited under section 3(3) of the Act; for example, for discussions on prices of products or services.

Although there is no exhaustive list on this aspect on ‘dos’ and ‘don’ts’, there should be abstinence from discussions on the following issues between competitors:

  • the cost of manufacturing products or providing services;
  • the quantity proposed to be provided;
  • credit, sale, purchase or billing terms;
  • discounts;
  • profits, margins or profitability;
  • transportation, cartage, freight, distribution charges or any other charges incurred in the course of the provision of services or the 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.

It is advisable to consult in-house counsel or external legal counsel concerning issues on which there is lack of clarity from a competition law perspective.

Cartels

Cartel behaviour

What form must behaviour take to constitute a cartel?

Section 2(c) of the Act defines ‘cartel’ to include an association between enterprises at the same level who by way of an agreement either 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 to mean any arrangement or understanding or action in concert, notwithstanding that it is not in writing or legally binding. As such, an agreement does not have to be in writing for the purposes of constituting a cartel, and concerted action could also be a cartel.

Accordingly, any understanding or arrangement that limits, controls or attempts to control the production, sale, price or trade of goods or services would be considered a cartel.

Avoiding sanctions

Under what circumstances can cartels be exempted from sanctions?

The following exemptions or defences are available to horizontal agreements, including cartels:

  • VSA Exemption: As per Notification No. SO 3250(E) dated 4 July 2018, all vessel-sharing agreements of the shipping industry were exempted from the application of section 3 of the Act for a period of three years. The exemption applies to carriers of all nationalities operating ships of any nationality from any Indian port, provided that these agreements do not include concerted practices involving price fixing, limiting capacity or sales and allocation of markets or customers.
  • Export-related agreements: as per section 3(5)(ii) of the Act, where an agreement relates exclusively to the production, supply, distribution, or control of goods and services related to exports, it is exempted from the applicability of section 3(3) of the Act. For the exemption to apply, the parties must be exporters and their agreement must exclusively pertain to exports.
  • Agreements entered into to protect IP rights: as per section 3(5)(i) of the Act, agreements entered into with a view to restraining infringements or that impose reasonable conditions to protect rights granted under statutes listed therein are also exempt from section 3(3) of the Act.
  • JV efficiency defence: as per the proviso to section 3(3) of the Act, if the agreement has been entered into by way of joint venture, which in turn increases efficiency in the production, supply, distribution, storage, acquisition or control of goods and provision of services, the presumption of an AAEC shall not extend to it, and it shall be prohibited only on proof of an AAEC. For instance, in Association of Third-Party Administrators v General Insurers’ Public Sector Insurance and Ors, Case No. 107/2013, a jointly formed captive third-party administrator by all public sector insurance companies was found to be efficiency-enhancing and, accordingly, permissible under the Act. The CCI has not restricted the scope of the defence to strict joint venture agreements but has extended it to any cooperation that results in efficiency gains. For instance, in Indian Glycols Ltd v ISMA, Case No. 21/2013, joint tendering for ethanol by oil manufacturing companies was found to be permissible under the Act.

In addition to these, no penalty can be imposed in cases of horizontal agreements that are shown not to cause an AAEC. For instance, in the case of Nirmal Singh Mansahi v Ruchi Soya and Ors, (Case No. 76/2012), the CCI found that since 95 per cent of the products were exported, there was no AAEC in India caused by the cartel proven to have been established between the parties.

Exchanging information

Can the company exchange information with its competitors?

While there are no specific provisions or guidelines regulating the exchange of information between competitors, such exchange is generally governed by section 3(3) of the Act. Companies can exchange information with their competitors, provided that the information exchange is not for the purposes of, and does not result in, activities prohibited under section 3(3) of the Act that are presumed to cause an AAEC. The CCI considers information exchange between competitors that relate to pricing information or provide details of production and dispatch as commercially sensitive and, where such an exchange is accompanied by an impact on prices or production, it shall be seen as facilitating coordination (Builders Association of India v Cement Manufacturers Association and Ors, Case No. 29/2010). However, the CCI has held that the mere exchange of commercially sensitive information without any impact on prices or production would not be in contravention of the Act (In re Alleged Cartelisation in Flashlights Market in India, Suo motu case 1/2017). See also question 11.

Leniency

Cartel leniency programmes

Is a leniency programme available to companies or individuals who participate in a cartel in your jurisdiction?

A leniency programme is available for both individuals and companies in India. The provisions related to leniency are contained in the Competition Commission of India (Lesser Penalty) Regulations 2009 (Lesser Penalty Regulations) and section 46 of the Act, as per which a company can avail leniency for itself as well as its officials named in the application. These provisions govern the manner and the extent to which the CCI, if satisfied, may grant leniency (in other words, lesser penalties) to applicants that make a 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 when the disclosure is made.

To seek the 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 and evidence, as may be required by the CCI;
  • cooperate genuinely, fully, continuously and expeditiously throughout the investigation and 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 a cartel.

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, 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.

Can the company reserve a place in line before a formal leniency application is ready?

Yes. As per the Lesser Penalty Regulations, for the grant of lesser penalties, the applicant may either make an application containing all the 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 email, the CCI directs the applicant to submit a written application. Failure to submit the required information along with the application within 15 days (or within the extended timeline) of the date of the first communication with the CCI may forfeit priority status.

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 the granting of priority status, and procedure prescribed for the priority applicant will apply mutatis mutandis.

The priority status works as follows:

  • up to or equal to 100 per cent - first to make vital disclosure by submitting evidence of a cartel, enabling the CCI to form a prima facie opinion regarding the existence of a cartel;
  • up to or equal to 50 per cent - second to make vital disclosure by submitting further evidence, which adds value to the evidence already in possession of the CCI and the DG; and
  • up to or equal to 30 per cent - third to make vital disclosure by submitting further evidence, which adds value to the evidence already in possession of the CCI and DG.
Whistleblowing

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 (in other words, an entity) who is a party to the 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 (who is not a member of the cartel in question) currently exists.

Dealing with commercial partners (suppliers and customers)

Vertical agreements

What types of vertical arrangements between the company and its suppliers or customers are subject to competition enforcement?

All vertical agreements that cause or are likely to cause an AAEC in India are prohibited and subject to competition enforcement as per section 3(4) of the Act. This section provides an illustrative list of vertical agreements that, if proven to cause an AAEC in India, are prohibited (in other words, any vertical agreement in respect of, inter alia, provision of services), including:

  • tie-in arrangements;
  • exclusive supply agreements;
  • exclusive distribution agreements;
  • refusal to deal; and
  • resale price maintenance.

Other vertical covenants, such as territorial restraints, restriction on online sales, etc, would also fall within the scope of consideration of the CCI and would be prohibited where they are proven to cause an AAEC (Tamil Nadu Consumer Products Distributors Association v Fangs Technology Private Ltd and Other, Case No. 15/2018; and In re M/S KC Marketing v OPPO Mobiles MU Private Ltd, Case No. 38/2018). Notably, the CCI has ruled that agreements with end consumers are excluded from the scope of the Act (Financial Software and Systems Private Ltd v M/S ACI Worldwide Solutions Private Ltd and Ors, Case No. 52/2013).

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 they cause an AAEC or are likely to cause an 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 the six factors under section 19(3) of the Act and will try to strike a balance between the anticompetitive (1-3) and pro-competitive effects (4-6) while determining the existence of an AAEC or its likelihood.

Further, objective justifications and legitimate business interests 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 very low market shares would militate against the existence of an AAEC (Shri Ghanshyam Das Vij v M/S Bajaj Corp Ltd and Ors, Case No. 68/2013). Hence, in addition to the factors listed in section 19(3) of the Act, objective justifications, legitimate business interests and the principle of de minimis are also taken into account by the CCI during the assessment of vertical arrangements.

Under what circumstances can vertical arrangements be exempted from sanctions?

Vertical agreements are exempt from sanctions in four situations:

  • No proof of an AAEC - where it cannot be shown that the vertical agreement causes or is likely to cause an AAEC in the market.
  • Protection of IP rights - section 3(5)(i) provides that any agreement that restrains the infringement of, or imposes reasonable conditions to protect intellectual property (IP) rights listed therein, will be exempt from the provisions of section 3(4) of the Act. The CCI has generally adopted a narrow interpretation of the exception and has held that the exemption is not available for any IP right and extends only to IP rights listed in section 3(5)(i). Further, the 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 Samsher Kataria v Honda Siel and Ors (Case No. 3/2011), the CCI, in determining whether the agreement fell 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 IP rights are in fact being satisfied. The appellate authority under the Act, the ertswhile Competition Appellate Tribunal (COMPAT) (which was replaced by National Company Law Appellate Tribunal in 2018) and the CCI both noted that 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. The CCI has also noted that restricting sales on the internet to protect intellectual property is not a valid justification for prohibiting online sales (In re M/S KC Marketing v OPPO Mobiles MU Private Ltd, Case No. 38/2018).
  • Agreements pertaining to exports - section 3(5)(ii) affords protection to agreements entered into by exporters provided that the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services of the exports.
  • The CCI’s position in previous cases also suggests that vertical arrangements that can be justified on the basis of objective justification or legitimate business interests; such arrangements are likely to be exempt from sanctions.

How to behave as a market dominant player

Determining dominant market player

Which factors does your jurisdiction apply to determine if the company holds a dominant market position?

In terms of explanation 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 the factors relevant for determining dominance that, inter alia, include the market share of the enterprise, the size and importance of its competitors, the dependence of consumers on the enterprise and entry barriers. As such, there is no presumption of dominant position based on market share alone (Belaire Owner Association v DLF Ltd, 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 a determinant factor for dominance and all factors under section 19(4) need to be considered. It was further highlighted that high market share in the case of new technologies may be fleeting and the presence of competitive constraints must be considered (Fast Track Call Cab Private Ltd and Anr v ANI Technologies Private Ltd, Case Nos. 06 and 74/2015).

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 conditions or prices (including predatory prices) in the purchase or sale of goods or services;
  • limiting or restricting:
    • the production of goods or services or markets thereof; or
    • technical or scientific development relating to goods or services;
  • indulging in practices resulting in the denial of market access in any manner;
  • making the conclusion of contracts subject to unrelated supplementary obligations; and
  • leveraging (using dominance in one relevant market to enter into or protect another relevant market).

Recently, while assessing the dominant position of Google in the markets of online general web search and web search advertising services, the CCI found, inter alia, that the prominent display and placement of Google’s commercial unit with a link to Google’s specialised search service amounts to an unfair imposition on users of search services as it deprives them of additional choices, which is in contravention of section 4(2)(a)(i) of the Act. The CCI also noted that Google imposed de facto exclusivity on website publishers who have negotiated search intermediation agreements with Google by preventing them from using the ‘same or substantially similar’ search services provided by competing search engines, in contravention of section 4(2)(a)(i) of the Act (Matrimony.com Ltd v Google LLC and Ors, Case Nos. 07 and 30/2012).

In a recent case pertaining to denial of market access, the CCI in its majority order, inter alia, observed that in the monopoly market of dedicated standing/tilting MRI machines in India, an exclusive distribution agreement between the manufacturer of the MRI machine and its subsidiary placed consumers in a disadvantageous position as the subsidiary was given exclusive rights for the provision of after-sales services and the supply of spare parts, which limited the provision of services in the after-sales market and denied market access to third-party service providers, in contravention of section 4(2)(b) and 4(2)(c) of the Act (House of Diagnostics LLP v Esaote SpA and Esaote Asia Pacific Diagnostics Pvt Ltd, Case No. 09/2016).

Under what circumstances can abusing market dominance be exempted from sanctions or excluded from enforcement?

Under the Act, a dominant enterprise may adopt discriminatory conditions or prices 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 Ors, Appeal No. 36/2014) as well as the CCI (Shri Saurabh Tripathy v Great Eastern Energy Corporation Ltd, Case No. 63/2014, and Rico Auto Industries Ltd v GAIL India Ltd, Case Nos. 16-20 and 45/2016, 02, 59, 62 and 63/2017) have recognised the existence of commercial reasons that could justify conduct that may otherwise be 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 that cross the jurisdictional thresholds specified in section 5 of the Act must be mandatorily notified to the CCI (collectively referred to as ‘combination(s)’). The Act adopts a suspensory regime and, as such, obtaining approval from the CCI is compulsory.

In acquisitions (including hostile acquisitions), it is the responsibility of the acquiring entity to file the details of the proposed transaction with the CCI. In a merger or an amalgamation, the parties must file a joint notice.

A notification is required to be filed within sufficient time of:

  • the passing of a final board proposal in relation to a merger or amalgamation; or
  • the 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.

Any acquisitions, 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

In India

In India

Assets

OR

Turnover

Assets

OR

Turnover

>20 billion rupees

>60 billion rupees

>80 billion rupees

>240 billion rupees

In India and outside India (aggregate)

In India and outside India (aggregate)

Assets (US$)

OR

Turnover (US$)

Assets (US$)

OR

Turnover (US$)

>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)

If 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, but the following exemptions are available to parties:

  • The central government has 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 the turnover is not more than 10 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 23A of the Regional Rural Banks Act 1976 from the application of the provisions of sections 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 and 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 involving both structural and behavioural remedies (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 eight 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), the CCI approves transactions emanating from resolution plans filed under the IBC provisions at a quick pace. For instance, in 2018, the CCI approved two such transactions (Ultratech/Binani C-2018/02/558 and RPPL/Binani C-2018/02/557) in under 15 working days. 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 the removal of certain restrictive clauses (viz, cooperation clauses) or the reduction of 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 the merging entities in cases of non-notification or giving effect to a transaction prior to obtaining the CCI’s approval. The CCI imposes these penalties according to the provisions of section 43A of the Act, which contemplates the imposition of a penalty of not more than 1 per cent of the turnover or the assets of the combination, whichever is higher. There is, however, no penalty imposed for a delay in filing, as the CCI has removed the requirement to file a notification within 30 days of the execution of a binding document.

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 have any defect or are 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 parties an opportunity to cure any defects in the filings by communicating the same to them. Investigation into the combination is suspended until the defects are rectified.

In the recent past, the CCI has imposed penalties on several parties for non-notification of combinations. In April 2018, the CCI imposed a penalty of 1 million rupees on Intellect Design Arena Ltd for non-notification of its acquisition of certain assets of Polaris Financial Technologies Ltd. According a strict interpretation of turnover ‘in India’, the CCI noted that the geographical demarcation of ‘turn­over’ was not relevant for the assessment of a combination notification and, as the figures provided on the book of accounts exceeded the prescribed thresholds, the combination notifiable and the de minimis exemption would not be available (IDAL/PFTL C-2015/12/348).

Citing belated filing by the parties, the CCI imposed a penalty of 100,000 rupees on Claridges Hospitality Private Ltd, Akira Marketing Private Ltd and Azure Hospitality Private Ltd for belated notification of a merger. Although the CCI no longer scrutinises belated filings as the 30-day time limit for filing a notification has been suspended until 29 June 2022, the board resolution for the instant merger was signed in September 2016; ie, before the exemption came into force (Akira Marketing/Claridges C-2017/05/508).

Investigation and settlement

Legal representation

Under which circumstances would the company and 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 the liability of officers or employees of the company. In a situation where a person is being proceeded against under section 48 of the Act, it may be advisable that said person is represented separately (more so if said 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. Notably, in most cases, the investigation against the officers and employees proceeds simultaneously with the company.

Dawn raids

For what types of infringement would the regulatory authority launch a dawn raid? Are there any specific procedural rules for dawn raids?

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 the Chief Metropolitan Magistrate, Delhi, 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 have not been frequently resorted to in India. In fact, the DG has conducted dawn raids in only four 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 the person subject to search and seizure under the CrPC apply to dawn raids as well. Notably, the rights of an enterprise subject to a dawn raid include:

  • the right to ask for the judicial warrant;
  • the right to ask for the identity of the person who is to conduct the search;
  • the right to object to the search or seizure of documents protected by attorney-client privilege; and
  • the right to object to any search or seizure outside the scope of the warrant.

In terms of section 240A of the Companies Act 1956, the officer, employees and the agents of an enterprise subject to a dawn raid are obliged to cooperate with and provide full assistance to the DG during a dawn raid. Importantly, they are bound to preserve and produce to the DG all the relevant books and papers that are in their custody or power.

Settlement mechanisms

Is there any mechanism to settle, or to make commitments to regulators, during an investigation?

There currently 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 question 32.

Corporate monitorships

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 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 investigations by the DG, as an investigation before the DG is not a criminal proceeding. Legal privilege in respect of communication with counsel would be available.

Confidentiality protection

What confidentiality protection is afforded to the company and/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 in force at the time. 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 the revealing of trade secrets or the 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 by 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:

  • the extent to which the information is known to the public;
  • the extent to which it is known to employees, suppliers or distributors and others involved in the enterprise’s business;
  • the measures taken by the enterprise to guard the information; and
  • the ease or difficulty with which the information could be acquired or duplicated by others.

In cases of leniency, a greater protection is afforded. As per regulation 6 of the Lesser Penalty Regulations, the CCI and the DG are required to maintain confidentiality concerning:

  • the identity of the leniency applicant; and
  • information, documents and evidence furnished by the leniency applicant.

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. The Lesser Penalty Regulations also give the DG the power to disclose the information furnished by a leniency applicant for the purposes of the investigation. Where the leniency applicant does not agree to such disclosure, the information may nevertheless be disclosed with the permission of the CCI.

Refusal to cooperate

What are the penalties for refusing to cooperate with the authorities in an investigation?

Act of non-cooperation

Penalty

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.

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.

A person that is required to furnish any document or information under the Act provides any document or information knowing the same to be false, omits to state any material fact or wilfully destroys or suppresses any such document.

Fine that may extend up to 10 million rupees.

Failure to comply with the directions of the CCI or pay fines imposed for non-compliance may result in 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.

Infringement notification

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.

Limitation period

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.

Miscellaneous

Other practices

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.

Future reform

Are there any proposals for competition law reform in your jurisdiction? If yes, what effects will it have on the company’s compliance?

In September 2018, the government of India constituted a Competition Law Review Committee to review the Competition Act 2002. This development is to bring the Act in tune with the dynamic business environment and recalibrate it to promote international best practices for antitrust and merger laws, as well as cross-border competition issues. The committee will also focus on other regulatory regimes, institutional mechanisms and government policies that overlap with the Act. The committee comprises nine members, including the secretary and joint secretary of the MCA, the chairpersons of the CCI and the Insol­vency and Bankruptcy Board of India, prominent lawyers and academicians. Though the committee was expected to submit its report on competition reforms in the first quarter of 2019, there is no intimation in the public domain regarding the same. The report will be open for public comments. The government is likely to introduce a bill to amend the Act taking into account the recommendations of the committee. A bill is likely to bring significant changes to the Act. However, it is not possible to assess the exact impact on competition compliance at this stage.

Updates and trends

Recent developments

Are there any emerging trends or hot topics regarding competition compliance in your jurisdiction?

In 2018, the CCI put out a policy note for the pharmaceutical market titled ‘Making Markets Work for Affordable Healthcare’, as this sector requires optimal regulation to ensure affordable and quality healthcare for consumers. The policy note identifies four major issues in the pharmaceutical and healthcare sector:

  • quality perceptions behind the proliferation of ‘branded’ generics, which may be aimed at introducing artificial product differentiation;
  • vertical arrangements and lack of transparency, especially in the area of diagnostics;
  • regulation of the pharmaceutical sector and competition; and
  • the role of intermediaries leading to higher drug prices.

Significant observations that emerged from the policy note are:

  • the recognition of a requirement to create a level playing field between online and offline platforms for the sale of drugs;
  • the plight of generic drug manufacturers caught in litigation owing to the filing of injunctions by innovating companies; and
  • removing obstacles for patients using the services of a hospital to purchasing standardised products from the open market.