Cartels 2020 Comparisons

Last Updated June 12, 2020

Contributed By Gaggar & Partners

Law and Practice

Authors



Gaggar & Partners is a boutique law firm specialising in competition, commercial litigation and arbitration, general corporate and real estate advisory, defence, gaming, IPR and white-collar crimes. With a growing team of 25 associates, two directors and seven partners, the firm has been involved in some of the leading cases across various judicial fora. Highly recommended for its competition practice, the firm has been retained by the Competition Commission of India (CCI) to prosecute special cases and represent the Director General (DG)/ CCI in sensitive cases relating to the evolving jurisprudence on investigation. The firm has been a flag bearer in cases relating to the leniency regime in India. Besides advising clients across sectors on various legal issues, the firm has been involved in the drafting of bills. Amongst the firm's noteworthy clients are NTN Corporation, National Engineering Industries, Citibank, Denso Ten, Toyo Tire, Haicheng Vivo Mobile (India) and the firm has also advised and represented celebrity sportspersons such as Virender Sehwag.

The Competition Act, 2002 (the “Act”), under Section 3, addresses anti-competitive agreements. "Agreement" has been defined under the Act to include any understanding or arrangement, irrespective of whether such arrangement or understanding is intended to be enforceable under law. The Act, under Section 2(c), provides a definition of "cartel" to include an association of producers, sellers, distributors, traders or service providers who, through an agreement, limit, control or attempt to control the production, distribution, sale or price of or trade in goods or services.

Section 3(3) of the Act prohibits agreements amongst enterprises that are engaged in the same or similar business, ie horizontal agreements, including cartels, that:

  • directly of indirectly determine purchase or sale prices;
  • limit or control production, supply, markets, technical development, investment or provision of services;
  • share market or source of production or provision of services by allocation of geographical area of the market or by type of goods or services or number of customers; or
  • bid rigging or collusive bidding.

Horizontal agreements under Section 3(3) of the Act are presumed to cause appreciable adverse effect on competition (AAEC) and "cartels" being a specific category of horizontal agreements, under Section 3(3), are presumed to cause AAEC and are, therefore, prohibited.

The Competition Commission of India (CCI) is the regulator under the Act, responsible for inquiring into and addressing anti-competitive practices and protect the interests of consumers in India. The office of the Director General (DG) is the investigative arm of the CCI and is responsible for investigation, collecting and analysing evidence upon commencement of an investigation under the Act.

The jurisdiction of the CCI extends to "enterprises", including a person or a department of the government, that are alleged to have or have engaged in any anti-competitive conduct in violation of the Act. The only exclusion to the otherwise broad definition of "enterprise", is governmental activities that relate to sovereign functions, which include activities of governmental departments in atomic energy, currency, defence and space.

Upon the completion of its inquiry, if the CCI finds that an enterprise had engaged in cartel conduct and upholds a contravention of Section 3(3) of the Act, the CCI is empowered to pass orders under Section 27 of the Act, including the imposition of a monetary penalty under Section 27(b) of the Act. In case of cartels, the penalty, for each cartel member, may extend to up to three times the profit for each year of continuance of the agreement or 10% of the turnover for each year of continuance of the agreement, whichever is higher. The Supreme Court of India (SC), in Excel Crop Care Limited v Competition Commission of India & Anr {(2017) 8 SCC 47}, provided the much needed clarification that in case of entities engaged in multi-product or multi-service businesses, "relevant turnover" for computation of penalty shall be turnover arising from the infringing product or service.

Penalties

Penalties under the Act are in the nature of civil sanctions both against companies and concerned individuals. However, there are certain situations, as provided under the Act, that provide for criminal sanctions.

In the event a person fails to comply with the order of the CCI, they would be liable to a fine of up to INR100,000 for each day of non-compliance which may extend to a maximum of INR100 million and if such a person fails to pay the fine, then pursuant to a complaint made by the CCI, such a person would be punishable with imprisonment of a term of up to three years or a fine of up to INR250 million or both, as determined by the Chief Metropolitan Magistrate, New Delhi (CMM).

A person who contravenes any order of the National Company Law Appellate Tribunal (NCLAT), which is the appellate forum under the Act, such a person may also be liable for a penalty of up to INR10 million or imprisonment for a term of up to three years or both as determined by the CMM.

A "complaint", known as an "information", may be filed by any person or association under Section 19(1) of the Act with respect to alleged anti-competitive agreements. "Person" under the Act includes an individual as well and therefore, an individual may, in their private capacity, also file an information under the Act. However, an information is not in the nature of a "private action" and is a method of institution of proceedings before the CCI with respect to an alleged contravention of the Act.

Another way by which cartel conduct or any other anti-competitive conduct may be challenged is through statutory reference made by any statutory authority. Furthermore, under the leniency regime, a cartel member may file an application for lesser penalty under the CCI (Lesser Penalty) Regulations, 2009 (“Leniency Regulations”) before the CCI, with evidence, as prescribed under the Leniency Regulations.

However, private right of action is available in the form of seeking compensation by concerned individuals for loss or damage arising from cartel conduct, pursuant to a finding of a contravention by the CCI.

Under the Act, "cartel" has been defined to include an association of producers, sellers, distributors, traders or service providers who, through an agreement, limit, control or attempt to control the production, distribution, sale or price of or trade in goods or services. Cartels, falling within the meaning of horizontal agreements, are prohibited under Section 3(3). Horizontal agreements that result in any of the following are presumed to cause AAEC and, therefore, violate Section 3 of the Act:

  • directly or indirectly determine purchase or sale prices;
  • limit or control production, supply, markets, technical development, investment or provision of services;
  • share market or source of production or provision of services by allocation of geographical area of the market or by goods or services or number of customers; and
  • bid rigging or collusive bidding.

Section 3 of the Act prescribes prohibitions against horizontal agreements under Section 3(3) and vertical agreements under Section 3(4). However, certain general exceptions to the prohibition under Section 3 have been prescribed under Section 3(5) of the Act. Under Section 3(5), agreements with respect to export of goods or provision of services do not fall within the prohibition of Section 3 of the Act.

Additionally, measures taken by an entity to protect its intellectual property rights are also exempted from the application of Section 3 of the Act.

While there is no industry/sector based exemption in respect of cartels under the Act, under Section 54 of the Act, the central government is empowered to exempt the following from application of the act:

  • certain enterprises, if necessary in public interest or for the security of the state;
  • any practice or agreement arising out of any obligation of India under any treaty, convention or agreement with any other country; or
  • any enterprise performing a sovereign function.

For example, in 2018, vessel sharing agreements were exempted from the application of Section 3 of the Act for three years.

Furthermore, cartels being a specific category of anti-competitive conduct are exclusively addressed under the provisions of the Act and no other legislation specifically deals with cartel conduct.

Judicial Precedent

In addition to the statutory framework, cartel enforcement has evolved through judicial precedent. The CCI and the erstwhile Competition Appellate Tribunal (COMPAT), (now the NCLAT), have primarily assessed cartel conduct on the basis of direct and circumstantial evidence. As direct evidence is uncommon with respect to cartels, CCI has analysed circumstantial evidence.

However, merely because there is "parallelism" in conduct does not necessarily imply a cartel, and certain additional factors, known as "plus factors" are required to be analysed to establish a contravention. The landmark case with respect to consideration of "plus factors" is the NCLAT judgment in Ambuja Cements & Ors v Competition Commission of India and Ors {TA (AT) (Compt) No 22 of 2017}, where the CCI’s finding of a cartel amongst cement manufacturers was upheld by the NCLAT, and the NCLAT conclusively noted that existence of "plus factors" such as manner of determining prices, low capacity utilisation, production and dispatch parallelism along with price parallelism conclusively established a contravention of the Act.

The Act does not provide for a limitation period with respect to any anti-competitive conduct. However, the provision with respect to anti-competitive agreements of the Act came into effect on 20 May 2009. The provisions of the Act have been interpreted to have a retroactive effect and not a retrospective effect, which means that the CCI can inquire into conduct that took place before May 2009, provided such anti-competitive conduct has continued beyond 20 May 2009.

That said, the period preceding 20 May 2009, with respect to the anti-competitive conduct, can only be looked into to show that the contravening act has continued.

The Act provides for statutory limitations with respect to time period within which appeals may be preferred against the orders of the CCI and the NCLAT, respectively. Under Section 53(B)(2), a party aggrieved by the order of the CCI is required to file an appeal with the NCLAT within 60 days from the date of receiving of the order from the CCI. Similarly, under Section 53T, a party aggrieved by the order of the NCLAT, is required to file an appeal before the SC, within 60 days of receipt of the order from the NCLAT.

The Act grants extra-territorial jurisdiction to the CCI under certain specified circumstances. Section 32 of the Act embodies the "effects doctrine" and has wide application. It empowers the CCI to inquire into any agreement which is likely to have AAEC in the relevant market in India, irrespective of the fact that:

  • the agreement has been entered into outside India; and
  • any party to such agreement is outside India.

Principles of comity entail mutual respect amongst governmental authorities and even judicial bodies towards each other’s decisions or judgments. Keeping in mind the extra territorial reach of the CCI under Section 32 of the Act, the principle of comity, enshrined under Section 18 of the Act, empowers the CCI to enter into any agreements or memoranda with any foreign agency. Pursuant to the same, CCI has entered into Memoranda of Understanding (MOUs) with agencies including but not limited to Federal Trade Commission (United States), Australian Competition and Consumer Commission; Directorate General for Competition (EU); Competition Bureau (Canada); Japanese Fair Trade Commission.

The antitrust agencies of Brazil, Russia, India, China and South Africa (BRICS) also signed a multilateral MOU in 2016. MOUs endeavour to enhance technical and enforcement cooperation amongst agencies. In light of the increasingly global nature of business, cartels are exceedingly multi-jurisdictional and with respect to cartel enforcement, inter-agency cooperation is valuable.

Principles of comity, encapsulated under inter-agency MOUs, are helpful in resolving conflict of jurisdiction amongst agencies, and are an important source of technical cooperation, capacity building, knowledge sharing and while adherence to such principles is not mandatory, MOUs are significant for cooperation amongst global anti-trust regulators.

Proceedings under the Act commence with the filing of an information under Section 19(1)(a) or receipt of a statutory reference under Section 19(1)(b) of the Act or even on the basis of information that might be available with the CCI (Suo Motu). If the CCI is of the opinion that there is a prima facie case of contravention of the Act, it will pass an order under Section 26(1) of the Act, directing the DG to conduct an investigation into the alleged anti-competitive conduct and submit a report on the findings. The DG is a separate investigative wing for the CCI.

In conducting its investigation and assisting the CCI, the DG has been bestowed with wide powers under section 41 of the Act. Under section 41, the powers of the DG are the same as the CCI under Section 36(2) of the Act, which include, conducting search and seizure operations known as "dawn raids" to collect evidence with respect to anti-competitive conduct, summoning and enforcing attendance of any person and examination on oath, allowing parties to conduct cross-examination, receiving evidence on affidavit, requiring discovery and production of documents. Once an investigation has commenced, the DG may issue requests for information (RFIs) to the concerned parties, requiring them to furnish information in a time bound manner. Upon submission of the DG report to the CCI, the investigation phase ceases, but, if needed, further investigation can be ordered by CCI.

"Dawn raids" are typically conducted to obtain crucial evidence and information where there is an apprehension that such evidence may be altered or even destroyed by the entity being investigated. Starting from 2014, ie, when the first dawn raid was conducted, such dawn raids are very commonly conducted in the Indian regime vis-à-vis cartel investigations.

There are certain obligations that must be adhered to by the entity and its individuals that are faced with such a dawn raid:

  • the company must understand the requirement of co-operation with requests for documents, evidence made by the DG officials during the raid; 
  • the company and its officials must exercise extreme discretion to ensure that public statements are not issued regarding the dawn raid; and
  • whilst co-operating with DG officials, the company may also seek time to call its external counsel, however, the investigation team is not obliged to wait for the counsel.

Regarding bullet point one; any denial to furnish or provide the documents or information that are being requested, would be treated as non-co-operation by the DG, and could have serious consequences and adverse inferences drawn against the company by the DG.

In terms of procedural compliance, a dawn raid can only commence with a valid warrant issued by the Metropolitan Magistrate, which authorises the DG’s office to conduct such a raid and upon commencement of a raid, the designated personnel of a company should check the warrant and check that a "search and seizure" operation is expressly authorised, and the company is also entitled to a copy of the warrant.

As part of such a "dawn raid", the DG is empowered to seize books and documents of a company, as well as electronic devices including computer hard drives, storage devices, which would include e-mail communications of the company. However, privileged information, if any, could be denied access to.

The SC in Competition Commission of India v JCB India Limited & Ors {2019 SCC OnLine SC 625} clarified the scope of search and seizure operations and noted that unless seizure were permitted, search by itself would not suffice for the purpose of an investigation, and therefore seized material may be utilised for the investigation. 

Though there is no specific obligation upon the DG/CCI to ensure preservation of documents seized from a company, however, the Delhi High Court (“Delhi HC”) in Telefonaktiebolaget LM Ericsson (PUBL) v Competition Commission of India {(2016) 232 DLT (CN) 1} (“Ericsson Case”), noted that in case of negligence, CCI/DG may not remain immune from a claim of loss/damages if they fail to maintain confidentiality/secrecy of information provided to them.

Preservation of data and potential evidence is an important duty cast upon companies facing investigation. While the Act does not per se speak of this obligation, under Section 204 of the Indian Penal Code, 1860 destruction of evidence to prevent its production as evidence is a cognisable offence and could lead to proceedings under criminal law in India.

Generally, questions can be posed by DG officials during the course of a raid, but employees would be required to respond to questions that are general in nature and for the facilitation of the raid, however, if deposition of any employees is to be conducted by the DG official, such a deposition has to be on oath in presence of witnesses, and a copy of the deposition has to be provided to the employee that has been deposed.

After the completion of the raid and conduct of interviews during the raid, the DG may issue further notices summoning witnesses to appear for a deposition on oath.

The company and its officials must understand the requirement of absolute cooperation with notices issued by the DG. Any refusal to cooperate with requests from the DG would be treated as non-cooperation on part of the company or the officials and could have serious consequences and adverse inferences drawn against the company/officials by the DG.

The company has the right to make and retain copies of documents that are seized by the DG officials during the raid and the company and its personnel should request the DG officials to provide a list of material that has been seized during the raid.

It is important for the company and its officials to understand that there is a right to legal representation in case DG officials require a deposition or a statement on oath to be furnished, during the course of the raid.

The right of legal representation, even during investigation by the DG, was upheld by the Delhi HC in Competition Commission of India v Oriental Rubber Industries {(2018) 251 DLT 137}. The Delhi HC noted that while a party may be accompanied by counsel, the counsel is not permitted to interfere with the questioning or guide the client on the scope of answers.

An internal counsel may participate in an interview but cannot claim any attorney client privilege. In fact, even the internal counsel may be interviewed and his correspondence with other persons from the management may be taken as evidence.

The manner in which counsels are retained by an entity and its officers is a matter of legal strategy and conflicting legal interest, which may differ on a case to case basis, and there is no bar with respect to the same under the Act. However, it is not uncommon for individual officers to retain separate counsels in case there are conflicting legal interests that may be required to be put forth.

Once an information has been filed, the defence counsel must undertake an in-depth study of the relevant sector, check for motive and bona fides of the complainant, understand and delineate the relevant market, undertake economic legal study with respect to their client and its business, engage in detailed interviews with the management, prepare strategies and possible responses.

Pursuant to the above, it should be the endeavour of a defence counsel to persuade the CCI, that there was no prima facie case to direct an investigation under the Act and that the CCI should close the matter by passing an order under Section 26(2) of the Act.

At the very outset, defence counsels should also check for the maintainability of such an order and any possible lacunae/errors and whether such an order may be challenged through a writ petition before the respective High Court or by way of filing a recall/review application before the CCI itself. In the past, parties have successfully challenged orders passed under Section 26(1) on grounds of lacunae/errors and have managed to get such orders quashed.

Once an investigation has commenced before the DG, defence counsels should typically ensure that their clients reply to RFIs in a timely manner and furnish complete and material information, without omissions. It would be equally important to sift through the information that is required to be provided so that the client does not unnecessarily end up providing more information than is sought.

Throughout the process before the DG and the CCI, defence counsels would also make sure that procedural rights of their clients are safeguarded including their right to access to information and other factors to preserve the right to natural justice.

Once an order under Section 26(1) of the Act has been passed by the CCI, the investigation phase by the DG commences. The DG, which is the investigative wing of the CCI, has a wide range of powers under Section 41(2) of the Act, including: summoning and enforcing attendance of any person and examination on oath, receiving evidence on affidavit, requiring discovery and production of documents. Once an investigation has commenced, the DG may issue RFIs to the concerned parties and require them to furnish information in a time bound manner.

As part of the investigation, the DG may, conduct dawn raids, issue notices/ RFIs to parties, direct the furnishing of information or evidence and even summon individuals to provide evidence by way of a statement on oath.

The RFIs/ notices issued by the DG are not only issued to parties to the investigation, but are very often also issued to third parties, such as statutory bodies, service providers, vendors etc.

The procedure with respect to conduct of investigation by the DG is set forth under the Act and the Competition Commission of India (General) Regulations, 2009 (“General Regulations”). The General Regulations permit the DG to decide the manner in which evidence may be presented before it and also set out the categories of evidence that may be requisitioned or relied upon by the DG. Under Regulation 41(2), such evidence includes, inter alia

  • transcripts of tape recordings;
  • video recordings;
  • e-mail communications;
  • telephone records;
  • statements of individuals;
  • responses to written questionnaires or interviews;
  • comments or opinions or analyses of experts based upon market surveys or economic studies;
  • registers, records, books of accounts; and
  • any other documents which may be considered relevant and material.

The DG may also require parties to submit evidence through an affidavit or even by providing oral statements.

Where the evidence has been provided to the DG by an oral submission, the DG also has the power to allow other parties to conduct a cross-examination of the party that has provided the oral evidence, if considered to be "necessary" and "expedient".

It is also to be noted that the rules of evidence as provided under the Indian Evidence Act, 1872 (“Evidence Act”) may be applicable to, inter alia, matters such as admissibility of electronic records, proof of verification of digital signatures, as more particularly set out under Regulation 41(3).

It is also to be noted that even during the inquiry stage before the CCI, after the investigation is complete by the DG, the CCI may, if it deems it necessary, require parties to provide such documents/material as may be required by the CCI to pass orders. The CCI may also direct the examination on oath of any person.

For such purpose, the DG, apart from issuing RFIs may also issue a notice under Section 41(2) (powers of the DG) read with Section 36(2) of the Act, summoning a witness to provide non-documentary evidence such as an oral statement on oath. Pursuant to a statement being provided on oath, the DG may also grant other parties the right to cross-examination of the deponent. 

In the exercise of powers, the DG may direct parties to submit any kind of information, documents or evidence. In the event parties to a cartel investigation are located in other jurisdictions outside India, they may even be required by the DG to produce documents (translated if required) located in their jurisdiction. The DG may also personally summon officials who are stationed overseas to join investigation and produce themselves.

Similarly, there is no difference between document available on a local computer vis-à-vis document on a cloud, and if directed by the DG, the party would have to produce any such information. However, if the document/evidence is procured from a computer, it would necessarily have to be accompanied by an affidavit under Section 65B of the Evidence Act.

In India, the concept of privileged communication between an attorney and the client emanates from Section 126 of the Evidence Act. Section 126 prohibits an advocate from disclosing communication made by or on behalf of the client, which was provided during the course of its engagement. The same extends to counsel admitted in any jurisdiction. It can be between an Indian client and counsel admitted in foreign jurisdictions.

The Advocates Act, 1961 (“Advocates Act”) recognises an advocate as a person qualified to be enrolled with any state bar council in India. However, under the Advocates Act and the Bar Council of India Rules, 1975, an advocate is restricted from being a full-time salaried employee of any company or other entity and if any lawyer is employed as such with a company, such a lawyer would have to cease from practising as an advocate for such period. Therefore, in-house lawyers do not qualify as advocates under the Advocates Act and privilege is not extended to communications between in-house counsel and the company, under the Evidence Act.

While the principle against self-incrimination is not enshrined under the Act, there is nothing that would compel a cartel member to provide evidence against oneself. While a cartel member under investigation may choose not to incriminate oneself in case of an investigation, in the event the DG directs a party to produce information or documents or provide a statement on oath, the party will necessarily have to comply with the same. However, attorney client privilege remains applicable throughout such proceedings.

Furthermore, with respect to confidentiality sought over information furnished, an application seeking confidentiality may be preferred before the DG/CCI.

Upon commencement of an investigation by the DG and once the DG sends initial RFIs, it is typically uncommon for parties to resist from replying to such RFIs. It is usually the case, especially in cartel investigations, that a party may become aware of the initiation of an investigation against it only once the first such RFI is received from the DG’s office. In such cases, a party may seek an extension of time to confer with their legal counsel with respect to the preferred strategy and way forward and also to collate necessary information for the RFI.

Failing to reply or deliberately choosing not to reply to an RFI from the DG can have serious adverse repercussions, both practically and legally. Under Section 43 the Act, if a person fails to comply with a direction of the CCI or the DG in exercise of powers under the Act, without there being any reasonable cause, such a person would be punishable with a fine of up to INR100,000 for each day during which such failure continues, subject to a maximum of INR10 million. In the past CCI has issued a show cause notice to parties concerned under Section 43 of the Act for withholding information that was sought by the DG or only supplying partial information. In one such case against Google Inc and Google India (“Google”), CCI had noted that there was a failure to comply even though the DG had issued several reminders to Google, and taking into account the extent of information provided by Google, imposed a fine of INR10 million under Section 43 of the Act.

In addition to the fact that non-compliance with notices/RFIs from the DG has serious monetary consequences for a party, failure to furnish information may also result in the DG drawing severely adverse conclusions against such a party in the investigation report. Furthermore, a party would not be able to offset the conclusions made by the DG, at the stage of inquiry before the CCI, if such a party had knowingly and willingly chosen not to reply to RFIs/notices.

The Act and the General Regulations provide for confidentiality of information, upon fulfilment of certain conditions. Any party may apply to the DG/CCI that any document(s) may be treated as confidential and such a request can be made if such a document becoming public would lead to disclosure of any trade secrets or loss of commercial value of such information. The party claiming confidentiality needs to prepare a public version of the document over which confidentiality is claimed along with the date on which confidentiality would ideally expire.

Upon receipt of a request, the DG/CCI consider factors including, extent of public knowledge of the information, measures taken by the applicant to guard secrecy of the information, extent to which information is known to employees of the applicant and others in the business of the applicant, and thereafter, such information may be granted confidential treatment by the DG/CCI.

For the purpose of leniency petitioners, the confidentiality provided is much stricter and different parameters exist.

Once an investigation by the DG has commenced, the counsel can either challenge the same before CCI by way of an application seeking review of the Section 26(1) order or if there are other lacunae or errors, then a writ petition can be filed before the concerned High Court. The same could also be done post any notice issued by the DG. The counsels for parties to the investigation advise and assist the parties through the course of the investigation to ensure that parties fully co-operate with the investigation so as to not attract consequences under the Act.

Upon completion of the investigation, the DG report is submitted by the DG to the CCI and then forwarded to the parties. At this stage, the parties have the right to put forth written objections/suggestions to the findings in the DG report. At this juncture, the role of the defence counsel becomes extremely significant.

In case the DG report concludes that there have been contraventions of the Act, defence counsels would analyse the findings of the DG and put forth both factual and legal arguments to rebut the findings. Upon submission of the written objections/suggestions, parties, through their defence counsels, are also given an opportunity of hearing before the CCI, during which the defence counsels put forth oral submissions with respect to the legal and factual points. The CCI may also allow parties to file written submissions following the oral hearing. The written objections/suggestions along with the oral submissions are taken into consideration by the CCI prior to passing of its final order.

In a number of cases, wherein there has been a procedural irregularity, violation of principles of natural justice or jurisdictional issues, upon the advice of counsels, writs have been filed with various High Courts. Some of these have resulted in stay of proceedings or quashing of proceedings before the DG/ CCI, especially at the stage of the issuance of an order under Section 26(1) by the CCI.

The Act contains provisions permitting a cartel member (individual or entity) to avail of lesser penalty upon the fulfilment of certain prescribed conditions under the Leniency Regulations (amended in 2017). An applicant under the Leniency Regulations can also be a foreign entity or individual.

Under Section 46 of the Act, the CCI may grant a reduction in penalty to a cartel member, which necessarily need not be the ring leader but any participant to such a cartel that has made "full and true"/vital disclosure regarding violations of the Act by the cartel.

However, a cartel member can only apply for lesser penalty during the pendency of the investigation and not after the DG report has been submitted to the CCI.

If during the course of investigation, an application for lesser penalty is submitted to the CCI, meeting the criteria under the Leniency Regulations, such an applicant would be granted a marker status. Once the investigation is complete, the CCI considers the DG report and would then pass a final order under the Act, which in case of a cartel, would also involve the imposition of a monetary penalty and the said order would also set forth the grant of lesser penalty, if any, to an applicant under the Leniency Regulations. In order to be eligible for a lesser penalty, the applicant must cooperate through the investigation and proceedings before the CCI.

Under the Leniency Regulations, the identity of the applicant and the information and evidence furnished by the applicant would be confidential.

Under the Leniency Regulations an individual involved in a cartel may also apply for lesser penalty. Furthermore, there is no limitation on the number of marker statuses that may be granted by the CCI. The entity with the first marker status may be granted up to 100% reduction in penalty, the second marker status is eligible for up to a 50% reduction in penalty, and the third marker status onwards would be eligible for up to a 30% reduction and so on. The marker status is however, subject to further change once the CCI completes the inquiry and the final order is passed.

The identity of the leniency applicant and the information furnished are accorded confidentiality and once the DG report is submitted, parties may be allowed to inspect only non-confidential versions of the information furnished. Under the Leniency Regulations, the identity of the applicant or information/documents/evidence may be disclosed if:

  • the disclosure is required by law;
  • the applicant agrees to such disclosure in writing; and
  • the applicant makes a public disclosure.

However, if the DG deems it necessary to make disclosure of any such information/documents/evidence for the investigation and such disclosure has not been agreed to by the applicant, the DG can seek prior approval from the CCI for such disclosure.

The first leniency was granted by the CCI in 2017 in In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items. Thereafter, the CCI has, in almost all cases, where there have been applications for lesser penalty, provided reductions in penalty ranging from 30%-100% of the total penalty, to the leniency applicants.

The DG, in the exercise of its powers, may directly send RFIs to employees of a company as well. The information sought from employees would depend on the facts and circumstances of the case but may include details of such employee’s role, business of the Company, reporting channels, etc, and other details which it may deem fit for the purpose of the investigation. A copy of such a notice may be sent simultaneously to the employee’s counsel as well.

The RFIs are sent by the DG under Section 41(2) read with Section 36(2) of the Act and should be replied to within the time period given under the notice. Reply on affidavit is generally required and employees can hire their own counsels or choose to reply on their own. The DG may expand its scope of investigation, however, prior permission of CCI must be sought and CCI would be required to pass a reasoned order authorising expansion of scope of the investigation.

Under the scheme of the Act, the powers that the DG has are extremely sweeping in nature. The DG may issue RFIs to entities that are being investigated and may also issue RFIs to other parties to the investigation, seeking information regarding each other and also to third parties that might have business relationships with the parties under investigation.

There are serious consequences of non-compliance with RFIs/notices sent by the DG. Under Section 43 the Act, failure to comply with a direction of the DG without a reasonable cause, attracts a fine of up to INR100,000 for each day during which such failure continues, subject to a maximum of INR10 million.

Typically, a notice/RFI is sent to senior management and also sent to the external legal counsel of such parties situated within India, by the DG, to ensure ease of compliance and co-ordination.

There may be inter-agency co-operation, such as between the CCI and other regulatory bodies, however such co-operation would be subject to restrictions under Section 123 of the Evidence Act, which prohibits the use of evidence derived from unpublished official records without permission from the concerned department head. Furthermore, the CCI is required to duly assess any new evidence obtained with respect to a proceeding with proper application of mind to the facts of the case. 

Under Section 21A(2) of the Act, the CCI may also make a reference of an issue to another statutory authority and upon receipt of the opinion, the CCI would provide its findings with respect to the issue in the opinion provided.

While the CCI has entered into MOUs with various antitrust authorities, typically, cartel enforcement does not entail information exchange with authorities in other jurisdictions. However, CCI could take suo motu cognizance of an investigation against a cartel which has been undertaken by anti-trust regulators in the other jurisdictions.

As per information available in the public domain, certain MOUs entered into by the CCI contain provisions for co-ordination and co-operation with respect to enforcement proceedings.

Cartel enforcement under the Indian Competition Act, does not entail a criminal case, both against cartel members and the concerned individuals.

Investigation Phase

Unlike other jurisdictions, under the Act, there are no separate civil proceedings in a court for anti-trust behaviour. The CCI, as a regulator, also performs adjudicatory functions for the purpose of determining liability of anti-competitive conduct under the Act. As a matter of procedure, it is the DG, being the investigative wing, that collects evidence and information and submits a report with its findings.

During the investigation phase, the DG collects information through various modes, including conduct of dawn raids, requisitioning information through RFIs/notices from parties and third parties, statements on oath. 

After Investigation Completion

Upon completion of the investigation stage before the DG, the inquiry before the CCI commences, where the CCI adjudicates on the rights and obligations of the parties and arrives at a conclusive determination of whether there has been a contravention of the Act. Even at this stage, the CCI can, if it deems fit, require the production of additional evidence.

Under the Act and the General Regulations, parties have the right to seek and apply for inspection of documents/evidence that forms part of the case records before the DG or the CCI. Such inspection of records may be allowed by the DG or CCI with respect to the non-confidential versions of documents filed by any of the other parties to the investigation including third parties. In some cases, the request for inspection may be rejected by the CCI/DG and such orders can be challenged by way of a writ petition before the concerned High Court.

As cartel offences involve multiple parties but with the same factual situation, investigation and inquiry proceedings under the Act are brought against multiple parties as part of a single case. In certain cases, if separate information has been filed by different informants, if the facts involved are common, the CCI may combine the information filed and direct the DG to conduct a common investigation and submit a consolidated report.

However, if the parties can sufficiently demonstrate that their case is factually different from the others or if it has confidentiality concerns, they can request for a separate proceeding. 

Under the Act, horizontal agreements under Section 3(3) are presumed to cause AAEC, however such a burden is rebuttable in nature, and the burden rests on the cartel members to rebut such a presumption and show that no AAEC was caused or is likely to be caused.

In criminal jurisprudence, the standard for establishing an offence is that of "beyond reasonable doubt", however, with respect to establishment of cartels, the standard is one of "preponderance of probabilities" and this standard has evolved through judicial precedent.

Under the Act, the DG is the investigative arm and is responsible for the collection of evidence, determination of facts and forming an opinion, based on such evidence, whether there has been any contravention of the Act. Upon completion of the investigation, the inquiry commences before the CCI and the CCI applies the law to the facts and determines whether there has been a contravention of the Act.

Evidence with respect to a cartel enforcement is specific to the relevant case and is typically not used in other cases. With respect to multi-jurisdictional cartels, even though there may be evidence provided in other jurisdictions, once an investigation commences in India, the DG seeks furnishing of such evidence afresh. Furthermore, there are strict confidentiality standards applicable with respect to evidence furnished by way of a leniency application and such evidence is not utilised by the DG/CCI with respect to other proceedings. However, under the Leniency Regulations, if the leniency applicant agrees to a disclosure of the information/evidence in writing, such sharing would be permissible.

It is also to be noted that the rules of evidence as provided under the Evidence Act, are applicable to, inter alia, matters such as admissibility of electronic records, proof of verification of digital signatures, presumption as to electronic agreements, presumption as to due execution of documents not produced, etc.

Under the Act, the CCI has the power to require assistance from experts in fields of economics, commerce, accountancy, international trade, or any other fields in discharging its functions and conducting inquiries against contraventions under the Act. Such experts are also involved in research, preparing expert reports, assistance of DG during investigation and any other assistance that the officers of the CCI may require, on a case to case basis.

The principle of attorney client privilege is applicable to proceedings before the DG and the CCI. Under Section 123 of the Evidence Act, there is a limitation on the use of evidence arising from unpublished official records and can only be shared with the permission of the concerned department head.

With respect to cartel offences, proceedings are initiated under the Act against cartel members and even though there are multiple parties, the facts would remain the same and, therefore, there is usually a single proceeding against such cartel members.

Under the Act, the DG, being the investigative arm, does not have the power to impose fines or penalties. The CCI is empowered to impose fines in certain specified cases, including, failure to comply with the directions of the DG or for furnishing a false statement or omitting to furnish material information. The CCI is also empowered to impose a penalty on an entity if such entity is found to have contravened the Act. Furthermore, upon appeal, the appellate tribunal, ie, NCLAT may uphold or set aside the penalty imposed by the CCI and the same may be further upheld by the SC on appeal from the NCLAT order.

Plea bargaining by way of becoming a whistle blower/leniency petitioner is contemplated within the Act. However, the Act does not expressly allow for the acceptance of settlements or commitments by parties to a proceeding, or withdrawing of the information. The CCI has, in its previous orders, declined accepting settlements put forth by parties, reasoning that the Act does not expressly allow for the same and has stated that the inquiry is not just with respect to the information filed by the informant but the offence in the matter.

However, the Madras High Court in Tamil Nadu Film Exhibitors Association v Competition Commission of India {AIR 2015 Mad 106}, had examined the scheme of the Act and noted that the CCI did have the power to accept settlements/commitments, pursuant to its residual powers in certain situations.

The imposition of a penalty on an enterprise and its individual officials for a contravention under the Act may result in serious reputational damages and loss of goodwill. The aspect of disqualification of individual officers of a company or an enterprise are not covered under the Act, but are governed by provisions under separate legislations. For example, imposition of a penalty under the Act may result in the disqualification of directors of a company under the Companies Act, 2013. Furthermore, CCI can pass a separate cease and desist order against the contravening entity.

Any liability established for a contravention under the Act, may be used as basis to establish a prima facie case in any other civil suit, such a finding may also be used as a base for seeking compensation by any person who makes a claim for compensation, before the NCLAT, arising from the findings of the CCI, for the recovery of compensation for any loss or damage to be shown.

Plea bargaining is not available under the Act, unless a cartel member decides to approach the CCI by way of an application for lesser penalty filed before the DG report is submitted to the CCI. In such a case, subject to the fulfilment of criteria under the Act and the Leniency Regulations, such an applicant may obtain a substantial reduction in the penalty ranging from 30%-100% under the Leniency Regulations.

Cartel enforcement under the Act is in the nature of a civil proceeding and there is no criminal enforcement against the companies or individuals.

Under the scheme of the Act, proceedings are adversarial in nature and upon determination of a contravention in respect of a cartel offence, the CCI is empowered to pass certain orders under the Act.

In case of cartels, penalties may extend to up to three times the profit for each year of continuance of the agreement or 10% of the turnover for each year of continuance of the agreement, whichever is higher. In addition to imposition of a penalty on a company, separate penalties may also be imposed on individual officers of a company, who were in-charge of or responsible for the conduct of the company at the time of contravention of the Act.

The penalty is imposed by the CCI, comprising of a Chairperson and three members who adjudicate the matter. Upon submission of the DG report to the CCI, suggestions/objections on the DG report are sought from the parties and an opportunity of hearing is also granted to the parties. After such a hearing and consideration of the DG report and the suggestions/objections raised by the parties, the CCI determines the liability under the Act and proceeds to impose penalties and orders of "cease and desist", regulating future behaviour of such entities. The CCI also has the power to pass “any other orders” as it deems fit in the facts and circumstances of the case and therefore if the need arises it may impose additional sanctions as well. However, it is normally not done as a matter of course and only in exceptional circumstances would the same be contemplated.

In determining the quantum of penalty to be imposed for a violation of the Act, an effective compliance programme has been accepted as a pertinent mitigating factor. Such a compliance hints at the possibility of the same being unintentional in nature wherein due care was taken by the said entity in putting in place processes to avoid a contravention of the Act.

Under the scheme of the Act, the scope of orders that may be passed under Section 27 by the CCI upon determining a contravention of the Act would pertain to orders passed against the cartel members, ranging from imposition of a monetary penalty to ordering cartel members from ceasing the contravening conduct. The question of consumer redressal would arise pursuant to the conclusion of inquiry proceedings by the CCI and can be sought in the form of a compensation application before the NCLAT.

A party aggrieved by an order of the CCI has a statutory right to appeal against such an order before the NCLAT and there is a further right of appeal on both facts and issues, against the order of the NCLAT before the SC.

Furthermore, it is also possible to seek the setting aside of an order passed by the CCI, which is otherwise not appealable under the Act, by filing a writ petition before the appropriate High Court, on grounds such as a lack of jurisdiction. 

Under the Act, a proceeding can be initiated and commenced post information filed by a private entity, a person or upon reference from a statutory authority. Competition concerns are in rem and not rights in personam, as noted by the Delhi HC in the Ericsson Case, and the same are considered to be in public interest and, therefore, no provision for settlement between the parties has been provided for.

However, the Act allows for institution of private action in the form of a compensation application, upon finding of a contravention of the Act by the CCI. Such compensation cannot be granted by the CCI but by the NCLAT.

An application for compensation can be filed before the NCLAT:

  • for any loss arising out of an enterprise violating any direction of the CCI;
  • for any loss arising out of an enterprise contravening an order of the NCLAT; or
  • for loss arising out of a contravention of the Act committed by an enterprise, with respect to which the CCI or the NCLAT have passed an order.

Several compensation applications have been filed with respect to findings of contravention of the Act, however, there is yet to be a judicial precedent with respect to the same.

Under the Act, if several parties have the same interest, they may, with the permission of the NCLAT, prefer a single compensation application and an order of the NCLAT with respect to such an application would apply to all parties to such an application. Furthermore, the procedure set forth under the Code of Civil Procedure, 1908, in respect of multiple parties having the same interest, with an option of filing a common suit, would apply to such compensation applications under the Act.

Under the Act, any party may file an application for compensation before the NCLAT provided the party is able to show "loss" or "damage" resulting from a contravention of the Act. Therefore, there would be no bar upon an indirect purchaser from applying for compensation but whether or not compensation would be granted would depend on such a party clearly establishing loss or damage arising out of the contravention.

Once an application for compensation has been made, the NCLAT would inquire into the grounds raised in the application and direct payment of compensation from the enterprise to such party. The adjudication of an application for compensation would be limited only to the application and would not entail a re-appreciation or re-adjudication of the facts and evidence by the NCLAT, which has already been concluded by the CCI. The NCLAT may, however, seek recommendations from the CCI before passing an order for compensation.

Applications for compensation can only be decided upon final determination of a contravention under the Act, and most orders of the CCI are appealed to the NCLAT and thereafter to the SC. At present, no compensation application has been decided finally by the NCLAT and the jurisprudence on compensation claims is yet to be determined.

At present, no compensation application has been decided finally by the NCLAT and the jurisprudence on compensation claims is yet to be conclusively determined. That being said there has been no instance of the attorneys of the successful applicant being compensated, however, they are entitled to the fee as agreed upon between the parties irrespective of the outcome of the case.

Furthermore, considering the fact that in case of "class action" compensation applications, wherein the issue and grounds are the same and multiple applicants, counsels for one party may also represent other parties and the sharing of attorney fees can be a matter of arrangement between the counsel and the parties concerned.

At present, no compensation application has been decided finally by the NCLAT and the jurisprudence on compensation claims is yet to be determined.

With respect to an order of the NCLAT adjudicating upon a compensation application, a party may prefer a statutory appeal against such an order before the SC, under the Act. At present, there is no jurisprudence with respect to such review.

In understanding cartel enforcement, the recent judgment of the SC in Rajasthan Cylinders and Containers Limited v Union of India {2018 SCC OnLine SC 1718} is relevant as it settled the law with respect to the importance of market conditions in understanding cartel conduct. In light of prevailing market conditions, the SC observed that factors based on which the CCI determined cartel conduct were valid justifications and that due to the market conditions, manufacturers were compelled to submit identically priced bids and there was no question of varying prices. The SC also noted existence of an oligopsony and noted that buyers influenced the fixing of prices.

The SC provided clarity that the presumption of AAEC can be rebutted by parties and set aside the finding of cartelisation arrived at by the CCI, which was upheld by the erstwhile COMPAT. The understanding of prevailing market conditions is crucial to the determination of cartel conduct under the Act.

The judgment of the SC in Competition Commission of India v Bharti Airtel Limited & Ors {(2019) 2 SCC 521}  is also significant as it clarified the scope of exercise of jurisdiction by sectoral regulators and the CCI, imparting much needed balance to the otherwise seemingly overlapping jurisdictions of such regulators.

The CCI, as part of its advocacy role, regularly publishes advocacy booklets for the ease of reference of stakeholders. These booklets cover various aspects of the Act, including cartel enforcement. Certain relevant booklets may be referred to at:

In light of the present COVID-19 situation, there has been an adverse impact on economies around the world. On 19 April 2020, the CCI issued a much needed advisory with respect to business in the time of COVID-19. The advisory recognises the disruption in business and the imminent need for businesses to co-ordinate activities, which may include sharing data, distribution networks, infrastructure, etc, to ensure seamless supplies and distribution, particularly of essential products and services.

If businesses do engage in co-ordination, the CCI would, in assessing such conduct, look at the accrual of benefits to consumers, improvement in production or distribution or promotion of technical, scientific or economic development. However, the CCI advisory very clearly states that only such conduct that is "necessary" and "proportionate" to respond to the COVID-19 situation will be considered. Therefore, there is no blanket exemption to cartel conduct during this period and any anti-competitive conduct, that has no valid justification, will be subject to inquiry by the CCI.

Businesses must ensure that if any co-ordination is engaged in, it must be backed by cogent reasons of efficiency.

Gaggar & Partners

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Law and Practice in India

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Gaggar & Partners is a boutique law firm specialising in competition, commercial litigation and arbitration, general corporate and real estate advisory, defence, gaming, IPR and white-collar crimes. With a growing team of 25 associates, two directors and seven partners, the firm has been involved in some of the leading cases across various judicial fora. Highly recommended for its competition practice, the firm has been retained by the Competition Commission of India (CCI) to prosecute special cases and represent the Director General (DG)/ CCI in sensitive cases relating to the evolving jurisprudence on investigation. The firm has been a flag bearer in cases relating to the leniency regime in India. Besides advising clients across sectors on various legal issues, the firm has been involved in the drafting of bills. Amongst the firm's noteworthy clients are NTN Corporation, National Engineering Industries, Citibank, Denso Ten, Toyo Tire, Haicheng Vivo Mobile (India) and the firm has also advised and represented celebrity sportspersons such as Virender Sehwag.