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Initiating an investigation
Who can initiate an investigation of potential cartel conduct?
The Competition Commission may initiate an investigation suo moto, on reference by any statutory authority or receipt of information from any person, consumer or consumer association or trade association based on a prima facie satisfaction that the Competition Act has been violated. On such satisfaction, the commission directs the director general to investigate the matter and submit a report within a specified period. On consideration of such a report, and any objections thereto from the parties concerned, the commission may either close the case or impose such penalties as deemed fit. The director general cannot initiate an investigation on its own or appeal against the directions or orders of the commission.
If an investigation is initiated by complainants or third parties, what rights (if any) do they have?
Any party which approaches the Competition Commission holds the status of ‘information provider’. Such informants have no right to withdraw the information without leave of the commission. Further, they must cooperate and participate in the inquiry as required. A copy of the investigation report is forwarded to the informants and charged parties, to enable them to raise objections or offer suggestions.
What obligations does a company have on learning that an investigation has commenced?
On learning that an investigation has commenced, companies must preserve and submit all papers and documents to the director general, as may be required, in connection with the investigation.
What obligations does a company have if it believes that an investigation is likely?
Irrespective of whether an investigation is likely, companies are mandated to preserve all books and papers relating to the company and any other bodies corporate which are in its custody or power.
What are the potential consequences of failing to act or delaying action?
When a party fails to comply, without reasonable cause, with a direction given by the Competition Commission or director general, the commission can, fine that party Rs100,000 (approximately $1,550) for each day during which such failure continues, up to a maximum of Rs10 million (approximately $155,750).
Formal stages of investigation
What are the formal stages of and approximate timeframe for investigations?
The investigation commences upon the passing of an order by the Competition Commission directing the director general to carry out an investigation. The director general is generally asked to complete the investigation within 60 days of receipt of the order. However, it is routine for the director general to seek extensions, which the commission generally grants. In most cases, an investigation is completed in 18 to 24 months, depending on the complexity of the case. Although there are no formal milestones in an investigation, the director general typically sends multiple notices to the parties from time to time, seeking exhaustive information from the charged parties, third parties and the informant. The director general also summons the parties to record their statements on oath and seek clarification on documents and evidence on record. The investigation concludes with the submission of the report to the commission, recommending whether a violation of the act has occurred.
The commission will consider such reports and may direct further investigation or forward a copy of the non-confidential version of the investigation report to the parties for comments. On receipt of such comments, the commission will hear the parties and adjudicate the case by passing its final order.
What investigative powers do the authorities have?
The director general has the power to:
- summon and enforce the attendance of any person and examine such person under oath;
- require the discovery and production of documents;
- receive evidence on affidavit;
- issue commissions for the examination of witnesses or documents; and
- requisition any public record, document or copy of such record or document from any office.
Further, the director general may conduct search and seizure operations on obtaining a warrant from the chief metropolitan magistrate in Delhi.
What is the geographic reach of public enforcement actions?
The geographic reach of public enforcement action covers all India. However, the Competition Commission also has extraterritorial reach if an act that occurs outside India causes or is likely to cause an appreciable adverse effect on competition within India. Accordingly, the commission can conduct an inquiry into such acts and pass orders as it may deem fit in accordance with the Competition Act. The commission has entered into memoranda of understanding with a number of competition agencies globally to enhance international cooperation.
When is court approval required to invoke these powers?
Approval from the Delhi Metropolitan Magistrate Court is required for conducting search and seizure operations.
Further, if any person does not comply with the orders or directions, or fails to pay the fine imposed by the Competition Commission for non-compliance, then the chief metropolitan magistrate of Delhi may punish such persons with a fine of up to Rs250 million (approximately $3.9 million), three years’ imprisonment or both, as may be deemed fit.
Similarly, if any appellate tribunal order is contravened without reasonable grounds, such persons may be punished by the chief metropolitan magistrate with a fine of up to Rs10 million (approximately $155,750), three years’ imprisonment or both, as may be deemed fit.
Are searches of business and personal premises authorised? If so, which bodies carry out searches and will they wait for legal advisers to arrive?
The director general can carry out search and seizure operations only after obtaining a warrant from the chief metropolitan magistrate of Delhi. The director general is not required to wait for legal advisers to arrive before initiating such action.
What level of cooperation with the authorities is required and what are the consequences for failing to cooperate?
Any person who, without reasonable cause, fails to comply with a direction given by the Competition Commission or director general can be fined up to Rs100,000 (approximately $1,550) for each day during which the failure continues, subject to a maximum of Rs10 million (approximately $155,750).
Further, any person who makes any statement or furnishes any document which such person knows or has reason to believe to be false or omits to state any material fact or wilfully alters, suppresses or destroys any document which is required to be furnished can be fined up to Rs10 million.
Is in-house legal advice or attorney work product protected by the law of privilege? Does this extend to the advice of in-house counsel?
In-house legal advice or advice by in-house counsel is not protected by the law of privilege. An in-house counsel in full-time employment is not recognised as an attorney or advocate under Indian law.
However, attorney-client work product or communication from an advocate (ie, those who are registered under the Advocates Act 1961 and licensed to practise by the relevant state bar council) are protected by the law of privilege.
Are any other limitations imposed on investigatory powers in order to safeguard the rights of those under investigation?
There are no limitations imposed on the investigatory powers of the director general under the Competition Act.
What is the process for objecting to an authority’s exercise of its claimed powers?
The aggrieved party may file an appropriate writ before a high court or the Supreme Court. Under the Constitution, high courts are granted supervisory powers over subordinate courts and quasi-judicial bodies and tribunals (eg, the Competition Commission).
Publicity and confidentiality
What information about investigations will be made publicly available and at which stage(s) of the process?
Information about investigations is not made publicly available until final orders are passed by the Competition Commission. However, prima facie orders of the commission directing an investigation by the director general are published on the commission’s website, except in cartel cases.
Is any information automatically confidential and is confidentiality available on request?
The Competition Commission is mandated to treat any information received as confidential and cannot disclose it without the written permission of the party or in compliance with the Competition Act or any other law in force.
Further, as per the Competition Commission of India (General) Regulations 2009, any party may avail of confidentiality on request in writing, subject to the commission’s satisfaction. Such satisfaction depends on whether disclosure to the public of any document or part thereof will result in disclosure of trade secrets or destruction or appreciable diminution of the commercial value of any information or can be reasonably expected to cause serious injury.
Do the authorities in your jurisdiction cooperate with authorities in other jurisdictions?
The Competition Commission has entered into a memorandum of undertaking with a number of competition agencies globally, including Russia and the United States (with the Federal Trade Commission and the Department of Justice), as well as with Australia, the European Union (director general of competition), Canada, Brazil, China and South Africa.
Cases where the commission may have cooperated with authorities in other jurisdictions are not in the public domain.
Do the relevant enforcement authorities request waivers so as to allow for increased cooperation with authorities in other jurisdictions? What are the consequences of declining to grant a waiver?
No comment regarding requests for waivers or decline thereof can be made, as cases involving cooperation with enforcement authorities in other jurisdictions have not yet surfaced in India.
How is a cartel investigation resolved? Are settlements, plea bargains or other negotiated resolutions available?
Settlements, plea bargains or other negotiated resolutions are not available under the Competition Act.
Cartel investigation or any other investigation under the act culminates in the submission of a detailed investigation report to the Competition Commission by the director general. The commission considers such investigation reports, obtains written submissions, hears the parties and passes its final order.
What is the process for negotiating a settlement, plea bargain or other negotiated resolution? Do such resolutions require court or other approval?
If a settlement is not reached, what is the procedure for adjudicating a charge of cartel conduct?
Which party must prove its case? What is the relevant standard of proof?
The director general must prove that an agreement exists among competitors (ie, among cartel members) and that such an agreement relates to any prohibited conduct – namely, to fix prices, limit output, share markets or indulge in bid rigging. Thereafter, a presumption in law would operate that the said conduct has an appreciable adverse effect on competition. Consequently, the onus to rebut such presumption shifts to the charged parties. However, the presumption of an appreciable adverse effect on competition does not apply to joint venture agreements if such an agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.
The relevant standard of proof under the Competition Act is based on the principle of ‘preponderance of probabilities’, which means that under the given facts and circumstance of the case, the Competition Commission considers whether the alleged conduct is likely. Thus, in the absence of direct evidence, the commission examines a host of economic factors, such as:
- the nature of the industry;
- the nature of the goods;
- cost structures;
- trends regarding movement of prices;
- capacity utilisation;
- supplies; and
- market shares.
It also looks into conduct-related factors, such as:
- evidence of meetings between competitors;
- telephone records;
- the similar or identical nature of bid documents;
- membership and the nature of information shared in trade associations; and
- any history of violation in India and other jurisdictions.
While the commission looks into a variety of economic and conduct-related factors, it accords primacy to conduct-related factors in its decisions.
Is there a hearing? If so, what is the process for submitting evidence and testimony?
Yes, there is a hearing.
Written or oral evidence and testimonies are collected on oath or affidavit by the director general during the course of investigation. Further, parties may also give written or oral evidence and testimonies to the director general by making an application in this regard. Once the investigation report is submitted to the commission, no new documents or testimonies can be introduced at the time of hearing or inquiry, unless permitted by the commission.
What are the accused’s procedural rights?
In cases where the director general has found a contravention of the Competition Act, the charged parties have a right to receive a copy of the investigation report and reply to it, either in person or through an attorney.
What is the appeal process?
Any party aggrieved by any direction, decision or order of the Competition Commission may appeal before the National Company Law Appellate Tribunal within 60 days of its receipt.
An appeal against any order or decision of the appellate tribunal can be submitted to the Supreme Court within 60 days.
To what extent can the appeal body review the agency’s findings of fact, legal assessment and penalties?
The appeal body has the power to conduct a plenary review of the Competition Commission’s fact findings, legal assessment and penalties. Accordingly, the appeal body can pass such orders as it deems fit, confirming, modifying or setting aside the appealed direction, decision or order.
Penalties for companies
What are the potential penalties for companies involved in a cartel?
Apart from cease and desist orders, a penalty of up to three times the profit of the participating firm for each year of the continuance of the cartel or 10% of its relevant turnover for each year of continuance of the cartel, whichever is higher, can be imposed.
Are there guidelines in place for penalties? If not, how are penalties normally calculated?
No specific guidelines are in place for calculating penalties. However, in various orders, the Competition Commission has stated that penalties must be commensurate with the seriousness of infringement and must also act as a deterrent. Keeping these principles in mind, the commission weighs various aggravating and mitigating factors, depending on the facts and circumstances of each case, to calculate the penalty.
Do the authorities take into account any penalties imposed in other jurisdictions?
The Competition Commission has thus far not adjudicated any case that involves penalties imposed in other jurisdictions.
How can a company mitigate its exposure to fines?
Although no guidelines have been issued in this regard, it can be observed from the mitigating factors considered by the Competition Commission in various cases that a company may mitigate its exposure to fines by having an effective competition compliance policy in place.
Penalties for individuals
What are the potential penalties for individuals involved in a cartel?
In cases where the contravention has taken place with the consent or connivance of or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such official shall be deemed guilty of that contravention and is liable to be fined up to 10% of his or her individual income for each year of the continuance of the cartel.
Further, every person in charge of and responsible to the company for the conduct of company business at the time that the contravention was committed shall be deemed guilty of the contravention and be liable to be fined up to 10% of his or her individual income for each year of the continuance of the cartel.
Do the authorities take into account any penalties imposed in other jurisdictions?
No such case has been adjudicated by the Competition Commission as yet.
Is a company permitted to pay a penalty imposed on its employee?
A company is not barred from paying penalties imposed on its employees.
Is a company permitted to continue to employ an employee involved in cartel conduct?
There is no bar on continuing the employment of an employee involved in cartel. However, the Competition Commission recently passed an order directing the removal for a specified period of certain office bearers of a trade association found to have been engaged in cartel conduct.
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