The Competition Act, 2002 (Act) regulates anti-competitive conduct in India. Public enforcement actions regarding cartels in India are governed by Section 3 of the Act, which deals with anti-competitive agreements. Section 3(3) of the Act specifically deals with anti-competitive horizontal agreements, including cartels.
The Competition Commission of India (CCI) is the nodal agency for enforcement of cartel prohibition in India, aided by its investigative arm, the Office of the Director General (DG).
The CCI can conduct cartel investigations:
The CCI directs the DG to commence an investigation if it is of the view that there exists a prima facie case warranting an inquiry. The DG is mandated to conduct a detailed investigation and submit an investigation report to the CCI. Thereafter, the CCI can call upon the parties to make written and oral pleadings. On reaching a positive finding of the existence of a cartel, the CCI may impose a penalty and/or pass any other order that it deems fit.
The CCI’s orders can be appealed against before the appellate tribunal, ie, National Company Law Appellate Tribunal (NCLAT). An NCLAT order is finally appealable before the Supreme Court of India (Supreme Court).
In India, the public enforcement agency responsible for cartel prohibition is the CCI, aided by its investigative arm, the DG.
CCI’s Powers to Impose Sanctions
Under section 27 of the Competition Act, in the case of a cartel, the CCI can impose a penalty of up to three times the profit or 10% of the (relevant) turnover of each participating company for each year of the continuance of a cartel agreement, whichever is higher. The relevant turnover means turnover derived from the sales of goods or services, found to be the subject of the contravention.
In addition to the imposition of penalties, the CCI may pass orders, inter alia, directing the parties to terminate the agreement and refrain from re-entering such an agreement (cease-and-desist order), or modify the terms of the agreement.
The CCI also has powers to impose penalties on the officials of an infringing company who were in charge of and responsible for the conduct of the business of the company at the time of contravention of the Act. The quantum of the penalty imposed may extend to up to 10% of the average total income derived by the individual in the previous three financial years.
In India, there are no criminal sanctions for cartelisation, but non-compliance with the orders of the CCI may attract criminal liability.
In February 2020, the Government of India released the draft Competition (Amendment) Bill, 2020 (Bill), proposing amendments to the Act. The Bill is currently pending before parliament. Key amendments proposed in the Bill concerning cartels are:
Section 53N of the Act provides a right to file for compensation for loss or damage suffered by any person or government or company or local authority due to contravention of the provisions of the Act. Such compensation claims must be filed before the NCLAT.
As per the Act, such compensation claims for damages can only be made after the CCI arrives at a finding of contravention of the Act or the NCLAT arrives at a finding (if the CCI decision is appealed).
While a few compensation applications are pending before the NCLAT for final adjudication, it is yet to pass a final order.
The term “cartel‟ is defined under Section 3 of the Act to include “an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or trade in goods or provision of services‟. Accordingly, the existence of an agreement must be first proved to establish the existence of a cartel.
Section 3(3) specifically provides those horizontal agreements, including cartels, that presumably have an appreciable adverse effect on competition (AAEC) in India. Thus, the burden of proof shifts to the incumbent to rebut the presumption.
These horizontal / cartel agreements include agreements that:
The Act provides an exemption to export cartels and efficiency-enhancing joint ventures.
Export Cartel: The restrictions relating to anti-competitive agreements, including cartels, do not apply to the right of any person to export goods from India to the extent that agreements relate exclusively to production, supply, distribution or control of goods or provision of services. Export cartels, ie, cartels having an effect in markets outside India, are exempt.
Joint venture: while certain horizontal agreements have been presumed to harm competition, an exemption from this presumption is available to an efficiency-enhancing joint venture. The burden of demonstrating qualifying efficiencies lies with the enterprise seeking the exemption. If the efficiency gain is shown to exceed the harm to competition, the party is unlikely to be held to be engaging in anti-competitive behaviour on application of the rule of reason.
Certain other statutes in India indirectly prevent anti-competitive conduct, including the operation of cartels, such as:
Neither the Act nor the (Indian) Limitation Act, 1963 (Limitation Act), which is the general limitation statute, provide a limitation period for proceedings under the Act.
The provisions relating to cartels and abuse of dominance came into effect on 20 May 2009. The CCI can, therefore, only adjudicate agreements that:
Under Section 32 of the Act, any conduct occurring outside India having or likely to have an AAEC in the relevant market in India may be the subject of an inquiry by the CCI. In the auto parts cartel investigation, the CCI has exercised extraterritorial jurisdiction where alleged cartels operated outside India but affected the Indian market.
The principles of comity are not formally established or applied in India.
In April 2020, the CCI, like several of its counterparts, issued an advisory to companies, considering the COVID-19 pandemic. Taking cognisance of disruptions in the supply chain caused by the pandemic, especially in healthcare and essential products/ services, the CCI acknowledged that there is a legitimate reason for businesses to collaborate and co-ordinate to ensure the supply and fair distribution of essential products/services, including the formation of efficiency-enhancing joint ventures to cope with the pandemic and address technical and economic challenges.
The advisory clarified that such activities might include:
Without committing formally to any specific relaxations or providing additional safe harbours, the CCI emphasised that the Act has in-built safeguards to protect companies from sanctions of certain co-ordinated activities, provided that such arrangements result in increasing efficiencies, which the CCI will take into consideration. Further, the CCI will only provide safe harbours to co-ordinated activity that is necessary and proportionate to address concerns arising from COVID-19 and companies cannot indulge in any anti-competitive activity under the garb of this advisory.
The initial investigatory steps taken by the CCI and the DG are as follows.
Step 1: Inquiry Into Alleged Cartelisation
The CCI has the power to inquire into any alleged cartel arrangement:
Step 2: CCI’s Prima Facie Order
Upon receipt of the information, the CCI forms a prima facie view on the matter and passes either of the following orders:
Step 3: DG’s Investigation
Upon receiving directions from the CCI, the DG (being the investigative arm of the CCI), reviews all the information on record with the CCI and collects further information and evidence from the parties involved as well as third parties. Further, the DG has the power to summon parties and examine them on oath, require the discovery and production of documents, receive evidence on affidavit, issue commissions for the examination of witnesses or documents, requisition public record/ document or copy of the same from any office in accordance with the prevailing law. Thereafter, the DG prepares and submits its report to the CCI (DG Report). The DG Report contains the allegations and the DG’s findings on the allegations, supported by necessary evidence, including all documents and statements of various stakeholders collected during the investigation. The DG can come to one of two conclusions in the DG Report:
Step 4: CCI’s Inquiry Subsequent to the DG Report
Once the DG submits the DG Report to the CCI, the CCI evaluates the findings, provides an opportunity for parties to provide written objections to the DG Report, and an oral hearing for the parties to present their case before the CCI.
If there exists a contravention of the Act per the DG Report, the CCI can:
If there exists no contravention of the Act per the DG Report, the CCI can:
Dawn raids are becoming increasingly common in India and are conducted by the personnel of the DG’s office at the premises of target companies suspected of having violated the Act. Based on public information, the DG has conducted 11 dawn raids in India so far.
The preconditions for conducting a dawn raid are:
A dawn raid generally starts in the morning and may last the whole day or even continue into the following day. The DG has the power to search the premises of a target company and an individual.
As part of the dawn raid, the DG can seize any evidence necessary for the investigation, except legally privileged material. Such evidence includes physical and electronic documents, emails and other correspondence, agendas and minutes of board meetings, meeting notes, internal brochures and memoranda, travel information, and storage devices.
The DG even has the power to interview witnesses and take their statements (on oath) during a dawn raid.
Obligations of a Company and an Individual Under Investigation
During a dawn raid, the target company and individual under investigation are obliged to:
The target company or individual have the right to request to be provided with a search warrant from the DG, obtain a list of all material (physical and electronic) seized during the raid, which is signed by the DG and the two witnesses; make and retain copies of all material seized by the DG, ensure the presence of two witnesses before the search begins, etc.
Refusal to Co-operate by the Target Company
During a dawn raid, a target company must extend its full co-operation to the DG and answer questions pertaining to itself and its employees, but it is not bound to provide voluntary information. In fact, it is advisable for the target company not to answer any leading questions or sign any documents at the investigator’s request.
Any person who fails to comply with the directions of the DG or the CCI (including obstructing the investigation) may be penalised under Section 43 of the Act. Such penalty can extend up to INR0.1 million (USD1,307) for each day such failure continues, subject to a maximum fine of INR10 million (USD130,698).
Role of External Counsel
During a dawn raid, the target company can request the DG to await the internal/external legal counsel to arrive, but the DG’s investigating team is not obliged to wait for the arrival of the legal counsel. The external legal counsel can provide an immediate, structured and comprehensive response to the dawn raid and ensure that the rights of the company are protected. For example, the legal counsel can ask the DG to provide a copy of the search warrant before commencing the dawn raid.
The Act cast an obligation on the person under the investigation not to make a false statement, furnish a false document, omit to state a material fact, alter, suppress or destroy a document. In case of violation, the CCI can levy a penalty of INR10 million (USD130,698) on such person or pass any other order as it deems fit.
Section 35 of the Act, read with Regulation 46 and Regulation 46A of the General Regulations, provides that any person or company may either appear themselves in person or appoint a legal practitioner/counsel or chartered accountant or cost accountant or company secretary or any of the person’s or company’s officers to present his or its case before the CCI.
The legal counsel can accompany a person summoned by the DG (ie, a witness) for deposition after making a written request for the same to the DG. However, the legal counsel cannot sit in front of or within hearing distance of the witness and cannot interact, consult, confer, or communicate with the witness during the deposition.
Typically, the principal initial steps that defence counsel should undertake during the initial phase of an investigation are to:
Section 36 and Section 41 of the Act read with Regulations 44 and 45 of the General Regulations, empower the CCI and the DG with the powers vested in a civil court under the (Indian) Code of Civil Procedure, 1908, including:
The CCI can also call upon experts in certain fields to assist it in inquiries.
The DG is empowered to conduct dawn raids at offices and residential premises as part of its investigation.
Further, under Regulation 41 of the General Regulations, the CCI and the DG also have the powers to, inter alia:
Any company or individual, if directed by the CCI and/or the DG to submit a document or evidence, is required to do so regardless of where the document or evidence is located. Further, the Act does not differentiate between documents within or outside India.
The Act contains no provisions on attorney-client privilege.
In India, the attorney-client privilege is governed by the Indian Evidence Act, 1872, which recognises privilege for legal advice provided only by external lawyers qualified to practise in India and not by in-house counsel or foreign lawyers. Attorney-client privilege does not extend to any communications made in furtherance of any illegal purpose.
Individuals and companies do not commonly resist initial requests for information. Resistance to providing information can attract a liability.
Any person who fails to comply with the directions of the DG or the CCI (including obstructing the investigation) can be penalised under Section 43 of the Act. Such penalty can extend up to INR0.1 million (USD1,307) for each day such failure continues, subject to a maximum fine of INR10 million (USD130,698).
Any person who fails to comply with the orders of the CCI can be penalised under Section 42 of the Act. Such penalty can extend up to INR0.1 million (USD1,307) for each day such failure continues, subject to a maximum fine of INR100 million (USD1,306,979).
The CCI has imposed a fine of INR10 million (USD130,698) on Google and INR15 million (USD196,047) on Monsanto for its failure to comply with the directions given by the DG seeking information and documents. Further, in a recent case, the CCI imposed a penalty on an individual for non-co-operation with the DG’s investigation. The NCLAT, however, set aside the penalty after the individual apologised.
As per Section 57 of the Act, no information relating to any target company, being information obtained for purposes of the Act, can be disclosed without prior permission in writing from the target company.
Regulation 35 of the General Regulations provides that the CCI will maintain confidentiality over the identity of the informant or any document or information submitted by any party to the investigation to the CCI or the DG upon a written request. Confidentiality can be sought over information if the publication of such information will result in the disclosure of trade secrets, lead to the deterioration of commercial value of the target company, or can be reasonably expected to cause serious injury to the target company.
In April 2022, the CCI amended the General Regulations and introduced the concept of a “Confidentiality Ring‟ in line with global best practices.
The CCI can create a confidentiality ring that would comprise authorised representatives of the parties who may access confidential information of the other parties, including information contained in the confidential version of the DG report. If the CCI deems it necessary, the complainant may be included as part of the confidentiality ring.
The CCI will be empowered to decide the extent of information and the number of members included in the confidentiality ring.
Representatives of the parties forming part of the confidentiality ring need to execute undertakings confirming that they will not disclose the information they are privy to by being in the confidentiality ring to any party outside it. Such information will not even be shared with other employees of the party (and its subsidiaries, joint ventures, etc). A breach of these undertakings can result in proceedings under the Act.
Confidentiality Under the Leniency Regulations
The CCI (Lesser Penalty) Regulations, 2009 (Leniency Regulations) mandate that the CCI treat the identity and all information received from the applicant as confidential. The CCI may subsequently, during the investigation process, request the applicant to waive confidentiality over relevant evidence to enable it to approach other companies which form part of the cartel.
The DG may disclose information in a leniency application if the applicant consents to the disclosure in writing, the disclosure is required by law, or the applicant has publicly disclosed the information. Further, if the DG deems it necessary, it may disclose information in the leniency application without the applicant’s consent after recording reasons in writing for such disclosure and obtaining prior approval from the CCI.
The Leniency Regulations also provide access to the case files to leniency applicants and non-leniency applicants (including third parties/private litigants) who have been impleaded in leniency proceedings.
Third parties, which are not parties to the proceedings, may be granted the right to access the non-confidential version of the file on application to the CCI. The Leniency Regulations grant those who have the right of access to file, the right to obtain copies of the non-confidential version of the evidence and information submitted by leniency applicants after the DG’s investigation report has been forwarded to parties involved in any investigations by the CCI.
It is common for a defence counsel for the target company to raise legal and factual arguments when submitting written objections to the DG Report. Subsequently, during the oral hearing before the CCI, the defence counsel is provided with an opportunity to make oral submissions prior to the CCI arriving at a final finding.
There is a leniency regime in India governed by Section 46 of the Act and the Leniency Regulation.
Under Section 46 of the Act, the CCI may impose a lesser penalty if a company which participated in a cartel makes a full and true disclosure to establish a contravention of Section 3(3) of the Act. However, leniency cannot be granted when the leniency application is made after the DG Report is submitted to the CCI.
The Leniency Regulations are silent on the treatment of ringleaders. In some cases, the CCI has granted a lesser penalty to applicants even though they orchestrated the cartels. CCI is not likely to disregard the leniency application of a ringleader or orchestrator of a cartel, provided they co-operate fully with the investigation.
The leniency regime also provides for a marker system for applicants. An applicant can approach the CCI with a marker application in relation to the evidence it has regarding a cartel on a no-name basis. The CCI issues a priority status to the applicant based on the time of the initial contact by the applicant.
The first applicant to contact the CCI (orally or in writing) is granted the status of first applicant. If the initial contact is oral, the applicant needs to ensure that the documentary evidence is provided to the CCI within 15 calendar days from granting priority status by the CCI. Failure to comply with this condition will result in the loss of the priority status of the applicant.
Conditions for Grant of Leniency
The essential conditions to qualify for a lesser penalty are as follows:
The CCI may grant a penalty reduction of up to 100% to the first leniency applicant that makes a “vital disclosure‟ by submitting evidence that helps establish a contravention of the Act. Subsequent applicants that provide “significant added value‟ to the evidence are granted penalty reductions of up to 50% (second applicant) and 30% (third and subsequent applicants).
The CCI will consider the following factors when deciding on the reduction:
Irrespective of whether a company is a ringleader of the cartel or not, it can seek leniency from the CCI.
Record of the CCI in Granting Leniency
There have been 19 cases where parties have approached the CCI with a leniency/lesser penalty application. In most of the cases, the CCI has granted the benefit of lesser penalty to applicants; however, there have been at least two cases where the CCI has decided not to grant any reduction in penalties to some applicants as they did not provide any value addition in establishing the existence of the cartel. The CCI did, however, grant reductions to other applicants in the same case, as the applicants extended their co-operation to the investigation and provided value addition in establishing the cartel and their role played in the cartel. In an unusual case, parties filed leniency applications, but the CCI did not find any contravention of the Act and did not impose any penalties.
There is no amnesty regime applicable in India.
The DG has wide powers of investigation under the Act, including seeking information directly from the employees of a target company under investigation. Typically, the DG issues a notice under Section 41 listing the information required for its investigation, and the period within which the information needs to be provided. Non-compliance with the notice may result in monetary fines.
The DG has wide powers of investigation under the Act, including seeking documentary evidence directly from the target company under investigation and third parties. Typically, the DG issues a notice under Section 41 specifying the list of information required for its investigation and the period within which the information needs to be provided. Non-compliance with the notice can result in monetary fines.
The DG can issue a notice under Section 41 of the Act to companies or individuals outside India to seek information required for the investigation. Typically, the said notice is sent via e-mail or by post to the registered office of the company.
The government of India issued a notification that allowed the income tax department to share “relevant and precise‟ information considered necessary by the CCI and the DG to perform their functions under the Act. This information must be kept confidential by the CCI and the DG.
Section 18 of the Act permits the CCI (upon prior approval of the central government) to enter into any memorandum or arrangement with any agency of any other country for the purpose of discharging its duties or performing its functions under the Act. The CCI has executed such memoranda of understanding on co-operation with several global competition agencies, such as those of Mauritius (February 2022), Japan (August 2021), Brazil (June 2021), BRICS nations (May 2016), Canada (December 2014), the EU (November 2013), Australia (June 2013), the US (September 2012) and Russia (December 2011), to set up a framework for co-operation and exchange of information.
The CCI can also share information or documents with other jurisdictions with the consent of the concerned parties.
India’s competition law is modelled mainly on EU competition law. The CCI has taken guidance from and relied on EU case law and guidelines while deciding issues before it. Inter-agency co-operation and co-ordination at the international level will strengthen a developing competition jurisdiction like India by aligning its jurisprudence with mature competition jurisdictions like the EU. Such co-operation will, inter alia, ensure that competition law is effectively and efficiently enforced, consistency of approach is maintained, and effective compliance is achieved.
In India, there are no criminal sanctions for cartelisation.
All competition law complaints (including cartel cases) are brought before the CCI in the first instance and litigated before the CCI. There is no separate civil action that can be brought before any other court for competition complaints.
Upon receiving directions from the CCI, the DG (being the investigative arm of the CCI) reviews all the information on record with the CCI and collects further information and evidence. All evidence is produced before the CCI.
Under Section 57 of the Act, read with Regulation 37 and 50 of the General Regulations, parties to any proceedings can make an application in writing (on payment of certain fees) to the CCI to inspect or obtain copies of documents or records submitted by the parties to the CCI during the proceedings. Pursuant to the submission of the DG Report to the CCI, parties can similarly make an application in writing to the DG to inspect the DG records.
There is no provision for parties to access information in the hands of third parties.
Regulation 61 of the General Regulations lays down that no civil court will have jurisdiction to entertain any suit proceeding regarding any matter that the CCI or NCLAT is empowered to determine under the Act. A civil court may not grant an injunction in relation to any action taken/to be taken pursuant to a power conferred under the Act.
Typically, the CCI proceeds against multiple parties who have engaged in a cartel in a single proceeding itself. There is no provision in the Act which allows parties to have individual and separate proceedings.
Section 3 of the Act prohibits all anti-competitive agreements (including cartels) which cause or are likely to cause an AAEC in India.
Once an anti-competitive horizontal agreement, including cartels, is established, it is presumed to have an AAEC in India. The burden of proof shifts to the accused to rebut the presumption based on the factors set out in Section 19(3) of the Act.
The DG, being the investigative arm of the CCI, is the finder of fact. Pursuant to the investigation, the DG presents its findings on facts and applies the law to the facts in the DG Report, then submitted to the CCI for its consideration.
The CCI evaluates the findings of the DG and ascertains whether the DG has correctly applied the law. The DG Report is only recommendatory in nature, and the CCI can either agree or disagree with the DG’s findings.
Evidence in one proceeding can be used in another proceeding by the CCI and the DG. Further, the evidence proffered by an applicant for leniency or evidence from another jurisdiction will be admissible before the CCI if the evidence suggests that the cartel arrangement will have an AAEC in India.
Section 36 and Section 41 of the Act read with Regulations 44 and 45 of the General Regulations, empower the CCI and the DG with the powers vested in a civil court under the (Indian) Code of Civil Procedure, 1908, including:
The CCI can also call upon experts in certain fields to assist it in inquiries, and the DG is empowered to conduct dawn raids.
Further, Regulation 41 of the General Regulations provides that the CCI and the DG may determine how evidence may be presented in the proceedings before them, but also admit various material as evidence as part of the investigation.
Section 36(3) of the Act empowers the CCI to call upon experts from economics, commerce, accountancy, international trade or any other field to assist the CCI in its inquiry. Such experts can materially contribute to the decision-making process of the CCI and provide relevant inputs on technical matters that the CCI would otherwise not be independently equipped to decide.
Regulation 41 of the General Regulations allows the CCI or DG to admit the opinion of handwriting experts, fingerprint experts, and persons skilled in the interpretation of foreign law, science or art as part of the investigation.
Although the Act does not provide for any privilege, the Indian Evidence Act, 1872 provides that communications between an external attorney and client are privileged.
It is possible to have multiple or simultaneous enforcement proceedings involving the same or related facts if different points of law are involved and different regulators have jurisdiction to adjudicate on such points of law.
In India, there have been cases where different regulators have had overlapping jurisdiction over an issue arising from the same or related facts. The Supreme Court, in the CCI v Bharti Airtel & Ors, decided on the overlapping jurisdiction of the CCI and the telecom sector regulator. In that case, the issue before the Supreme Court was whether some telecom operators cartelised by denying points of interconnection to a new telecom operator in accordance with the relevant telecom regulations.
The Supreme Court held that since the telecom regulator was the specialised sectoral body, it was better suited to adjudicate the case in the first case. Only if the telecom regulator returned prima facie findings, which led to anti-competitive conduct by the telecom companies, could the CCI’s jurisdiction be activated.
The DG does not have any powers to start an investigation on its own, nor can it impose sanctions directly on the target company and/or individuals for cartel conduct. It is the CCI that can impose sanctions on target companies and individuals if found guilty of cartelisation.
The Act does not contain any provision for plea bargaining or settlement. Although there is a proposal in the Bill to provide for plea bargaining/settlement, that provision is limited to vertical agreements and abuse of dominant position.
Under Section 48 of the Act, if a company is found guilty of contravening the provisions of the Act (including engaging in cartel conduct), then the persons in charge of the company will also be presumed to be guilty of such contravention unless such persons can prove that the contravention was without their knowledge, or that they exercised due diligence to prevent it.
Under Section 48 of the Act, directors or officials of a company who are guilty are also liable to be fined up to 10% of their average personal income for the last three preceding financial years. Additionally, individual liability for cartel conduct extends to lateral effects under Schedule V of the Companies Act 2013, such as if a person has been sentenced to imprisonment for any period or to a fine exceeding INR1000 (USD13.07) for the conviction of an offence under the Act, he shall not be eligible for appointment as a managing or whole-time director or a manager of a company.
The Act does not contain any provision for plea bargaining or settlement, and therefore, these effects cannot be avoided or mitigated.
In India, there are no criminal sanctions for cartelisation, but non-compliance with the directions of the DG and CCI and orders of the CCI or the NCLAT may attract criminal liability.
Under Section 27 of the Act, where cartel conduct is established, the CCI has the power to impose a penalty of up to 10% of the average (relevant) turnover of each participating company for the preceding three financial years.
In cases of cartels, the CCI can impose a penalty of up to three times the (relevant) profit or 10% of the (relevant) turnover of each participating company for each year of the continuance of a cartel agreement whichever is greater.
In addition to the imposition of penalties, the CCI may pass orders, inter alia, directing the parties to terminate the agreement and refrain from re-entering such an agreement (cease-and-desist order) or modify the terms of the agreement.
Under Section 48 of the Act, directors or officials of a company who are guilty are liable to be fined up to 10% of their average personal income for the last three preceding financial years.
There are no criminal sanctions for cartelisation, but non-compliance with the directions of the CCI or the DG and orders of the CCI or the NCLAT may attract criminal liability.
While computing and applying penalties, the CCI considers aggravating and mitigating factors. Aggravating factors include playing an active role in a cartel, repeat offending, etc. Mitigating factors include termination of anti-competitive activities, small size and/or low revenue of a company, the existence of compliance programmes, extenuating circumstances such as the prevalence of the COVID-19 pandemic, etc.
The CCI considers an “effective compliance programme” as a mitigating factor while imposing sanctions and penalties.
The Act does not provide for mandatory consumer redress.
Orders passed by the CCI can be appealed against before the NCLAT. Sections 53A and 53B of the Act provide that any person aggrieved by a CCI order may appeal to the NCLAT within 60 days from the date of communication of such order to the aggrieved party.
The Act does not provide a statutory appeal against all orders of the CCI before the NCLAT. For example, a prima facie order of the CCI passed under Section 26(1) of the Act, which directs the DG to conduct an investigation, is not appealable. However, such an order may be challenged before a (Writ) High Court under the provisions of general administrative and constitutional law. An appeal against an order of the High Court can be filed before the Supreme Court.
Under Section 53O of the Act, all proceedings before the NCLAT are deemed judicial proceedings, wherein the NCLAT has the same powers as a civil court.
Under Section 53T of the Act, an NCLAT order is finally appealable before the Supreme Court within 60 days from the date of communication of such order to the aggrieved party.
Section 53N of the Act provides a right to file for compensation for loss or damage suffered by any person or government or company, or local authority due to contravention of the provisions of the Act. Such compensation claims must be filed before the NCLAT, being the court of first instance to hear compensation claims.
The NCLAT can adjudicate upon a claim for civil damages in cases of cartel conduct arising from:
The Act does not contain any provisions for “stand-alone” action and only provides for “follow-on” actions.
Section 53N(4) of the Act provides for filing a claim for loss or damages caused to numerous persons having the same interest. In such case, one or more such persons may file a claim before the NCLAT. Such a claim can only be made once the CCI arrives at a finding of contravention of the Act or the NCLAT arrives at a finding (if the CCI decision is appealed).
Since the NCLAT is yet to decide a case on compensation claims, it is to be seen how questions of indirect purchasers or passing-on defences will be handled.
Regulation 41 of the General Regulations (which provides the kind of evidence that can be admitted) is wide enough to include the admission of evidence from government proceedings as well as private investigations.
There is no provision for settlement under the Act.
Typically, the time taken by the CCI from the initiation of the investigation to the passing of the final order is approximately three to five years.
There is no provision in the Act that provides compensation for successful attorneys.
There is no provision in the Act which provides for payment of defence costs and/or attorneys’ fees by unsuccessful claimants.
An appeal from the NCLAT’s decisions may be filed before the Supreme Court, which is the final court of appeal.
Apart from the information stated above, there is no other information or material pertinent to understanding the process, scope and adjudication of claims involving alleged cartel conduct.
This article covers recent key developments in the cartel regime in India. We focus on the steps undertaken by the Office of the Director General (DG) in gathering credible evidence and the evolving jurisprudence of the Competition Commission of India (CCI) on substantive aspects. We briefly address the legislative changes and suggestion how the process can be further streamlined.
Over the last few years, the CCI has changed its approach toward cartel investigations to uncover more credible and reliable evidence. It has embraced an assertive and dynamic enforcement agenda to free the markets from cartels and promote deterrence. Conducting frequent and effective dawn raids and streamlining the leniency regime for incentivising self-reporting and busting cartels are some of the active measures taken by the CCI in this regard.
Upsurge in dawn raids
The first dawn raid that was conducted by the DG, which is the investigative wing of the CCI, in 2014 on the premises of JCB India Limited in an abuse of dominance case was challenged and stayed by the Delhi High Court for not following fair procedures under the Competition Act, 2002 (Competition Act), and the Code of Civil Procedure, 1908. Almost five years later, in 2019, the matter was finally settled by the Supreme Court of India, which allowed the DG to use evidence seized in the dawn raid and proceed with the investigation.
After this rough start and a gap of around two years since the first dawn raid, the DG conducted its second dawn raid in the Zinc Carbon Batteries’ case (Suo Moto Case No 2 of 2016). This raid was a success and was followed by leniency applications by the parties raided, confessing to their guilt. Since then, the DG has conducted a string of successful raids leading many of the raided parties to file leniency applications. The raids, together with material provided by the leniency applicants, have resulted in the collection of concrete smoking-gun evidence leading to convictions in many cases.
Recently, the DG used its dawn raid powers in investigations relating to vertical agreements that fall under Section 3(4) of the Competition Act. It raided the premises of Amazon-owned Cloudtail, Appario Retail, sellers of Walmart-owned Flipkart, and sellers of Meesho in relation to allegations that all sellers do not receive equal treatment from e-commerce platforms.
Successful leniency regime
Over time, the CCI’s leniency regime has changed from being uncertain in terms of its benefits to the applicants to become a successful tool for cartel detection and enforcement. The CCI has decided on various cases involving leniency applications and provided much-needed clarity on how it determines the reduction in penalty, thereby encouraging members of a cartel to invoke and benefit from the regime.
Under the leniency regime in India, the first party to make a vital disclosure to the CCI (that helps establish a prima facie case or provide evidence to establish the contravention) can benefit from a reduction in a penalty of up to or equal to 100%. The second applicant can obtain a reduction of up to or equal to 50%, and the third and any subsequent applicant(s) in line may get a reduction of up to or equal to 30% upon making a disclosure of evidence that provides significant added value to the evidence already in possession of the CCI or the DG. Individuals that are part of the leniency application filed by the company get the same benefit as the company, which encourages people to come forward and provide evidence.
In a case involving bid rigging (Suo Motu Case No 02 of 2013), the CCI granted Globecast a 100% reduction in penalty for making vital disclosures that led the CCI to form a prima facie opinion on the existence of the cartel and provided key evidence that aided in the investigation.
A 100% reduction in penalty was also given to Panasonic in three cases (Suo Motu Case Nos. 2 of 2016, Suo Motu Case Nos 02 of 2017 and 03 of 2017) involving cartel conduct in the dry cell batteries market in India for providing crucial evidence that, among other things, aided the CCI in conducting dawn raids at the premises of the other alleged cartel participants.
More recently, in the Beer Cartel case (Suo Motu Case No 06 of 2017), the CCI granted a 100% reduction in penalty to SABMiller India Limited (now Anheuser Busch InBev India Limited) for being the first leniency applicant and disclosing the cartel and its modus operandi, at a stage when the CCI had no information about the existence of the cartel.
The CCI has granted a reduction in penalty even to those leniency applicants that approached the CCI at a stage where the CCI/DG already had evidence regarding the existence of a cartel, provided that the additional information or evidence submitted by the leniency applicants gave “significant value addition‟ in aiding the cartel investigation. In cases where the CCI already has enough evidence to find a violation, the later applicants are unlikely to get the full amount of reduction.
To further improve the existing leniency regime, the Competition Law Review Committee’s report dated 26 July 2019 (CLRC Report) has recommended the introduction of a framework for the CCI to grant additional leniency to an enterprise if it discloses a second cartel in the first cartel proceedings in which it is already a leniency applicant (Leniency Plus). In line with these recommendations, the Competition Amendment Bill, 2020 (Amendment Bill) proposes introducing a Leniency Plus regime.
Despite the fact that this Amendment Bill has not yet come into force, the CCI has recently, in a bid-rigging case for procurement of high-performance polyamide bushes and self-lubricating polyester resin bushes by the North Western Railways (Reference Case No 3 of 2018), taken into consideration the disclosure of a second cartel by a leniency applicant while deciding on the reduction in penalty for this applicant in the first cartel proceedings.
Unaffected cartel enforcement during the COVID-19 pandemic
The CCI has taken several measures for the benefit of businesses and also leveraged technological tools during the pandemic to ensure that competition regulation continues uninterrupted. Cartel enforcement by the CCI has remained largely unaffected during the pandemic. In its attempt to operate as near to normal as possible, the CCI has conducted several cartel investigations in the last two years in various sectors, including cement, vegetable seeds, tyres, aviation, printing and publishing, textile, paper, railway and transport.
The previous position of the CCI on the implementation of agreements, established through the Flashlights case (Suo Motu Case No 01 of 2017), was that the mere exchange of commercially sensitive information between competitors was not sufficient to establish contravention of Section 3 of the Competition Act, in the absence of an agreement and its implementation.
However, in recent cases, such as the Automotive Bearings case (Suo Motu Case No 07 (02) of 2014), the Beer Cartel case (Suo Motu Case No 06 of 2017) and the Paper Manufacturers’ case (Suo Moto Case No 5 of 2016), the CCI has held that, if a link can be established between the exchange of commercially sensitive information amongst the competitors and an actual or likely appreciable adverse effect on competition (AAEC) in the market, it can fall foul of the provisions of the Competition Act.
In the Beer Cartel case, the CCI examined if three beer companies and an association were involved in cartelisation by price fixing and restricting the supply of beer in various states and union territories across India. Pursuant to leniency applications filed by all three beer companies, the CCI was presented with evidence of the exchange of commercially sensitive information amongst the competitors. The CCI held that the exchange of commercially sensitive information amounted to a contravention where there is a clear link between the information exchange and actual or likely collusion.
In one instance, the CCI found that the exchange of commercially sensitive pricing information between two specific beer companies compromised the integrity of an independent bidding process and was likely to stifle competition in tenders floated by a government body (thereby establishing a clear link between the information exchange and its impact on a specific bidding process).
In another instance, the CCI held that the sharing of commercially sensitive data relating to production, stock, revenue, etc was clearly done to track market shares and distribution, which amounted to market allocation between the beer companies. Therefore, in the Beer Cartel decision, the CCI made known its changing position – that parties can be held liable for standalone information exchange if there is a link between such exchange and likely anti-competitive effects in the market.
It is clearly established that implementation of anti-competitive conduct subsequent to information exchange is not a requirement for establishing AAEC or contravention of the Competition Act. The parties exchanging information might claim non-implementation, amongst other factors, to rebut the presumption of an AAEC. However, the CCI will examine the anti-competitive effects or likely anti-competitive effects of the information exchange only from the standpoint of the factors prescribed in Section 19(3) of the Competition Act for determining AAEC.
While the Competition Act does not have specific rules/provisions dealing with information exchange, there is no denying that information exchanges between competitors can result in increased transparency in the market that can present risks under competition law.
The CCI has made clear its position that the exchange of information, which is commercially sensitive, will be viewed with suspicion if it causes or is likely to cause an AAEC. This is clearly a more nuanced view than that adopted in the Flashlights case; however, it is not indicative of the position that every standalone exchange of information is caught by the prohibition.
Notwithstanding this, information exchanges between competing enterprises could bring them under the scrutiny of the CCI with a high probability that it will direct an investigation by the DG.
Trade association meetings
The CCI scrutinises the activities of trade associations, viewing them as a potential forum for illegal co-operation between competing members. The CCI recognises that trade associations have an important and legitimate role in areas such as standard setting, addressing general industry issues and common concerns with the government. However, trade associations and their members would be in breach of Section 3 of the Competition Act if the trade association is used as a platform to fix prices, limit supplies, facilitate the exchange of any confidential information or future business plans between members, or engage in exclusionary behaviour such as collective boycotts.
Given that the CCI subjects any interaction/exchange of information between competitors (including through trade associations) to a strict treatment, companies attending trade association meetings should exercise extreme caution. In a case concerning Indian Agro & Recycled Paper Mills Association (Suo Motu Case No 05 of 2016), the CCI noted that “mere attendance” in meetings where confidential information was discussed “influences and takes away the independent decision-making ability of independent competitors”.
Marker status – joint leniency and the doctrine of single economic entity
The Competition Act prohibits enterprises from entering into agreements that cause or are likely to cause an AAEC within India (Section 3(1)). The term “agreement‟ is defined very broadly and includes any arrangement, understanding or action in concert, irrespective of whether it is formal, written or intended to be enforceable by legal proceedings (Section 2(b)). Section 3(3) of the Competition Act deals with “horizontal agreements‟, and such agreements are presumed to cause an AAEC. This very concept of an agreement implies that a “plurality” of parties is essential to find a contravention under Section 3 of the Competition Act. Simply put, “it takes two to tango”.
The Single Economic Entity doctrine thus ascertains whether connected entities (such as a parent and subsidiary or a number of subsidiaries of the same parent) should be considered as a single entity for the purposes of Section 3 and can, therefore, seek joint leniency, or as distinct entities having the capacity to collude in violation of Section 3, thereby warranting a filing of separate leniency applications.
In the early days, the CCI’s analysis of the Single Economic Entity doctrine was cursory and of limited precedent value. The CCI appeared to have considered entities forming part of the same “group” to be a Single Economic Entity without assessing the need to establish factual control. This could have been because the cases which came up initially before the CCI involved less complicated structures and a clearer factual matrix than later cases.
In its later decisions, the CCI has shown a more sophisticated understanding and reasoning for applying the Single Economic Entity doctrine. It has relied on structural links and the “competitor theory”, under which related firms that publicly identified themselves as competitors could not benefit from the Single Economic Entity doctrine. This means that the actual presence of competition between affiliated entities, or even the appearance of such competition, will be a significant, if not determining, factor in concluding that the entities do not form part of a Single Economic Entity and are hence capable of collusion under Section 3(3) of the Competition Act. Therefore, even if entities belong to the same group, they could be denied a single marker under the leniency regime if they are not considered part of a Single Economic Entity.
In January 2022, the CCI held that four maritime transport companies had cartelised in the provision of maritime motor vehicle transport services to automobile original equipment manufacturers on various routes (Suo Motu Case No 10 of 2014). Three of the four companies had applied for leniency, out of which two were group companies, being parent and subsidiary. The group companies argued that they should be treated as joint applicants benefiting from the same 50% reduction offered to the parent company. The CCI rejected this and granted a 30% reduction to the subsidiary company on the ground that the leniency provisions did not provide for joint applications and the concepts of group and single economic entity were not applicable for leniency applications involving cartelisation.
The above position was reinforced in April 2022 in a case involving cartelisation in the bidding process for the procurement of certain high-performance polyamide bushes and self-lubricating polyester resin bushes by the North Western Railway (Reference Case No 3 of 2018), wherein the CCI gave different marker status to two companies even after noting that they belonged to the same group. Accordingly, if companies in the same group are seen as competing, the CCI will not accept a joint leniency application.
The CCI has been adopting a judicious approach in investigating cartel cases.
In two recent cases, the CCI dismissed allegations that airlines had colluded to raise prices. In one case (Suo Moto Case No 3 of 2015), involving an alleged cartel between April 2012 to March 2014, all the airlines were using similar algorithmic software to predict demand and assign seats to fare buckets. However, the DG and the CCI concluded that human intervention was pivotal in determining final prices, with the software merely facilitating decision-making. Accordingly, the case was closed.
In the other case (Case No 32 of 2016), in rejecting allegations that several domestic airlines had colluded to raise prices during a period of domestic unrest in February 2016, the CCI recognised that algorithms could make collusion easier without the need for a formal agreement or human interaction. However, it found that airlines were using different software, and the algorithms applied were different as inputs were provided by individual airlines to the software developers based on the different historical behaviour of flights. This resulted in different custom-made algorithms suited to the needs of individual airlines, with the final call taken by route analysts of the different airlines.
Nature of evidence
In October 2021, the CCI closed proceedings alleging cartelisation in the Automotive Bearings case (Suo Motu Case No 07 (02) of 2014), where the parties had filed leniency applications, and the DG had found that there was a breach of Section 3 of the Competition Act. The CCI closed the case on the basis that the abstract admissions of the parties and the evidence provided by them were insufficient and, in some instances, either contradictory or non-reliable.
The CCI has been sensitive to businesses on account of the effects of the pandemic when deciding whether to impose fines and at what levels. It has been increasingly focusing on securing future compliance and market correction by refraining from imposing monetary penalties and only passing cease and desist orders wherever best suited. In various cases, such as the procurement of carbon brushes by the Southern Railway (Reference Case No 02 of 2016), the procurement of axle bearings by the Eastern Railway (Reference Case No 02 of 2018) and the procurement of low-density polyethylene covers by the Food Corporation of India (Reference Case No 07 of 2018), the CCI refrained from imposing any penalty upon cartel participants and directed the companies to immediately discontinue and desist from engaging in illegal conduct again.
In these cases, the CCI considered various mitigating factors, including:
Taking into account the shortcomings in the previous confidentiality regime, the CCI has, with the Competition Commission of India (General) Amendment Regulations, 2022, amended Regulation 35 of the Competition Commission of India (General) Regulations, 2009 (General Regulations), which governs the CCI’s confidentiality regime. This amendment aims to address the considerable delay and waste of precious time deciding on confidentiality claims.
Pursuant to this amendment, parties are required to self-certify that their confidentiality claims over information/documents filed with the DG/CCI are consistent with the requirements set out under the General Regulations. The amendment does not change the standard for documents/information to qualify as being confidential. Further to the amendment, the parties must confirm the date on which confidential treatment shall expire, on a self-certification, certify the reasons for claiming confidentiality as provided under the General Regulations; and provide an undertaking certifying the confidentiality claims by the party itself or any of its employees (authorised by the company).
A false undertaking may lead to the imposition of penalties. The self-certification system shifts the burden to the parties claiming confidential treatment, and they will have to bear the risk of penalties if they get it wrong.
Similar to the practice in jurisdictions such as the EU and UK, the amendment introduces the concept of confidentiality rings. Confidentiality rings are a limited group of representatives of the parties, who will be provided access to the entire case records in un-redacted form (including commercially sensitive trade secrets) submitted by parties, subject to appropriate undertakings and certain limitations. The CCI will have the discretion to set up a confidentiality ring if it considers it necessary. There are no provisions for the parties themselves to apply for a confidentiality ring or even for parties with confidential information to oppose the creation of a ring.
Confidentiality rings will enable the sharing of confidential information with other parties in a secure manner and help to address natural justice concerns. Certainty on certain aspects, such as the extent to which parties themselves may be able to initiate or oppose the creation of confidentiality rings, may become clearer when the CCI puts the amendment into practice.
The Way Forward
Strict adherence to natural justice principles and fair process is an absolute must to ensure that the rights of all stakeholders are protected. Although cartel enforcement is not a criminal regime, certain conduct may result in imprisonment (such as non–co-operation during a dawn raid), making it imperative that the rights available to individuals are protected at all times.
The Indian constitution provides for the right to counsel, and the Supreme Court has held that assistance from a lawyer is an essential requisite of the procedure established by law. Currently, as a practice, legal representatives are not permitted to join in during a dawn raid and are discouraged from being present during depositions. It must be ensured that the valuable right of effective representation by a counsel of choice is not taken away. Transparency and fairness in procedures and a streamlined approach for stakeholders (such as counsels, companies and their officials) would only strengthen the regime.
216 Okhla Industrial Estate, Phase III
New Delhi 110 020
+91 11 4159 0700, 4060 6060
+91 11 2692 4900www.amsshardul.com