Source: https://iclg.com/practice-areas/cartels-and-leniency-laws-and-regulations/india
Timestamp: 2019-04-19 01:03:24+00:00

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In India, cartelisation is a civil offence prohibited under the Competition Act, 2002 (“Act”).
Cartels are prohibited under Section 3(1) read with Section 3(3) of the Act. Section 2(c) of the Act defines a cartel to include an association of producers, sellers, distributors, traders or service providers who, by an agreement amongst themselves, limit control or attempt to control the production, distribution, sale or price of, or trade in, goods or provision of services.
Section 3 of the Act prohibits and renders void agreements entered into between enterprises or persons or association of enterprises or persons with respect to the production, supply, distribution, storage, acquisition or control of goods or provision of services, which cause or are likely to cause an appreciable adverse effect on competition (“AAEC”) in India.
(d) directly or indirectly result in bid-rigging or collusive bidding.
Such agreements are presumed to have an AAEC and are consequently void.
An agreement can be in any form – written, oral or even a gesture. It does not have to be legally binding.
The Competition Commission of India (“CCI”) is the nodal agency which enforces the cartel prohibition in India.
(d) upon receipt of a leniency application.
(a) Scenario 1: In case the CCI is of the opinion that there exists no prima facie case, it shall close the matter and pass an order to that effect under Section 26(2) of the Act.
(b) Scenario 2: In case the CCI is of the opinion that there is a prima facie violation of the Act, it shall direct the Director General (“DG”) to investigate the matter. To this effect, it shall pass an order under Section 26(1) of the Act.
The DG is the investigative arm of the CCI. Upon receipt of an order under Section 26(1), the DG is required to review all the information on record with the CCI and collect further information and evidence. The DG is required to submit a report to the CCI, containing its findings on the allegations made, supported by all the evidence, documents and statements collected during the course of the investigation along with the DG’s analysis (“DG’s Report”).
disagree with the findings of the DG and direct a further investigation or support a further inquiry or itself proceed with a further inquiry in accordance with the provisions of the Act.
come to a conclusion that the material is insufficient to support such findings of the DG and accordingly form an opinion that a further inquiry is required before arriving at a conclusion.
The Ministry of Corporate Affairs of the Government of India has extended the exemption granted to Vessel Sharing Agreements (“VSAs”) of the liner shipping industry with effect from 4 July 2018 for a period of three years. The exemption applies to carriers of all nationalities operating ships of any nationality from any Indian port as long as such agreements do not include concerted practices involving fixing of prices, limitation of capacity or sales and the allocation of markets or customers. During the subsistence of this exemption, parties entering into VSAs are required to file the relevant VSA and other documents with the Directorate General of Shipping.
Section 32 of the Act empowers the CCI with extra-territorial jurisdiction, thereby giving it the power to inquire into any cartel operating outside India, which causes or is likely to cause an AAEC within India.
Please Note: * indicates that the investigatory measure requires the authorisation by a court or another body independent of the competition authority.
The Act contains provisions for the imposition of pecuniary penalties for non-compliance with the directions of the CCI and the DG. Further, the DG has the power to conduct unannounced search and seizure exercises (“dawn raid”).
The Act does not provide any general surveillance powers to the CCI or the DG. However, we understand that the DG, in the course of its investigation, coordinates with telecom companies to procure telephone call logs. In some extreme cases, the DG has sought cell tower data from telecom companies to geo-locate individuals who it suspects of having participated in a cartel.
The Act empowers the CCI to regulate its own procedure. In addition, both the DG and the CCI are vested with the same powers as a civil court under the Code of Civil Procedure, 1908 while trying a suit, including summoning and enforcing the attendance of any person and examining him on oath and requiring the discovery and production of documents.
The investigation powers of the CCI and the DG include the power to conduct dawn raids which has been exercised in two instances, thus far.
The searches under the Act are conducted by the officials from the office of the DG or any other officer authorised to carry out the search by the DG. Nothing under the Act or the rules framed therein require the officers conducting a search to wait for the legal representatives to be present before commencing the search exercise.
The Bar Council of India Rules (the code of ethics governing advocates in India) do not recognise a full-time salaried employee of a person, firm, cooperation, government or concern as an ‘attorney’. As such, the professional communications between an in-house counsel and officers, directors and employees of a company cannot avail the attorney-client privilege in India.
The Act does not provide any material limitations to the investigatory powers to safeguard the right of defence of companies and/or individuals under investigation.
The Act imposes sanctions for the obstruction of an investigation under Section 43 of the Act. A failure without reasonable cause to comply with the directions of the CCI or the DG in the course of an investigation exposes the offender to a fine of up to INR 100,000 for each day during which such failure continues, subject to a maximum of INR 10 million.
While the CCI has never penalised any person under this provision in a cartel case, a penalty of INR 10 million was imposed on Google in an investigation for alleged abuse of dominance for non-compliance with the directions of the DG.
It may also be noted that in the recent case of AKMN Cylinders (P) Ltd. & Anr v. CCI (Competition Appeal A.T. No. 50/2018), where the CCI had imposed a penalty on an individual on account of non-cooperation with the DG, the National Company Law Appellate Tribunal (“NCLAT”) set aside the penalty after an apology by the Appellant.
In case of cartels, under Section 27 of the Act, the CCI is empowered to impose on the enterprise a penalty of up to three times of its profit for each year of the continuance of such an agreement or 10% of the turnover for each year of the continuance of such an agreement, whichever is higher.
India, at present, does not have penalty guidelines to determine the quantum of penalty to be levied in each case.
Section 48(1) presupposes guilt only on the relevant individuals who were in charge and responsible for the conduct of the company at the time of the contravention of the Act. Section 48(1) also allows this presumption to be rebutted, if relevant individual(s) can demonstrate that the infringing act was committed without their knowledge, or had exercised due diligence to prevent such contravention. In contrast, under Section 48(2), the consent, connivance, or neglect of the relevant individuals is established by their de facto involvement, and is therefore not rebuttable. Additionally, Section 48(2) extends to anyindividual or person that has been involved with the company’s contravention, and is not limited to persons in charge of the company at the time of such contravention.
The maximum penalty that can be imposed on individuals associated with a company’s cartel conduct under Section 27 is 10% of his/her income for each year during the continuance of such a conduct by the company. However, in practice, on most occasions, the CCI has computed penalties by applying a rate of 10% to the individuals’ average income for the three preceding financial years.
In In Re: PK Krishnan, Case No. 28 of 2014, the CCI not only imposed a penalty of 10% of the individuals’ average income for the past three preceding years, but also specifically directed the All Kerala Chemists and Druggists Association to disassociate its management, governance and administration from two of its office bearers for a period of two years. Therefore, besides imposing monetary penalties on errant individuals of an organisation, the CCI has wide powers under Section 27 of the Act to pass any other order “it may deem fit”. In case of companies, a similar risk (as highlighted above) would exist if the CCI were to order the suspension or removal of directors or key managerial personnel. In the context of directors at least, an order of the CCI categorically directing the company to disassociate itself with a director is likely to trigger disqualification and vacation of office under Sections 164 and 167 of the Companies Act. Furthermore, the recently released compliance manual of the CCI also indicates the possibility of a CCI order disqualifying directors of companies.
The Act does not include any provisions for the reduction of a penalty on the basis of financial hardship.
However, in In Re: Express Industry Council of India and Jet Airways & Ors. (Case No. 30 of 2013), a case relating to a cartel for fixing of fuel surcharge for cargo transport by airlines, the CCI considered the fact that the airlines were incurring losses and had substantial debts while deciding the quantum of penalty.
The Act does not set out a limitation period for investigating matters relating to anti-competitive agreements. Further, the decision of the Supreme Court in Excel Crop Care v. Competition Commission of India and Anr. (Civil Appeal No. 2480 of 2014) has clarified that the CCI can examine anti-competitive agreements that have been entered into prior to the enforcement of Section 3 of the Act (i.e., 20 May 2009) and are either acted upon subsequently or the effects of which continue after the enforcement of Section 3 of the Act.
The Act does not contain any provision for this.
Yes, a leniency programme is provided for under Section 46 of the Act and supplemented by the Competition Commission of India (Lesser Penalty) Regulations, 2009 (“Leniency Regulations”). The Leniency Regulations govern the procedure and extent to which leniency (i.e., reduced penalties) can be granted to the applicants who make vital disclosures on cartel activity. The term ‘vital disclosure’ of information means full and true disclosure of information or evidence which would be sufficient to enable the CCI to form a prima facie opinion in relation to the existence of a cartel.
Yes, the leniency programme in India provides for a marker system wherein ‘priority status’ is granted to leniency applicants in order to determine the quantum of reduction in the penalties which could be imposed.
The CCI is empowered to grant “up to 100%” reduction in fines, i.e., complete immunity, to the applicant who is the first to make ‘vital disclosure’ to the CCI. Such information should either enable the CCI to form a prima facie opinion of the existence of the cartel or establish the contravention of Section 3 of the Act in a matter under investigation by the DG.
Subsequent leniency applicants who disclose evidence that provides ‘significant added value to the evidence’ already in possession with the CCI or the DG may also be granted leniency. The CCI can grant an applicant which is marked as second priority a reduction in penalty of “up to 50%”, whereas the third and subsequent applicants can be granted a reduction in penalty of “up to 30%”.
In practice, the CCI does not grant the first applicant “up to 100%” reduction in fines in cases where an investigation has commenced, and the parties subsequently file a leniency application. In In Re: Cartelization with respect to tenders floated by Pune Municipal Corporation for Solid Waste Processing (Case No. 50 of 2015, Suo Motu Case No. 3 of 2016 and Suo Motu Case No. 4 of 2016) (“PMC Cases”), all the parties had filed their leniency application after the commencement of the investigation. In this case, the CCI has granted “up to 50%” reduction in fines to the first leniency applicant followed by the other applicants.
The Leniency Regulations require that an enterprise seeking leniency should, in addition to making vital disclosure, also cease participation in the cartel (unless ordered otherwise by the CCI) and fully cooperate with the CCI. Such cooperation is required throughout the investigation and other proceedings before the CCI. Further, relevant evidence pertaining to the cartel should not be concealed, destroyed, manipulated, or removed by the leniency applicant.
The Indian leniency programme is still in its nascent stages, but has seen significant growth in the past year. The CCI passed its first order in a leniency case in 2017, and in 2018, the CCI has already passed orders in four other leniency cases. While it has exercised its power to grant a 100% reduction to the first applicant in In Re: Cartelisation in respect of zinc carbon dry cell batteries market in India (Suo Motu Case No. 02 of 2016) andin In Re: Cartelisation by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports broadcasters, Case No. 2 of 2013 (“Sports Broadcaster Case”), where the information brought a new cartel to light, it has also exercised its discretion and not awarded any reduction to the second and third applicants in one of the PMC Cases.
While the Leniency Regulations allow the applicant to initially contact the CCI orally, the CCI will subsequently direct the applicant to submit a written application comprising the information specified in the Schedule to the Leniency Regulations, which includes the goods/services involved, the geographic market covered, the duration of the cartel, an estimate of the volume of the business affected by the cartel, and evidence supporting the existence of the cartel. Oral applications can be made to secure a marker.
The 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 entities 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 made a public disclosure of the information. Further, if the DG deems it necessary, he may disclose information in the leniency application, without the applicants’ consent, only after recording reasons in writing for such disclosure, and obtaining prior approval from the CCI. Additionally, inspection (of non-confidential information/evidence) in leniency matters can be allowed only after the CCI has forwarded a copy of the report of the DG to the parties concerned.
The ‘continuous cooperation’ requirement ceases to apply upon completion of the investigation and proceedings before the CCI.
The Indian competition law regime does not include a ‘leniency plus’ or ‘penalty plus’ policy.
Yes, the 2017 amendment to the Leniency Regulations has brought clarity in the regulation that individuals involved in a cartel can act as whistle-blowers and also seek a reduction in penalty. To this end, the leniency applicant is required to specify the names of such individuals involved in the cartel, at the time of submission to the CCI.
The Act does not prescribe any procedure for settlement or plea bargaining.
Sections 53A and 53B of the Act stipulate that any person aggrieved by an order/decision of the CCI may appeal to the NCLAT within 60 days from the date of receipt of such order/decision. A final appeal from the NCLAT’s order lies before the Supreme Court under Section 53T of the Act within a period of 60 days from the date of communication.
It should be noted that a prima facie order directing the DG to conduct an investigation is not appealable.
No, there are no specific provisions in the Act for suspension of the company’s requirement to pay the fine. The erstwhile Competition Appellate Tribunal (“COMPAT”) and subsequently, the NCLAT, at their discretion, have typically required appealing parties to deposit between 10%–25% of the total fine imposed by the CCI before hearing the appeal.
However, in the recent case of Himmatlal Agrawal v. Competition Commission of India (Civil Appeal No. 5029 of 2018), where the COMPAT had ordered the Appellant to deposit 10% of the penalty amount and dismissed the appeal upon his failure to do so, the Supreme Court held that the right to appeal was a statutory right and an appeal could not be dismissed due to an the Appellant’s failure to deposit the amount. However, it found that the stay order on recovery of the penalty by the CCI could be vacated if the deposit is not made.
It may also be noted that in the recent case of SCM Soilfert Ltd. & Anr. v. CCI (I.A. 55/2018 in A.T. No. 59/2015), the NCLAT has clarified that interest is required to be paid on the penalty amount, from the date it was due till the date when it is given to the CCI, regardless of the deposit with the COMPAT/NCLAT registry.
There are no specific provisions in this regard. However, given that the NCLAT has the same powers as are vested in the civil courts, cross-examination is permissible.
(c) for the contravention of orders of the CCI and the NCLAT.
The Act does not contain any provisions for ‘standalone’ action. Therefore, it only contemplates ‘follow on’ actions.
Section 53N(4) of the Act provides for a claim for loss or damages to be filed by way of class actions and representative claims.
The Act does not provide for a limitation period for filing an application for civil damages arising from cartel conduct. In cases where no period of limitation is prescribed, Indian Courts generally adhere to a principle known as the “doctrine of laches”, which provides that proceedings ought to have been initiated within a “reasonable period of time” and that a failure to do so results in serious prejudice and harm to the defendant and adversely impacts the ability of the defendant to defend itself.
The Act does not contain any provisions relating to the “passing on” defence.
Under Rule 4 of the COMPAT (Form and Fee for Filing an Appeal and Fee for Filing Compensation Applications) Rules, 2009, if the amount of compensation claimed is less that INR 100,000, the fees payable would be INR 1,000. If the amount of compensation claimed is more than INR 100,000, the amount of fees payable would be INR 1,000 plus INR 1,000 for every additional INR 100,000 claimed, subject to a maximum of INR 3,000.
No such cases have been decided yet and there have not been any substantial out of court settlements. However, follow-on claims have been filed against DLF Limited in the case involving Belaire Owners’ Association v. DLF Limited, as well as by the Metropolitan Stock Exchange of India against the National Stock Exchange which is presently pending before the NCLAT and the decision in the case may provide guidance for follow-on claims.
The trend from recent leniency cases indicates that the CCI will consider granting a 100% reduction in fines or complete immunity only where the applicant has come forward and has disclosed a cartel that was previously not known to the CCI. However, where the investigation has already been under way and a significant time had lapsed from the start of the investigation before the parties came forward and cooperated with the investigation, the CCI has tended to treat the leniency application as a case for the reduction of fines as opposed to granting complete immunity.
The CCI has also begun to consider commercial justifications more seriously when deciding on both abuse of dominance and cartel cases. In In Re: Indian Oil Corporation and Ors. (Case No. 05 of 2018), the commercial justification provided by parties was accepted by the CCI in relation to a cartel case for the first time.
It may also be noted that in a recent cartel case, Vipul A. Shah v. All India Film Employee Confederation and Ors. (Case No. 19 of 2014), the CCI clarified that trade unions are not exempt from the provisions of the Act. Pursuant to the above, it found a memorandum of understanding for the fixation of wages, the imposition of a mandatory requirement of a no-objection from the unions prior to hiring a non-member and the fixation of a ratio for hiring workers to be anti-competitive and in violation of the anti-cartel provisions of the Act.
It is interesting to note that the Act provides for the levy of a penalty based on the ‘turnover’ of the culpable entities. However, the meaning of the term ‘turnover’ has not been clarified in the Act. Therefore, the CCI has often levied penalties as a percentage of the ‘total turnover’ in the past. In the case of Excel Crop Care Ltd. v. Competition Commission of India (Civil Appeal No. 2480 of 2014), the Supreme Court of India has sought to correct this practice, by observing that such a practice would bring about inequitable results and clarified that a penalty ought to be levied on the ‘relevant turnover’ of the culpable entities, i.e., the turnover pertaining to products and services that have been affected by the contravention. However, in the Sports Broadcaster Case, the CCI has held that the concept of relevant turnover/profit requires proof that the parties are a multi-product company. Such a multi-product company must prove that its products/services are not related to and not dependent on the products that are involved in the cartelisation. Essentially, the parties must clearly indicate what proportion of their total turnover does not include the turnover from products/services that are not part of the cartelisation. If this cannot be proved, the CCI will calculate penalties based on the total turnover/profit, as opposed to a “restricted” turnover/profit that may be submitted by the parties.

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