Cartels 2024 Comparisons

Section 3(3) of the Competition Act, 2002 (“Act”) specifically prohibits agreements between enterprises engaged in identical or similar trade of goods or provision of services in the following forms:

• price fixing directly or indirectly;
• limiting production, supply, markets, technical development, investment or provision of services;
• market or customer allocation; and
• bid rigging/collusive bidding.

As per the Competition (Amendment) Act, 2023 (“Amendment Act”), an enterprise or association of enterprises, though not engaged in identical or similar trade, shall also be presumed to be a part of the cartel if they participate or intend to participate in the furtherance of such agreement.

The Competition Commission of India (CCI) may inquire into any alleged contravention of Section 3(3) through the following means:

• on its own motion (suo motu);
• on receipt of information from any person, consumer or association; and
• on the receipt of reference made to it by the central government, state government or a statutory authority.

The specific forms of cartel conduct that can be challenged in India have been provided in 1.4 Definition of “Cartel Conduct”.

Public Enforcement Agencies

The CCI is the sole public enforcement agency vested with the mandate of enforcing the Act in India. Its duties include elimination of practices having adverse effect on competition, promotion and sustenance of competition, protection of the interests of consumers and ensuring freedom of trade.

The Director General (DG) is the investigative arm of the CCI which conducts investigation independently on the directions of the CCI.

The findings of the CCI are appealable before the National Company Law Appellate Tribunal (NCLAT). Pursuant to the Amendment Act, an appeal can only be admitted on the pre-deposit of 25% of the monetary penalty amount imposed by the CCI. An appeal from the order of the NCLAT lies before the Supreme Court of India (SC).

Scope of Liabilities, Penalties and Awards

The CCI is empowered to impose civil penalties on delinquent enterprises. For cartel conduct, the CCI may issue (i) “cease and desist” orders; and/or (ii) impose a monetary penalty upon the delinquent entities of up to three times of the profit or 10% of the turnover for each year of the continuance of the cartel, whichever is higher.

The CCI can also impose penalty of up to 10% of the income of the delinquent individuals of such enterprises for each year of the cartel activity.

However, holding of an enquiry and finding by the CCI that an action of an enterprise is in contravention of Section 3 are conditions precedent to imposition of diverse sanctions including monetary penalties.

Further, the CCI must be guided by the CCI (Determination of Monetary Penalty) Guidelines, 2024 (Penalty Guidelines) before imposing any penalty upon a delinquent entity.

Furthermore, the NCLAT is also empowered to award compensation to any person, if such a party demonstrates that it has suffered actual damages on account of the impugned conduct of the delinquent parties.

Any party or person may make an application to the NCLAT under Section 53N of the Act to adjudicate on a claim for compensation that may arise from findings of the CCI or the NCLAT or the SC. Such a party or person, however, has to establish that it suffered actual loss or damage due to the contravention of provisions of Chapter II of the Act (pertaining to anti-competitive agreements and abuse of dominance).

No compensation claims have been adjudicated by the NCLAT to date. However, there are a few compensation cases which are at the advanced stage of finalisation.

As per the Act, a “cartel” is considered as an agreement entered into between enterprises or association of enterprises or persons which:

• determines prices;
• limits or controls or attempts to control the production, supply, distribution, technical development or provision of services;
• results in market/customer allocation; or
• results in bid rigging.

Such agreement is prohibited and is presumed to have an Appreciable Adverse Effect on Competition (AAEC). However, this presumption of AAEC does not apply to agreements entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.

Under the Act, the central government may by notification, exempt from the application of this Act any class of enterprises. The central government had previously granted such an exemption to Vessel Sharing Agreements prevalent in the ship lining industry since 2013, however, the same has expired in 2021.

The limitation period under the Act for filing of an information/reference is three years from the date on which the cause of action arose. However, the CCI may condone a delay on sufficient cause being demonstrated.

The jurisdiction of the CCI extends to all agreements relating to “goods and services” which have an AAEC in India. For conduct emanating from outside India the CCI has been explicitly empowered to exercise jurisdiction over entities who are a part of such an agreement if such an agreement has an AAEC in India.

As per the Act, the CCI for the purposes of discharging its duties or performing its functions enter into any memorandums or arrangements with the prior approval of the central government, with any agency of any foreign country.

Further, the CCI has entered Memorandum of Understanding (MoU) with 13 jurisdictions which include Brazil, Japan, EU, USA, BRICS countries, etc.

The EU–India MoU (2013) provides for avoidance of conflicts between the competition regulators of the two jurisdictions and lays down mechanism for consultations to minimise adverse effects on enforcement functions of either regulator.

The CCI has shown inclination towards opportunities for enhancing competition in the blockchain sector.

The CCI has expressed its view through a discussion paper wherein, it believes that though blockchain can be beneficial for the economy, however, competition law concerns may arise from such technologies.

The CCI, while viewing possible instances of cartelisation in the blockchain sector, has observed that unless adequate measures are adopted, the transactional information in the ledger can be easily viewed by the blockchain participants (visibility effect). However, the same information may not be accessible to entities outside the blockchain (opacity effect) due to restricted access (in case of a “permissioned consortium blockchain”) or encrypted data with pseudonyms (in case of a “permission-less public blockchain”).

Additionally, the CCI has also observed that transparency of information generally is expected to intensify competition. However, in some cases, it is possible that there may be visibility of information of competitors, who are part of the blockchain. Thus, exchange of competition sensitive information can be viewed as anti-competitive.

Similarly, the CCI has recently launched a market study on “evolving landscape of Artificial Intelligence and application of Artificial Intelligence (AI) in markets in India”. As per the related press release, the CCI recognises that the “transformative capabilities of AI have significant procompetitive potential, at the same time there may be competition concerns emanating from the use of AI”.

The CCI can initiate a cartel investigation suo motu or on receipt of an information or on a reference by the government/statutory authority. The first step is a direction to the DG to cause an investigation into the matter and to submit an Investigation Report, inter alia, containing its findings.

During the course of investigation, the DG has the powers to summon and enforce the attendance of any person and examine them under oath, requiring discovery and production of documents, receiving affidavits under oath, requisitioning public records, and issuing commissions for examination of witnesses or documents.

Further, the DG also has the power of conducting “dawn raids”. However, before a dawn raid is conducted, the DG is required to take prior authorisation from the Chief Metropolitan Magistrate in Delhi.

Once the investigation is complete, the report of the DG is submitted to the CCI for its consideration.

Dawn raids in cartel cases have become common in India. During such raids, the DG may be authorised to enter, with assistance, the place(s) where information, books, papers, other records are stored; conduct “search and seizure” operations; and examine individuals on oath. The DG also has the power to take into custody records of the parties, including electronic records. However, a copy of the seized information/documents may be provided to the raided party. During the raid, the DG must ensure the presence of two independent witnesses and the officers of the party under investigation are legally bound to co-operate with the investigation. Such dawn raids must be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973, relating to “search and seizure”.

Further, there is no restriction on external counsels from being present during a dawn raid, however, they should not cause any obstructions.

As per the Act, a party under investigation is duty bound to preserve and to produce all information, books, papers, other documents (including electronic records). Further, all officers (present or past) and agents (including bankers, auditors and legal advisers) of a party also have similar obligations.

Parties under investigation have a right to counsel. However, during an interview/deposition, there are certain limitations on counsels to participate in the interview/deposition such as they may not sit in proximity of the interviewee/deponent, should not prompt or interfere with the responses. Internal company counsels may be summoned for deposition as agents of the party under investigation.

There is no restriction on individuals of a party under investigation to engage separate outside counsels. However, in-case the need arises, individuals are free to engage separate counsels.

At the outset, counsels of parties should ensure that a competition compliance programme is put in place so that in-case the eventuality so arises the officers of a party are aware of the steps to be undertaken till the outside counsels are informed of any dawn raids at the premises of the party. For instance, the Reception should be provided with a list of key contacts to be notified immediately in the event of a dawn raid. Since time is of essence in cartel investigations, defence counsels should ensure that they investigate internally the alleged conduct and suggest appropriate strategies to the party.

In addition to the possibility of a dawn raid wherein the DG can search the premises of the parties and seize documentary and non-documentary information (including electronic evidence), the DG may issue probe notices to parties, third parties and require them to submit comprehensive information. As per the provisions of the Act, the parties are legally bound to comply with such notices. Further, the DG also has the power to summon individuals and record their statement on oath.

During the course of an investigation the DG can order a party located in India to produce documents and other evidence even if it is stored in another jurisdiction. Further, parties not located in India can also be subjected to an investigation in case the conduct in question has an Indian nexus.

Under Sections 126 and 129 of the Indian Evidence Act 1872, communications between party and external lawyers are privileged communications and therefore protected. However, since the Bar Council of India Rules do not recognise in-house counsels as Advocates, communications with in-house counsels does not benefit from this privilege. Further, there are no privileges as such which may be pertinent to cartel investigations.

Generally, parties under investigation do not challenge the initial requests unless they are roving and fishing in nature and beyond the scope of the investigation. Non-cooperation can lead to monetary sanctions, which prejudice the interests of parties and also cause reputational harm.

The parties under investigation are required to furnish complete and comprehensive information even if the same is confidential in nature. However, parties furnishing such information can request for confidentiality by demonstrating that the information is not available in the public domain, known only to limited employees, adequate measures are taken by the party to guard the secrecy and the information cannot be acquired or duplicated. Further, even third parties can claim confidentiality on information furnished by it.

Defence counsels raise legal and factual arguments throughout the course of investigation; however, the first formal opportunity to present defences is while submitting comments/objections to the Report of the DG. Once a party under investigation has submitted its comments/objections to the Report of the DG, the CCI provides an opportunity for hearing wherein the parties present oral arguments before the final order is passed by the CCI.

Under the leniency regime in India, a cartel member who makes true, full and vital disclosures with respect to a cartel can benefit from reduction in penalty depending on the stage and nature of information provided by such applicant.

The regime follows a marker/priority status approach. The first marker is granted up to 100% reduction in the determined penalty, the second marker is granted up to 50% reduction in penalty and third and subsequent applicants are granted up to 30% reduction in determined penalty.

The CCI has been quite active in this space and has amended the leniency regime multiple times through regulations. Further, there are obligations which the leniency applicants are required to satisfy before being granted the benefit of lesser penalty. For instance, the applicants should cease to have been a part of the cartel; provide vital disclosures in respect of the contravention; provide all information, documents evidence; co-operate genuinely, fully, continuously and expeditiously throughout the investigation and proceedings before the CCI; and not conceal, destroy, manipulate documents.

Further, individuals of the applicant who are named in the enquiry are also covered in the party’s leniency application they also benefit from lesser penalty.

The newly amended Act and the LPR Regulations 2024 have introduced the concept of “leniency plus”. As per this revised leniency regime, leniency applicants in an ongoing investigation are incentivised to disclose collusive conduct that is not related to the ongoing investigation and are unknown to the CCI.

Further, the LPR Regulation 2024 also allows for withdrawal of leniency applications before the receipt of the DG report by the CCI. However the DG is permitted to use the information and evidence submitted by the applicant even if the application is subsequently withdrawn.

There is no amnesty scheme under the Act.

Employees of a party under investigation can be summoned by the DG and examined under oath. During investigation, the DG issues summons to such employees and provides a date and time for recording of statement under oath. During the recording of such statements, the DG can also direct the employee to furnish information/documents supported by duly executed affidavit which may be relevant to the investigation.

The DG may seek documentary information directly from a party under investigation and can also direct third parties to furnish documentary information. The DG generally sends notices requisitioning information. Further, the DG may also direct such parties to submit the information on an affidavit.

The DG may seek information from parties located outside India. Since the DG is mandated to submit a self-contained Report to the CCI, the DG may require a party located outside India to submit information which may be necessary for the investigation. Parties located outside India are mandated to respond to the DG and non-furnishing of information, submitting incomplete and/or false information, may attract penalty.

There is significant inter-agency co-operation in India. The Act provides for a mechanism whereby a government and statutory authority can make a reference to the CCI if such an authority suspects any anti-competitive behaviour by companies.

The Act empowers the CCI to enter into MoU’s or arrangements with foreign agencies and as a part of its capacity building efforts, the CCI has entered into MoUs with the European Commission, Federal Antimonopoly Service of Russia, Australian Competition and Consumer Commission, Competition Bureau of Canada, etc.

As a part of the MoU’s/arrangements with these agencies, the CCI can potentially co-operate with them on cross-border matters.

In addition CCI is a Member of International Competition Network and BRICS and takes active part in their deliberation.

The Act does not provide for criminal sanctions in respect of infringements. However, non-compliance of CCI’s order trigger criminal provisions.

Under the Act, the sole agency to investigate and penalise cartel activity is the CCI. However, a party aggrieved by the CCI’s final order can file an appeal before the National Company Law Appellate Tribunal (NCLAT)

Once the CCI is of the prima facie opinion that there exists a cartel, a formal order is passed wherein the CCI records its findings and directs the DG to cause an investigation into the matter.

Post the DG’s investigation into the matter, his report is submitted to the CCI which forwards the same to the parties under investigation for their comments/objections. This is followed by an oral hearing and thereafter a final decision is taken by the CCI. The parties are provided with an opportunity to access the files of the DG/CCI subject to confidentiality provisions.

Typically, enforcement actions involving cartels can be brought against multiple parties in a single proceeding. There is no provision under the Act which allows parties to obtain separate trials.

Following the initiation of an investigation, the onus to prove a cartel is upon the office of the DG which presents its findings to the CCI by way of report. The evidence to be presented by the DG should be documentary and in the absence of documentary evidence, the DG may rely upon circumstantial evidence to prove the existence of a cartel. Thereafter the burden of proof shifts upon the parties to dispel the existence of the cartel and its effects in India.

The DG being the investigative arm of the CCI acts as a finder of facts. However, the final determination of infringement is done by the CCI.

There is no provision in the Act that permits the CCI to use evidence obtained in one proceeding in another proceeding. However, the CCI may rely upon its findings in a previous case.

As per the Act, the CCI is mandated to adhere to the principles of natural justice and can regulate its own procedure. However, rules of evidence relating to documents and their admissibility under the Indian Evidence Act, 1872, are followed.

The CCI is empowered to call experts, including persons from the fields of economics, commerce, and accountancy to assist the CCI during the course of any inquiry. Further, even parties under investigation regularly engage economists to present economic arguments and to put forward that they endeavour to demonstrate that there is no economic harm to the market.

The Act does not recognise any privileges. However, attorney and client communications are privileged and can be protected against disclosure.

The CCI generally clubs multiple cases involving the same facts. However, it may not inquire into anti-competitive agreements, if the same or substantially same facts and issues have already been decided by the CCI previously.

The DG does not have the power to impose any monetary sanctions on parties under investigation for cartel conduct. Sanctions, if any, are imposed by the CCI.

There is no concept of “plea bargaining” or “settlement” for cartel cases under the Act. However, under the leniency regime, the parties engaged in a cartel can approach the CCI for immunity/lesser penalty as explained in 2.11 Leniency and/or Immunity Regime.

If parties are held liable for cartel conduct, an aggrieved party can claim compensation for actual damages suffered. Further, in cases wherein individuals of a company are held responsible for cartel conduct, they can potentially be debarred from holding key positions in other companies.

Furthermore, debarment of delinquent parties from bidding processes depends on the terms and conditions of the tender documents and facts and circumstances of each case, however, the authors have noticed an increasing trend wherein tender documentation of procurers have specific clauses which contain debarment of the bidder in case they are found to be in contravention of the Act.

The Act only prescribes imposition of civil sanctions for cartel conduct.

As explained in 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards, for cartel conduct, the CCI is empowered to (i) issue “cease and desist” orders against the delinquent parties (including individuals); and/or (ii) impose monetary penalties. However, while imposing monetary penalties, the CCI must take guidance from the Penalty Guidelines.

As per the Penalty Guidelines, a step wise procedure has been laid out to calculate the amount of monetary penalty to be levied on the delinquent parties (including its individuals). As per the Penalty Guidelines, due regard is given to the nature and gravity of the offence, nature of the industry including implications on the economy. Furthermore, and importantly the CCI will also have due regard to various other factors which include:

• whether the enterprise has implemented a competition compliance programme;
• admission of contravention;
• extent of co-operation;
• duration of the offence;
• role of the enterprise; and
• retaliatory measures on other enterprises to participate in the contravention, etc.

On individuals, a monetary penalty which may be up to 10% of the average income of the preceding three financial years can be imposed, however, this is also subject to factors provided above.

The CCI, with the Penalty Guidelines, has codified that an effective competition compliance programme will act as a mitigating factor. This also flows from the CCI’s decisional practice. Since the Penalty Guidelines have been published recently, it remains to be seen the extent of reduction in penalty exercised by the CCI in cases where the delinquent parties have established a competition compliance programme.

The CCI does not have the power to order compensation to be paid by delinquent parties to aggrieved parties. The power to direct compensation vests with the NCLAT.

An order of investigation passed by the CCI is not appealable before the NCLAT since it is construed as an administrative/inter-departmental order which does not effectively determine the rights and obligations of the parties. Although, such orders can be challenged before constitutional courts in case the principles of natural justice have been violated.

Final orders wherein the CCI determines that delinquent parties have indulged in cartelisation can be challenged before the NCLAT. However, as per a newly introduced amendment to the Act, the delinquent parties are mandated to pre-deposit 25% of the penalty amount (if imposed) before the appeal is entertained.

Under the Act, any enterprise or person or government authority may make an application to the NCLAT for a claim of compensation if such enterprise or person or government authority can show that it suffered an actual loss or damage on account of the cartel. Further, such proceedings can only be initiated after the CCI has conclusively determined the existence of a cartel or it has been decided as such by the NCLAT or the Supreme Court. However, till date, no compensation application been finally decided by the NCLAT, though parties generally seek only monetary compensation.

Under the Act, where any loss or damage is caused to numerous persons having the same interest, one or more of such persons may, with the permission of the NCLAT, make an application for compensation and such an action is to be guided by the Rules laid down under the Code of Civil Procedure, 1908. Though no class action for determination of compensation has been instituted till date.

Since no compensation application has been decided by the NCLAT to date, the approach of the NCLAT with regard to indirect purchasers or “passing-on” defences is unclear.

Since a claim for compensation is based on the findings of the CCI or the NCLAT or the SC, the evidence put forth before these forums is admissible and thus parties may rely upon such evidence. However, since no compensation application has been decided by the NCLAT to date, the approach with respect to evidence obtained from other governmental proceedings remains unclear.

Since no compensation claim has been adjudicated by the NCLAT to date, the time for settlement of such disputes is unclear.

The Bar Council of India, which governs the profession of advocates, prohibits contingency fees and therefore an attorney’s compensation cannot be based on the quantum of compensation.

Unsuccessful parties are not obliged to pay defence costs and/or attorneys’ fees unless directed by the NCLAT or the competent courts.

Since compensation claims are filed and adjudicated by the NCLAT, the decisions of the tribunal can be challenged before the SC.

There is no additional relevant information pertinent to the understanding of the process, scope and adjudication of claims involving alleged cartel conduct in India.

The CCI, as part of its advocacy initiative, regularly releases advocacy booklets and guides relating to cartel conduct:

• Booklet 1; and
• Booklet 2.

A snapshot of important decisions, inter alia, concerning “cartels” is also published by the CCI in its quarterly newsletter, “Fair Play”:

• Fair Play 1; and
• Fair Play 2.