The Competition Act, 2002 (Competition Act) is the primary legislation that regulates anti-competitive conduct in India, including cartels and the Competition Commission of India (CCI) is the statutory authority in charge of competition law enforcement.^[i]  The Office of the Director General (DG) is the investigative arm of the CCI.

The Competition Act regulates three types of conduct: (i) anti-competitive agreements, including cartels;^[ii] (ii) abuse of dominant position;^[iii] and (iii) combinations (i.e., mergers, acquisitions and amalgamations).^[iv]  Section 3 of the Competition Act prohibits two types of anti-competitive agreements: (i) horizontal agreements between competitors (including cartels); and (ii) vertical agreements between enterprises or persons at different stages or levels of the production.

A cartel includes any agreement between competing enterprises that relates to:

• fixing of purchase or sale prices;
• limiting or controlling supply, production, markets, technical development, investment or provision of services;
• sharing or allocating geographical markets or customer groups; or
• bid rigging.

The CCI is first required to prove that an ‘agreement’ pertaining to any of the above-mentioned activities exists or existed between the competing enterprises.  Once the existence of such an agreement is proved, they are presumed to cause an appreciable adverse effect on competition (AAEC) in India.  Such a presumption is rebuttable but in practice, rebutting the presumption is rare and difficult.

The term ‘agreement’ is broadly defined to include any understanding or action in concert, which need not be a formal understanding between competitors reproduced in writing.  To prove the existence of an agreement, the CCI applies the test of preponderance of probabilities, which means that an existence of agreement is inferred from a number of coincidences and indications, which, taken together, may – in the absence of any other plausible explanation – constitute evidence of the existence of an anti-competitive agreement.

Penalties under the Competition Act for cartels

The Competition Act prescribes that a penalty for violation of cartel provisions by enterprises and the monetary consequences could be up to 10% of the average turnover of the infringing enterprise(s) for the preceding three financial years, or up to the higher of three times the profit or 10% of the turnover for each year of the continuation of the cartel.

There is no specific list or guidance in relation to (aggravating or mitigating) factors that are considered by the CCI in determining the quantum of penalties.  However, the CCI has exercised its powers rather judiciously and has, in multiple decisions, taken into account aggravating and mitigating circumstances when imposing penalties.  Further, the Supreme Court of India (Supreme Court) in the Excel Crop case^[v] clarified that the penalty imposed by the CCI for anti-competitive conduct must be on the ‘relevant turnover’ of the enterprise – i.e., the turnover derived from the products and services that form a subject matter of the cartel/anti-competitive conduct.  The Competition Amendment Bill, 2022, however, proposes to introduce a new penalty mechanism, whereby monetary penalty for anti-competitive conduct will be computed on the global turnover of the contravening parties.  This proposed amendment (as and when implemented) will have a significant impact on big tech companies and other multinational corporations that earn a significant portion of their revenue through their global operations.

Penalties on individuals

The Competition Act empowers the CCI to penalise officials/individuals of the infringing enterprise.  An individual penalty can be imposed in the following scenarios:

• By virtue of position of responsibility:^[vi] An example of this would be (i) the managing director or chief executive director (in case of a company), or (ii) a partner (in case of partnership firm). Such individuals can, however, be exempt from personal liability, if they are able to prove that (i) the contravention was committed without their knowledge, or (ii) they exercised due diligence to prevent the contravention from being committed.
• By virtue of participation in conduct:^[vii] Any official of an erring enterprise can be individually penalised, if it is proved that cartel conduct has taken place either with their consent or connivance or as a result of their negligence. However, unlike the provisions of Section 48(1), liability on individuals is established by their de facto

The CCI may impose a penalty that may extend up to 10% of the average total income derived by the relevant individual in the three prior financial years (as recorded in their income tax statements submitted to the tax authorities in India).

Individual liability under the Competition Act has a follow-on consequence under the provisions of Indian corporate laws.  The Companies Act, 2013 disqualifies a person from becoming a managing or full-time director of a company, if such a person has been found guilty of an offence under the Competition Act and has incurred a fine exceeding INR 1,000.  Approval from the government of India is required for any such managing or full-time director disqualified (by virtue of individual liability imposed on such persons) to regain his/her eligibility to become a managing or full-time director.

Endnotes:

^[i]               Orders passed by the CCI can be appealed to the National Company Law Appellate Tribunal and, finally, to the Supreme Court of India.

^[ii]              Section 3 of the Competition Act.

^[iii]              Section 4 of the Competition Act.

^[iv]              Section 5 of the Competition Act.

^[v]              Excel Crop Care Limited v. CCI & Anr (Civil Appeal No. 2480 of 2014).

^[vi]              Section 48(1) of the Competition Act.

^[vii]             Section 48(2) of the Competition Act.

The CCI and its investigative arm, the DG, are vested with wide-reaching powers to conduct investigations under the Competition Act.  Such powers include obtaining statements on oath from individuals, directing the parties to produce documents, examining witnesses and conducting search and seizure operations.

Powers to conduct a dawn raid

The DG is empowered to conduct unannounced search and seizure operations (i.e., dawn raids).  To conduct a dawn raid, the DG is required to prove that documents and other electronic evidence relevant to an investigation may be destroyed, falsified or secreted.  Dawn raids are typically conducted simultaneously across offices of the company and can extend to the personal premises of directors and other executives, depending on the scope of the search warrant.  To date, there have been 14 dawn raids conducted by the CCI.  Of these, 12 were related to cartel investigations.

During the course of dawn raid operations, the DG can enter the domestic premises or means of transport of an individual, secure access to digital data (including laptops and mobiles), and take statements on oath, in addition to accessing physical documents.  Typically, the DG clones all the data saved in the electronic device seized and subsequently returns the device(s) to the company officials.

Procedural challenges to the dawn raid process

Given that the competition law landscape is relatively nascent in India, the CCI is yet to publish procedural guidelines that govern dawn raids.  There have been instances where the investigated parties have made due process challenges that occurred during the course of dawn raids, by way of invoking writ jurisdiction of relevant High Courts.  For instance, a raid involving an allegation of abuse of dominance by JCB was challenged as the search warrant authorising the dawn raid did not explicitly allow for seizure of evidence.  While the Delhi High Court^[i] allowed this challenge and ordered the setting aside of the seized material, the Supreme Court^[ii] overturned the Delhi High Court’s decision on the ground that a ‘search’ operation invariably included ‘seizure’ of material as a search by itself would not have been of any assistance to the investigation.  Some of the frequent issues encountered by the investigated parties during the course of a dawn raid include seizure of materials that are over encompassing and may be beyond the scope subject matter of investigation, or insufficient details in the search warrant.

Deposition statements

Any deponent has the right to be accompanied by an advocate.  However, an advocate can only be present at the deposition at a non-hearing distance from the deponent and must undertake not to interfere with the deposition in any manner.^[iii]  The deposition statements are recorded in writing and the deponent is given an opportunity to review the correctness of the statements recorded.  Deposition statements can be used as evidence in the proceedings.

Penalty for non-cooperation with the DG during investigation

Failure to appear for oral depositions or to provide information requested by the DG may result in the CCI initiating penalty proceedings for non-cooperation.  Non-cooperation with the DG or preventing the DG from carrying out the dawn raid process can attract a penalty of up to INR 1 lakh for each day during which such non-cooperation continues, subject to a cap of INR 1 crore, as may be determined by the CCI.

Procedure for investigating cartels

The CCI can either direct the DG to investigate possible cartels on its own motion (through its suo motu powers) or based on a reference from the central or state government or a statutory authority.  Additionally, any person, consumer or trade association can file a complaint (referred to as ‘information’) based on which an inquiry can be initiated by the CCI.

If the CCI is satisfied that a prima facie case exists, it passes an initiation order (based on the evidence on record) and directs the DG to conduct an investigation into the alleged cartel and submit a detailed report with its findings.  Thereafter, the CCI invites the views or objections of the alleged cartelists on the DG report, including the informant, and offers them an opportunity of an oral hearing.  If the CCI finds a contravention, it may impose penalties and pass any other order as it deems fit.  On the other hand, in case there is no conclusive evidence of a cartel (either at a prima facie stage or post-investigation report), the CCI can pass a closure order.

Endnotes:

^[i]               JCB (India) Ltd. v. CCI, 2016 SCC OnLine Del 6609.

^[ii]              Competition Commission of India v. JCB India Ltd. & Ors, 2019 SCC OnLine SC 625.

^[iii]               Regulation 46A of the CCI (General Regulations), 2009 allows for the presence of advocates (albeit at a non-hearing distance) during depositions.

In the last few years, the CCI has primarily focused on public procurement (in terms of cartel enforcement).  In the last year, out of a total of seven final orders that have been passed by the CCI, four orders concerned bid rigging in relation to government tenders.  The CCI’s proactive enforcement of bid rigging cases has been largely on account of the references made for such anti-competitive conduct by various government agencies, which involved participation by small and medium enterprises.  A total fine of INR 3.67 crores was imposed by the CCI in 2022–2023, which indicates a shift towards the CCI’s enforcement focus towards bid rigging in public procurement, which is primarily catered to by small, micro and medium enterprises.

No monetary penalty imposed where a cease-and-desist order is sufficient

In June 2022, the CCI passed an infringement order finding 10 trade associations of trailer owners guilty of cartelisation by (i) fixing the tariff rates for trailers, and (ii) imposing restrictions on container freight stations having their own fleet of trailers, by mandating them not to ply more than 20 trailers of their own movement of containers.  While there was overwhelming evidence clearly establishing the role played by the 10 trade associations in facilitating the cartel, no penalty was imposed by the CCI, taking into account the financial hardships suffered by the members of the trailer owner associations on account of the increase in the prices of fuel, insurance and other expenses.  Instead, a cease-and-desist order was deemed sufficient to remedy the harm caused due to the anti-competitive conduct.

Similarly, in October 2022, the CCI passed an order against several Kraft paper manufacturers and their associations for (i) facilitating the increase in price of Kraft paper, and (ii) creating an artificial shortage of Kraft paper by collectively shutting the operation of paper mills, to facilitate the price increase.  While the CCI directed the Kraft paper manufacturers and trade associations to cease and desist from indulging in such anti-competitive conduct, no monetary penalty was imposed as: (i) the cartelists were small-scale industries and first-time offenders; (ii) several Kraft mills were either sold or closed post the COVID-19 pandemic, or were in financial distress; and (iii) certain Kraft paper manufacturers were leniency applicants and certain others had admitted their involvement in the cartel during the investigation.

Closure of the investigation in the alleged pulses cartel

In October 2022, the CCI closed a suo motu case initiated against various agro-commodity companies for their alleged fixing of the prices of pulses from January 2015 to February 2016.

It was alleged that these agro-commodity companies had colluded by collectively hoarding pulses and creating an artificial scarcity during January 2015 to February 2016, which led to a substantial increase in prices.  Interestingly, during the investigation, the DG conducted a dawn raid at the premises of each of the four agro-commodity companies.  The DG, in its investigation report, found the conduct of these companies to be in contravention of the cartel provisions, based on the following reasons: (i) the abnormal increase in the prices of pulses during the investigation period; (ii) instances of communication between the four agro-commodity companies, including the sharing of commercially sensitive information; and (iii) accumulation of stock of pulses by the four agro-commodity companies during the investigation period.  The CCI, however, disagreed with the findings of the DG and noted that: (i) the DG had not correct understood the economic relationship between the four agro-commodity companies as they also had a buyer-seller relationship and any such exchange of information between buyers and sellers need not be in furtherance of a cartel; and (ii) there was no evidence gathered by the DG that indicated joint hoarding of stocks of pulses.  The CCI ultimately closed the inquiry owing to a lack of concrete evidence establishing collusion.  This case was landmark for two important reasons: (i) it was one of the rare cartel investigations where the DG’s findings of the existence of a cartel were revised by the CCI in the final order; and (ii) it was the first instance of the CCI exonerating opposite parties after conducting a dawn raid.

Dawn raids becoming an important tool to gather evidence in cartel cases

Dawn raids continue to remain a vital tool used by the CCI and the DG to gather evidence in cartel investigations.  In the last year, the CCI conducted two dawn raids: (i) in December 2022, at the offices of several steel companies for alleged price collusion of steel products used in the construction industry; and (ii) in May 2022, at the offices of several mining service companies for allegedly colluding on prices while offering services to Coal India.  Notably, out of the 14 dawn raids conducted in India so far, 12 were for investigating cartels.

Information exchange – now a standalone violation under the Competition Act

In the early years of cartel enforcement, the CCI did not view a mere information exchange, absent an agreement, as adequate for establishing an anti-competitive agreement between competitors.  For instance, in the Flashlight cartel case,^[i] the CCI clarified that it did not consider mere exchange of commercially sensitive information between competitors to be anti-competitive, unless such information exchange was actually acted upon by the competitors.  In contrast, in the 2020 Bearings cartel case, the CCI held that discussions between automotive bearings companies on their pricing strategies was presumed to cause an AAEC in the market, regardless of whether the information exchange was implemented.  The CCI reasoned that discussion of pricing between competitors, even if not implemented, compromises their independent decision-making process in determining prices.

Recently, in the 2021 Beer cartel case,^[ii] the CCI held that the exchange of price, cost and sales information by beer companies while submitting bids to various state governments in India, even absent any evidence of an agreement, was in contravention of the Competition Act.  The CCI further observed that exchange of information between competitors compromised the integrity of the independent bidding process and was therefore likely to stifle competition amongst beer manufacturers, even absent any evidence of an agreement between the parties.  The CCI further held that the implementation of an agreement was not a necessary condition for establishing a contravention of Section 3(3) of the Competition Act.

This point was further reinforced in the 2021 Paper cartel case,^[iii] in which the CCI clarified that when competitors attend meetings where commercially sensitive information is discussed, mere participation in such meetings compromises the independent decision-making ability of the competitors, such that they can no longer independently decide on price-related policies in the market.

Applicability of the single economic entity defence to cartels

A violation of Section 3(3) of the Competition Act would not arise if such an agreement is made between two or more entities that form part of the same group and such entities are able to demonstrate that they are a single economic entity with a common business objective.  To avail the single economic entity defence, two or more enterprises must be (i) part of the same group, (ii) able to establish that they share common economic incentives, and (iii) under the common day-to-day control of either each other or a common controlling entity.^[iv]  While assessing the applicability of a single economic entity, the CCI would test whether there is either de jure control or de facto control that is exercised by a common parent enterprise over the management and affairs of the two or more related companies.

In National Insurance Company Ltd v. Competition Commission of India,^[v] the CCI rejected the applicability of the single economic entity defence to three insurance companies (all being public sector companies owned by the government) given that each of these four insurance companies were formed pursuant to a statute passed by the government of India to encourage competition in the insurance sector.  In other words, the government of India had established these four insurance companies to be independent and commercially and economically separate, and the common ownership held by the government of India was therefore not sufficient to benefit from the single economic defence.

In the Delhi Jal Board order, the CCI similarly rejected the applicability of the single economic entity defence in a bid rigging allegation, notwithstanding the fact that both Grasim Industries Limited and Aditya Birla Chemicals (India) Limited (ABCIL) (both being related entities arguing for the single economic entity defence) belonged to the Aditya Birla group.  While the CCI appreciated that both Grasim and ABCIL belonged to the same group, they represented themselves as independent decision-making centres while participating in tenders floated by the Delhi Jal Board.  The Delhi Jal Board order is currently under appeal before the National Company Law Appellate Tribunal (NCLAT).

In light of the Delhi Jal Board order and the National Insurance Company decision, it appears that, to avail the single economic entity defence, related entities must ensure that they have not positioned themselves in the market as independent and competing entities.

Key issues in relation to investigation and decision-making procedures

The Competition Act stipulates that the discharge of the CCI’s functions shall be guided by the principles of natural justice, although the CCI can regulate its own procedures.  In terms of investigative powers, the DG’s powers are akin to a Civil Court under the Code of Civil Procedure, 1909, in relation to matters such as summoning and enforcing attendance of persons and examining them under oath, requiring discovery and production of documents, receiving evidence on affidavit, requisitioning documents from parties in accordance with provisions of the Indian Evidence Act, 1872, issuing commissions for the examination of witnesses or documents, etc.

This translates into the requirement for, inter alia: (a) granting access to relevant documents for alleged parties to be able to defend themselves; (b) not sharing confidential information of one party with another unless such confidentiality is waived (or is legally required to be disclosed); (c) granting adequate time to alleged parties to respond to questionnaires from the CCI; and (d) adherence to the principles of natural justice, such as granting the opportunity to be heard, etc.  However, in the past, various parties have successfully challenged non-adherence of such practices by the CCI (on merit as well as on writ grounds).  For example, in the Fuel Surcharge case,^[vi] the Competition Appellate Tribunal (COMPAT) remanded the case back to the CCI on technical grounds (as the CCI disagreed with the DG’s findings of no contravention but did not provide adequate opportunity for the alleged parties to respond to the CCI’s findings before issuing the final order).  In this case, the CCI subsequently reconsidered the DG’s report and directed the alleged parties to provide reasons for why they should not be held in contravention for collusive practices under the applicable provisions of the Act.  However, the CCI has addressed most of the due process concerns over the last decade, and its investigations as well as orders are now seldom set aside due to procedural infirmities.

Key issues that arise during dawn raids

One of the primary issues that may arise during investigations (including dawn raids) is seizing legally privileged and sensitive personal data (unfortunately this cannot be strongly objected to as it can be viewed as ‘obstruction to a public servant’s duty’ under the Code of Criminal Procedure).  Notably, the impending enactment of the Amendment Bill may also grant the DG the power to examine ‘agents’ (i.e., bankers and such auditors and legal advisors that are employed by the company under investigation) on oath.  Implicitly, in-house legal counsel can also be deposed by the DG during a dawn raid.  In any event, the protection of privileged communication under Sections 126 and 129 of the Evidence Act extends only to external counsel and not to in-house counsel.^[vii]

No clarity on quantum of penalty

The CCI has been imposing penalties for cartel offences for over a decade.  However, the quantum of penalties imposed and the reasons for imposing such penalties in different cases do not yield any specific trend or pattern.  In Excel Crop, the Apex Court clarified that the CCI ought to consider aggravating and mitigating factors and levy penalties considering the ‘relevant turnover’ of the alleged party or parties.  Consistent with the Apex Court’s suggestion in Excel Crop (i.e., to issue guidance on imposition of penalties), such guidelines are imperative to ensure that due process is followed during the calculation of penalties (by making it a fair and transparent process).  This will also go a long way in encouraging leniency applicants, as it will provide greater clarity on how the penalty will be calculated.

Endnotes:

^[i]               Suo Motu Case No. 01 of 2017, involving alleged cartelisation in the flashlights market by Eveready Industries India Ltd, Panasonic Energy India Co. Limited, Indo National Limited and Geep Industries (India) Pvt. Ltd.  The closure order was passed by the CCI on 6 November 2018.

^[ii]              Suo Motu Case No. 06 of 2017, involving cartelisation in the beer market by United Breweries Limited, Crown Beers India Private Limited, SABMiller India Private Limited, Carlsberg India Private Limited and All India Breweries Association.  A total penalty of INR 873 crore was imposed on these entities for their conduct by way of an order passed on 24 September 2021.

^[iii]              Case No. 24 of 2017.

^[iv]              Case No. 52 of 2012 and Kansan News Pvt Ltd v. Fastway Transmission Pvt Ltd. (Case No. 36 of 2011), as confirmed by the erstwhile Competition Law Appellate Tribunal.

^[v]              Appeal Nos 94 to 97 of 2015.

^[vi]              Case No. 30 of 2013.

^[vii].  Satish Kumar Sharma v. Bar Council of Himachal Pradesh, AIR 2001 SC 509.

Section 46 of the Competition Act read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (as amended) (Lesser Penalty Regulations) sets out the legal framework for leniency in relation to cartel investigations in India.  The objective of the CCI’s leniency programme is to encourage cartel participants to admit their participation in a cartel and provide vital evidence and information that can assist the CCI and the DG in investigating cartels.  In exchange for this vital disclosure and the cooperation extended, the CCI is empowered to grant a penalty reduction to such leniency applicants.

Under the Competition Act, any member of a cartel (be it an enterprise or an individual) can file a leniency application with the CCI seeking a penalty reduction in exchange for full, true and vital disclosure of information and evidence that are material for the investigation of the cartel.  A leniency application can only be filed before the DG submits its investigation report to the CCI.  The leniency regime has been a great success in India, with 19 leniency applications being filed with the CCI so far.  During the last year, eight penalty orders involving cartels were passed by the CCI, out of which five penalty orders were passed pursuant to a leniency application.

Framework for penalty reduction

The CCI has the power to grant a penalty reduction of up to 100% (i.e., complete immunity from penalty) to the first applicant that makes a ‘vital disclosure’ to the CCI.  The information submitted by the first applicant must either enable the CCI to (i) form a prima facie opinion of the existence of the cartel, or (ii) establish a contravention of Section 3 of the Competition Act in a matter under investigation by the DG.

Subsequent leniency applicants have the burden of disclosing evidence that adds significant value to the evidence already in possession with the DG/CCI.  The second leniency applicant that provides the additional evidence/information can be granted a penalty reduction of up to 50%, whereas the third leniency applicant (or subsequent applicants) can be granted a penalty reduction of up to 30%.

Leniency applications in India for cross-border cartels

Enterprises that have filed leniency applications in jurisdictions outside India (for participation in cross-border cartels) and that intend to file leniency applications in India are governed by the framework set out above.  However, in order to get the maximum penalty reduction, such leniency applicants will have to supplement/corroborate the evidence that the CCI may already have received from antitrust regulators outside India with whom the CCI has signed a memorandum of understanding (MOU) for cross-border cooperation during investigations.^[i]

Withdrawal of leniency

There are no provisions for allowing the withdrawal of a leniency application by the applicant.  The CCI, however, has the power to withdraw leniency if, during its inquiry process, the leniency applicant fails to comply with any of the conditions required to avail leniency.  Any such decision of withdrawal of leniency would likely be communicated by the CCI in the final order and not during the inquiry.

Wider considerations to be accounted for while filing for leniency

While leniency remains an effective tool to get a penalty reduction for facilitating a cartel, there still remain various practical concerns that a leniency applicant may possibly factor in while applying for leniency:

• Risk of compensation claims: A leniency application necessarily involves an admission of guilt by the leniency applicant for the anti-competitive conduct. Accordingly, while a leniency applicant may benefit from a reduced penalty, it does not absolve the leniency applicant from compensation claims that may be filed by a third party for the economic damages that it may have suffered due to the cartel.
• Reputational harm: Leniency applications that involve an upfront admission of guilt by the applicant and may accordingly result in significant reputation harm for the applicant. Such reputational harm may also negatively impact the stock prices of the applicant, in case it is a listed entity.

Endnote:

^[i]             The CCI has entered into memoranda of understanding with various foreign antitrust regulators outside India including: (i) Competition Commission of Mauritius; (ii) Japan Fair Trade Commission; (iii) Administrative Council for Economic Defence, Brazil; (iv) Competition Bureau of Canada; (v) Director General for Competition of the European Commission; and (vi) Australian Competition and Consumer Commission.

Any person, consumer or trade association can file ‘information’, based on which an inquiry can be initiated by the CCI.  The proceedings under the Competition Act are ‘in rem’ proceedings (i.e., proceedings that affect the public at large) and not ‘in personam’ (i.e., proceedings against an individual person).  The issue of whether an informant is required to show that it suffered economic harm or was otherwise affected by the alleged anti-competitive conduct as a precondition of filing information before the CCI was examined at length by the Supreme Court in the Samir Agarwal case.  The Supreme Court held that the framework of the Competition Act did not require the informant to state how he/she is personally aggrieved by the contravention of the provisions of the Competition Act – with the informant only being required to disclose the details of the alleged contravention as part of the information filed with the CCI.  This effectively allows third parties to file information before the CCI for suspected anti-competitive conduct (including for cartels).

Role played by the third-party informant at the CCI and during appellate proceedings

Once the CCI directs an investigation, the third-party informant has a right to file its response to the investigation report and also attend the oral hearing scheduled by the CCI.  However, in order for an informant to be involved at an appellate stage before the NCLAT (for an appeal filed against the CCI’s final order) and ultimately before the Apex Court (for an appeal filed against the NCLAT’s final order), the third-party informant must show that it qualifies as a ‘person aggrieved’ by the decision passed by the CCI/NCLAT (as the case may be).  In Samir Agarwal,[i] the Supreme Court held that the term ‘person aggrieved’ must be interpreted widely to include all kinds of informants, irrespective of whether such an informant suffered any economic loss or damage as a result of the final order passed by the CCI.  As a result, anyone (including a third-party informant) can be part of the appellate proceedings at the NCLAT and the Supreme Court (as the case may be).

Right of third-party informant to access documents of opposite parties

A third-party informant can inspect and obtain copies of the non-confidential versions of the documents/submissions made by parties during the proceedings.^[ii]  The CCI has also recently introduced the concept of ‘confidentiality rings’ that would allow parties to an antitrust proceeding to get access to confidential information/documents of other parties during an investigation, so that parties can defend themselves effectively.^[iii]  The informant can be included in the confidentiality ring (and therefore get access to the confidential documents/submissions of the opposite parties) only if deemed necessary by the CCI.

Right of appeal against civil liability and penalties

The Competition Act allows parties to file an appeal against final orders passed by the CCI and the NCLAT.  Final orders passed by the CCI can be appealed to the NCLAT.^[iv]  Final orders passed by the NCLAT can be further appealed to the Supreme Court.^[v]

The NCLAT was formed in 2017 and succeeded the erstwhile COMPAT, which was a specialist standalone appellate body to decide appeals against the CCI’s orders.  While reviewing the appeals filed against the CCI’s cartel infringement orders, the NCLAT focuses its analysis on the following points: (i) whether sufficient evidence was considered by the CCI in establishing a cartel infringement; (ii) whether the CCI considered all the arguments raised by the cartel participants (including any procompetitive justifications put forth); (iii) whether the quantum of penalty passed by the CCI was proportionate to the economic harm caused due to the cartel; and (iv) whether there were any procedural irregularities committed by the DG/CCI during the investigation process.

In most cases, the NCLAT has upheld the CCI’s cartel infringement decisions (including the quantum of penalty levied by the CCI).^[vi]  In a few instances, the NCLAT has upheld the cartel infringement findings, but has remanded the matter back to the CCI to reconsider (and possibly reduce) the quantum of penalty imposed on the cartel infringer.^[vii]  In a few instances, the NCLAT has also remanded the matter back to the CCI for fresh consideration, on account of the procedural irregularities committed by the CCI in its inquiry.^[viii]

Endnotes:

[i]               Civil Appeal No. 3100 of 2020.

^[ii]              Regulation 37 of the CCI (General Regulations), 2009.

^[iii]              Regulation 35 of the CCI (General Regulations), 2009 (as amended in 2022).

^[iv]              Section 53A of the Competition Act.

^[v]              Section 53T of the Competition Act.

^[vi]              Jaiprakash Associates Ltd. v. Competition Commission of India & Ors (TA (AT) (Compt.) No. 11 of 2017 with TA (AT) (Compt.) No. 12 of 2017), All India Brewers Association v. Competition Commission of India & Ors (Competition Appeal (AT) No. 16 of 2021).

^[vii]             M/s Saraswati Sales Corporation v. Competition Commission of India (Competition Appeal (AT) No. 31 of 2022), Manoj Gupta v. Competition Commission of India & Anr (Competition Appeal (AT) No. 38 of 2019), Sahuwala Cylinders Pvt. Ltd. & Anr v. Competition Commission of India & Anr (Competition Appeal (AT) No. 38 of 2019), Sahuwala Cylinders Pvt. Ltd. & Anr v. Competition Commission of India & Anr (Competition Appeal (AT) No. 38 of 2019).

^[viii]            CEAT Limited v. Competition Commission of India & Ors (Competition Appeal (AT) No. 05 of 2022).

Criminal sanctions

There are no criminal sanctions prescribed under the Competition Act for cartel infringement.

Cooperation with other antitrust agencies

Section 18 of the Competition Act empowers the CCI to enter into an MOU or arrangement with competition antitrust agencies, with the prior approval of the government of India.  The International Cooperation Division within the CCI facilitates such communication and cooperation efforts with antitrust regulators outside India and international cooperation agencies.

Cross-border issues

Section 32 of the Competition Act empowers the CCI to inquire into any anti-competitive conduct (including cartels) that took place outside India but led to an AAEC in India.  The CCI exercised these extra-territorial powers to initiate an investigation into a cartel entering into and operating in Japan for fixation of anti-vibration rubber products and automotive hoses (both being an input used by automobile companies in their manufacturing process).^[i]  The DG, in its investigation report, noted that there was no evidence to suggest that these products were fitted in any automobiles manufactured/sold in India.  In other words, due to the lack of AAEC in India, the CCI closed the case.

Endnote:

^[i]               Suo Motu Case No. 01 of 2016.

Reform proposals

The Competition Amendment Bill, 2022 (Bill) was passed by the Lok Sabha (i.e., the Lower House of the Indian Parliament) on 29 March 2023.  The Bill proposes significant changes to the Competition Act, including some key amendments to the provisions governing the cartel and leniency regime in India, which are summarised below:

• Penalty to be Computed on the Global Turnover Derived from all Products and Services: The Bill clarifies that the monetary penalty for anti-competitive conduct will be computed on the global turnover of the contravening parties, which will increase the penalty exposure particularly for global conglomerates.
• Expanding Powers of Granting Leniency: Similar to the United Kingdom, the United States of America, Singapore and Brazil, where an alleged cartel participant makes a true and vital disclosure of another undisclosed cartel, the CCI is empowered to grant an additional lesser penalty for the cartel already being investigated.
• Withdrawal of Leniency Application: The Bill allows a leniency applicant to withdraw its application. However, the DG/CCI may use the information in the withdrawn leniency application for the purpose of investigation, except the admissions of the leniency applicant.
• Expanding the Scope of Cartels to Include ‘Hub and Spoke’ Arrangements: The Bill expands the scope of cartels to include ‘hub and spoke’ arrangements implemented by entities involved at different levels of the value chain. By way of the 2023 Amendment, the CCI can proceed against any entity that participates or intends to participate or acts or intends to act in facilitating a horizontal agreement or cartel, in whatever capacity.  In effect, the proposed amendment widens the scope of the provision to include even a non-competing entity, which helps facilitate a cartel, to be considered a ‘cartel participant’.
• Introduction of Commitments and Settlements: The Bill introduces provisions allowing parties to offer settlements and voluntarily undertake certain commitments. Commitments can be offered at any time after an investigation has been initiated but before the investigation report is issued.  Settlements can be offered after the investigation report is issued but before the CCI issues its final decision.  Commitments or settlements can be offered for both anti-competitive vertical agreements and abuse of dominant position, but not cartelisation.
• Issuance of Guidelines: The Bill requires the CCI to publish guidelines regarding the appropriate amount of penalty to be levied for any contravention of the Competition Act.

The Bill, as passed by the Lok Sabha, will be tabled before the Upper House of the Indian Parliament, i.e., the Rajya Sabha.  Once passed by the Rajya Sabha, the Bill will be submitted to the President of India for her assent.