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Antitrust and Competition in India

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Samir Gandhi, Hemangini Dadwal and Indrajeet Sircar

1.           Overview of competition laws

For 40 years, India had its own version of competition law, which was enacted through a legislation called the Monopolies and Restrictive Trade Practices Act 1969 (MRTP Act). This legislation, based on principles of a “command and control” economy, was designed to put in place a regulatory regime in the country which did not allow concentration of economic power in a few hands that was prejudicial to public interest and therefore prohibited any monopolistic and restrictive trade practices. Post-economic liberalization in 1991, it became imperative to put in place a competition law regime that was more responsive to the economic realities of the nation and consistent with international practices. Consequently, in 2002, the Indian Parliament approved a comprehensive competition legislation — the Competition Act 2002 (Competition Act), to regulate business practices in India so as to prevent practices having an appreciable adverse effect on competition (AAEC) in India. The Competition Act primarily seeks to regulate three types of conduct: anti-competitive agreements, abuse of a dominant position and combinations (i.e., mergers, acquisitions and amalgamations). The Competition Act, which was amended by the Competition (Amendment) Act 2007, later came into force on 20 May 2009, when the Government of India notified the provisions related to anti-competitive agreements and abuse of dominant position of the Competition Act. It took three more years for the merger control provisions of the Competition Act to be brought into force in June 2011.

2.           Enforcement and administration

The Competition Act has also created a new enforcement authority, the Competition Commission of India (CCI), which is solely responsible for the enforcement and administration of the Competition Act. The CCI comprises of a chairperson and not fewer than two and not more than six other members to be appointed by the Government of India. The CCI presently comprises five members, including the chairman , Ashok Chawla. The CCI may initiate an inquiry in relation to an anti-competitive agreement or abuse of dominant position either on its own, on the basis of information or knowledge in its possession, or on receipt of information or on the receipt of a reference from the government or a statutory authority. Any person, consumer or their associations can file a complaint/information relating to anti-competitive agreements and abuse of dominant position. With respect to combinations, the CCI may initiate an inquiry either on its own or on the basis of the notification by the firms proposing to enter into the combination. The CCI and its investigative wing, the Office of the Director General (DG), is entrusted with extensive powers of investigation with respect to anti-competitive practices, which include powers to summon and enforce the attendance of any person, examine them on oath, receive evidence on affidavit and other similar provisions. If the CCI is of the opinion that there is a prima facie case, it shall direct the DG to investigate the matter and report its findings. The DG is also empowered to carry out “dawn raids” for the purpose of its investigation. Late last year, in a case involving allegations of abuse of dominance, the DG exercised this power for the first time. The CCI may rely upon the recommendations made by the DG in its report and, after giving the concerned parties a due opportunity to be heard, pass such orders as it may deem fit, including an order to cease and desist and impose penalties. Under the Competition Act, there is a provision for appeal to the Competition Appellate Tribunal (COMPAT) against certain orders of the CCI. A further appeal from the decision of the COMPAT may lie before the Supreme Court of India.

3.           Anti-competitive agreements and other conduct

3.1         Scheme of the Competition Act

The Competition Act is based on the “effects doctrine” and grants the CCI jurisdiction over any agreement, abuse of a dominant position or combination that takes place outside of India as long as such agreements, conduct or combination have or are likely to have an AAEC in India. This is a significant development in the new competition law regime since the erstwhile MRTP Commission did not have extra-territorial jurisdiction.

3.2         Anti-competitive agreements

The Competition Act seeks to regulate two kinds of agreements: (a) anti-competitive agreements between/amongst competitors (horizontal agreements) and (b) anti-competitive agreements between enterprises or persons at different stages or levels of the production chain (vertical agreements). Under the Competition Act, certain kinds of horizontal agreements (described in the next subsection) are presumed to cause an AAEC in India. The presumption does not mean that all alleged horizontal agreements are necessarily anti-competitive; it remains open to the parties entering into such an agreement to provide evidence that their agreement does not result in an AAEC and rebut the presumption. On the other hand, such presumption does not apply to vertical agreements. Vertical agreements are usually permitted unless it is established that they cause, or are likely to cause, an AAEC within India. The Competition Act provides an exhaustive list of horizontal agreements that are presumed to cause an AAEC in India, as well as an inclusive list of vertical agreements that may be prohibited depending upon their effect on conditions of competition within India.

3.3         Cartel conduct

The Competition Act sets out a list of horizontal agreements that are presumed to cause an AAEC within India. In other words, once it is established that such an agreement exists and the agreement results in any of the conduct listed, the CCI may, on the basis of the presumption that they cause an AAEC, seek to prohibit them. These four types of agreements, which are also known as “cartel” arrangements, are set out in this list:

  • price-fixing agreements, i.e., agreements between competitors, which directly or indirectly have the effect of fixing or determining purchase or sale prices;
  • agreements between competitors, which seek to limit or control production, supply or markets;
  • market-sharing agreements between competitors irrespective of the form that they may take; this includes market sharing by way of product allocation, allocation of geographic markets or source of production; and
  • bid-rigging agreements, i.e., agreements between competitors, which have the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process of bidding.

Notably, the presumption that these types of horizontal agreements cause an AAEC in India does not apply if the agreement is entered into by way of joint ventures, provided that such joint venture agreement results in increased efficiency in the process of production, supply, distribution, storage, acquisition or control of goods or provision of services. If a joint venture between competitors, however, involves the acquisition of assets or shares or voting rights or control of one party to the agreement by another, it may be characterized as a “combination” and will require pre-notification to the CCI, if it satisfies the asset or turnover thresholds prescribed under the Competition Act. Since its inception in 2009, the CCI has examined allegations of cartelization in several sectors, including cement, tires, film distribution, banks, steel, float glass and pharmaceuticals. The CCI has come a long way since its first cartel violation decision, when three associations of film producers got away with nominal fines. However, the CCI has taken a stricter approach in subsequent decisions, including the cement cartel case in which 11 companies were fined 50 percent of the profits made during the cartel period. Interestingly, in the last few cartel decisions, there has been an increasing trend within the CCI to scrutinize the role of trade associations in cartel investigations. In fact, the recent orders of the CCI, including the cement cartel case, distribution of pharmaceuticals case and the LPG manufacturers cartel case, well demonstrate that the CCI is unlikely to shy away from holding trade associations liable where such associations have engaged in any conduct, by which they have, directly or indirectly, assisted its members to engage in any kind of anti-competitive activity. It may also become important to note that the CCI has started to look into the role of individuals (members of the executive committee of the industry association) in the anti-competitive practice carried out by the association, and most recently imposed penalties on the income of the office bearers of a trade association for their role and contribution to cartel activity.

3.4         Vertical agreements

As far as the regulation of vertical agreements is concerned, there is no corresponding presumption of an AAEC under the Competition Act. As such, vertical agreements are subject to a detailed examination (commonly known as the “rule of reason” test) and it is only when an AAEC in India is established that such agreements are sought to be prohibited. Vertical agreements such as tie-in, resale price maintenance, refusal to deal, exclusive supply agreements and exclusive distribution agreements are specifically listed and may be prohibited under the Competition Act depending on their actual or likely effect on conditions of competition. While assessing the likely effects of the agreement on the relevant market in India, the CCI may consider all or any of the factors prescribed in section 19(3) of the Competition Act. Amongst others, these factors include driving existing competitors out of the market and foreclosure of competition by hindering entry into the market. From a review of the CCI’s decisions on vertical arrangements, it appears that it has clearly established that for an infringement of the provision on anti-competitive vertical agreements under the Competition Act, five essential elements have to be satisfied:

  • there must exist an agreement amongst enterprises or persons;
  • the parties to such agreement must be at different stages or levels of the production chain, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services;
  • the agreeing parties must be present in different markets;
  • the agreement should be of the nature as illustrated in section 3(4) of the Competition Act; and
  • the agreement should cause or should be likely to cause an AAEC in India.

Most importantly, the CCI has acknowledged that for a vertical restraint to adversely affect the competitive conditions at different levels of a production-supply chain, it is imperative for the parties to the agreement to possess some market power in their respective market spheres. Most recently, the CCI imposed heavy fines on 14 original equipment manufacturers for entering into refusal to deal arrangements and exclusive distribution and supply agreements in relation the supply of spare parts. Significantly, each of the manufacturers were held to be dominant in the supply of spare parts in their brand. In another case, the CCI has also held that where an agreement cannot be strictly classified as a horizontal or vertical agreement, but has the effect of causing or is likely to cause an AAEC, it would still be treated as an anti-competitive agreement, and be prohibited. Further, by way of a notification dated 11 December 2013, the Indian government, in public interest, exempted Vessel Sharing Agreements (VSAs) of the liner shipping industry from the provisions of section 3 of the Competition Act for a period of one year. However, there is no update on whether this notification has been extended beyond one year.

4.           Abuse of dominant position

The Competition Act prohibits an enterprise, which enjoys a “dominant position” in a relevant market from abusing its position of dominance. Under the Competition Act, “dominant position” is defined as a position of strength, enjoyed by an enterprise, in the relevant market in India which (a) enables it to operate independently of competitive forces prevailing in the relevant market or (b) to affect its competitors or consumers or the relevant market in its favor. The Competition Act does not specify any single criterion for determining whether an enterprise or group enjoys a dominant position in a relevant market; instead it provides a list of several factors, which may be considered by the CCI when determining such dominance. These factors include market share, size and resources of an enterprise, size and importance of competitors, market structure and size of market, and countervailing buying power. The Competition Act provides an exhaustive list of practices, which, when carried out by a dominant enterprise or group, would constitute an abuse of dominance and any behavior by a dominant firm which falls within the scope of such conduct is likely to be prohibited. These include:

  • imposing unfair or discriminatory conditions on sale or purchase of goods/services, including predatory pricing;
  • limiting or restricting:
  • production of goods or provision of services of a market; or
  • technical or scientific development relating to goods or services to the prejudice of consumers;
  • indulging in practice or practices resulting in denial of market access, in any manner;
  • making the conclusion of contracts subject to acceptance by other parties of supplementary obligations, which, by their nature according to commercial usage, have no connection with the subject of such contracts; and
  • using one’s dominant position in one relevant market to enter into or protect another.

The prohibition on imposing “unfair” or “discriminatory” pricing, however, does not apply to dominant enterprises when such conduct is employed to meet competition. Interestingly, the terms “unfair” or “discriminatory” have not been defined under the Competition Act. The CCI has so far issued decisions in abuse of dominance cases pertaining to sectors such as the stock exchange, real estate, specialty glass, sports regulation, etc. One of the interesting trends in the CCI’s enforcement pertains to the determination of the “relevant market” in investigations into potential abuse of dominance. So far, the CCI seems inclined to define the relevant market in the narrowest possible way. For instance, in the DLF decision, when assessing alleged abuse by DLF (a real estate company), the CCI adopted a fairly narrow definition of the relevant market. The primary question was whether “high-end” residential apartments in a small geographical region (Gurgaon) would constitute a relevant market. In its analysis, the CCI distinguished between the markets for high-end and low-end apartments and found that these form two separate product markets, as consumer preferences for each were different. Similarly, in the recent auto-parts decision, the CCI considered each brand of cars to qualify as a separate relevant market for the supply of spare parts and after-sales services. The language used in section 4 (1) of the Competition Act seems to suggest that abuse of a dominant position is subject to a per se prohibition. In other words, the CCI is not required to carry out a market effect analysis for abuse of dominance cases. Nevertheless, from a review of the decisions of the CCI, it appears that the CCI is inclined to analyze market effects as well while dealing with abuse of dominance cases.

5.           Mergers and acquisitions

From 1 June 2011, all high-value combinations (i.e., acquisitions, mergers and amalgamations) require prior notification to and approval from the CCI. The provisions pertaining to the Indian merger control regime are contained in sections 5 and 6 of the Competition Act and the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 as amended up to 4 April 2013 (Combination Regulations) issued under the Competition Act.

5.1         Filing thresholds

A merger filing with the CCI must be made if any one of the asset/turnover thresholds set out in the succeeding list is satisfied, unless the de minimis test described is met. Post the combination, the group to which the target will belong will have the following:

  • assets in India of more than INR60 billion; or
  • turnover in India of more than INR180 billion; or
  • worldwide assets of more than USD3 billion, including at least INR7.5 billion in India; or
  • worldwide turnover of more than USD9 billion, including at least INR22.5 in India.

The parties to the transaction (i.e., the buyer and the target) have:

  • assets in India of more than INR15 billion; or
  • turnover in India of more than INR45 billion; or
  • worldwide assets of more than USD750 million, including at least INR7.5 billion in India; or
  • worldwide turnover of more than USD2.25 billion, including at least INR22.5 billion in India.

5.2         De minimis test

No filing is required if:

  • the target has assets in India of INR2.5 billion or less; or
  • the target has turnover in India of INR7.5 billion or less.

The CCI has the jurisdiction to review mergers and acquisitions that are taking place wholly outside India as long as they satisfy the prescribed asset and turnover thresholds under the Competition Act. Further, the pre-notification is required to be made within 30 days of the approval of the transaction by the board of directors (in the case of mergers or amalgamations) or within 30 days of the execution of an agreement or any other binding document conveying the decision or intention to acquire (in the case of an acquisition). Where no such document has been executed but the intention to acquire is communicated to the Central Government or State Government or a statutory authority, the date of such communication shall be deemed to be the date of execution of the other document for acquisition. In the case of a hostile takeover, a notification to the CCI will need to be made within 30 days from the date of execution of any document by the acquirer, which conveys the decision or intention to acquire shares, control, assets or voting rights in the target. It becomes important to note that a failure to notify a combination does not mean that the CCI cannot investigate such combinations. The Competition Act empowers the CCI to investigate such combinations up to one year from the date on which the combination takes effect. The responsibility for making the notification to the CCI varies depending upon the nature of transaction. While in the case of an acquisition, it is the sole responsibility of the acquirer, in the case of mergers and amalgamations, it is the joint responsibility of all the parties. Notification to the CCI may be made either in Form I or Form II, as specified in the Combination Regulations. Form I is a short form of notification and Form II is the longer form, which requires extensive details and documents relating to the parties, the transaction and the affected markets to be provided (much more than what appears to be required in other jurisdictions across the world). The notice to the CCI is ordinarily to be filed in Form I while a Form II is “preferred” in instances when (a) it is a horizontal combination and the parties to the combination have a combined market share of 15 percent or more and (b) if it is a vertical combination and the parties to the combination have a combined or individual market share of 25 percent or more in the relevant market. Further, the CCI has the power to ask for additional information or to ask parties to file the notice in Form II even after the parties have notified a transaction in Form I. Form I filings are to be made with a fee of INR1.5 million and Form II filings are to be made with a fee of INR5 million. The Competition Act, however, exempts share subscription or financing facility or any acquisitions made pursuant to a loan agreement or an investment agreement by banks, public financial institutions, venture capital funds and foreign institutional investors, from the requirement of prior notification and approval. Such transactions only require notification to the CCI in Form II within seven days of completion of the transaction. The Ministry of Corporate Affairs, Government of India, has by way of its Notification S.O. 93(E) dated 8 January 2013, exempted from filing requirements all combinations involving banking companies in respect of which the Central Government has issued a notification under section 45 of the Banking Regulation Act 1949, for a period of five years from the date of the notification.

5.3         Exemptions from notification

Schedule I of the Combination Regulations treats certain categories of transactions as being ordinarily not likely to cause an appreciable adverse effect on competition, and hence provides that a pre-notification need not normally be filed for such transactions. These include the following:

  • acquisition of shares or voting rights made solely as an investment or in the ordinary course of business, provided that the total shares or voting rights held by the acquirer directly or indirectly, does not entitle the acquirer to hold 25 percent or more of the total shares or voting rights of the company, of which shares or voting rights are being acquired, directly or indirectly or in accordance with the execution of any document including a shareholders’ agreement or articles of association, not leading to acquisition of control of the enterprise whose shares or voting rights are being acquired;
  • an acquisition of additional shares or voting rights of an enterprise by the acquirer or its group, not resulting in gross acquisition of more than 5 percent of the shares or voting rights of such enterprise in a financial year, where the acquirer or its group, prior to acquisition, already holds 25 percent or more shares or voting rights of the enterprise, but does not hold 50 percent or more of the shares or voting rights of the enterprise, either prior to or after such acquisition: Provided that such acquisition does not result in acquisition of sole or joint control of such enterprise by the acquirer or its group;
  • an acquisition of shares or voting rights, where the acquirer, prior to acquisition, has 50 percent or more shares or voting rights in the enterprise whose shares or voting rights are being acquired, except in cases where the transaction results in transfer from joint control to sole control;
  • acquisition of assets not directly related to the business activity of the party acquiring the asset or made solely as an investment or in the ordinary course of business, not leading to control of an enterprise, and not resulting in the acquisition of substantial business operations in a particular location or for a particular product or service, irrespective of whether such assets are organized as a separate legal entity;
  • amended or renewed tender offer, where a notice has been filed with the Commission prior to such amendment or renewal;
  • an acquisition of stock-in-trade, raw materials, stores and spares, trade receivables and other similar current assets in the ordinary course of business;
  • acquisition of shares or voting rights pursuant to a bonus issue, stock split, consolidation, buy back or rights issue, not leading to acquisition of control;
  • acquisition of shares or voting rights by a securities underwriter or a stock broker on behalf of a client in the ordinary course of its business and in the process of underwriting or stock broking;
  • acquisition of control, shares, voting rights, or assets by one person or enterprise, of another person or enterprise within the same group, except in cases where the acquired enterprise is jointly controlled by enterprises that are not part of the same group;
  • a merger or amalgamation of two enterprises where one of the enterprises has more than 50 percent shares or voting rights of the other enterprise, and/or a merger or amalgamation of enterprises in which more than 50 percent shares or voting rights in each of such enterprises are held by enterprise(s) within the same group, provided that the transaction does not result in a transfer from joint control to sole control.

By way of recent amendments to the Combination Regulations on 28 March 2014 (2014 Amendment), the exemption that was earlier available to combinations taking place entirely outside India with insignificant local nexus and effect on markets in India was removed.

5.4         Merger review

The Competition Act prohibits a person or an enterprise from entering into combinations which cause or are likely to cause an AAEC within the relevant market in India. In other words, an “effects test” envisaged under the Competition Act will be applied by the CCI to determine whether a proposed combination is likely to cause an AAEC in India. This effects test essentially involves an economic assessment to determine the possible pro- and anti-competitive effects of the combination. While assessing the likely economic effects, the CCI is required to examine several factors prescribed under the Competition Act, including the extent of barriers to entry, countervailing buying power, level of combination in the market, and the extent of effective competition likely to sustain in the market. Based on such assessment, the CCI may finally pass three types of orders: (a) approve the combination; (b) disapprove the combination; and (c) approve the combination subject to modifications. Further, subsequent to the 2014 Amendment, the CCI has adopted a substantive approach to notifications earlier escaping scrutiny, by requiring that the determination of the notification requirements should be with respect to the substance of the transaction, thereby requiring the parties to provide details of transactions which may otherwise benefit from the exemptions under the Act and the Combination Regulations, as long as such transactions are considered to be interdependent and interconnected with the primary notifiable combination. The CCI is required to form a prima facie opinion within 30 days of the notification as to whether a proposed transaction will cause an AAEC. If the CCI is of the opinion that the notified transaction is not likely to cause an AAEC in India, it will prima facie approve the proposed transaction so notified to it and publish its decision on its website (Phase I Review). On the other hand, if the CCI finds that a proposed transaction may prima facie give rise to an AAEC and accordingly merits further investigation, then the time limit for the CCI’s final determination is extended to the maximum of 210 days from filing of the notification under the Competition Act (Phase II Review). The Phase II Review process involves inter alia directing parties to publish the details of the combination in national newspapers and inviting the opinion of any person or member of the public affected or likely to be affected by the combination. Often, during the merger review process, the CCI requires the parties to the combination to file additional information. The time taken by the parties to the combination in furnishing additional information shall be excluded from the 30-day period to form a prima facie opinion and 210-day period to pass the final decision on the proposed combination. Further, while the Combination Regulations provide that the CCI shall endeavor to make its final determination within 180 days from the date of filing the notification, this target is not binding on the CCI. In the event that the CCI fails to pass a merger clearance decision within 210 days (excluding the stoppage time), the combination will be deemed to be approved. The merger control regime in India has now been in place for almost four years. The CCI has looked into more than 200 combinations in sectors, including automobiles, pharmaceuticals, steel, insurance, media and real estate. While a majority of the combinations have been approved by the CCI unconditionally, the CCI has sought commitments and modifications to a few combinations in the first phase of review. While two of these were in relation to non-compete clauses in the pharmaceutical sector, more recently the CCI sought to make modifications in relation to an agreement to set up a joint venture between state-owned oil manufacturing companies and the Mumbai Airport facilities for an integrated fuel facility at the airport. The commitments included removal of restrictive use clauses and ensuring access to all aviation turbine fuel suppliers at the Mumbai Airport. In the recent past, CCI has escalated at least two cases, one in the pharmaceutical sector and another in the cement industry, to the detailed second phase review stage as contemplated under the Competition Act. In one of these cases involving two generic pharmaceutical companies, the CCI has approved the transaction subject to the divestment of two key product lines and six other major products of the parties. This case, being the first ever case involving structural remedies, provides some valuable insights into the implementation of the provisions of the Competition Act dealing with the detailed second phase review stage, which remained largely untested till recently. In most cases, the CCI has been able to clear merger applications well within the specified time limit, subject to clock stops. The CCI has also established a number of key principles since its introduction, which will shape the competition law regime in India. For example, through its decisions, the CCI has sought to clarify what it considers “control” under the Competition Act. Further in relation to the exemption available to certain acquisition of shares not amounting to more than 25 percent in the target enterprise, the CCI has clarified that where such an acquisition is made by an enterprise into its competitor, the acquisition is not considered to be in the “ordinary course of business” or “solely as an investment,” and accordingly, the exemption is unlikely to be available. While the CCI has in place a mechanism for informal and non-binding consultations with the combination division, there still remain a number of ambiguities in the language used in the provisions of the Competition Act and Combination Regulations which are yet to be clarified by the CCI.

6.           Penalties and liabilities

The Competition Act, unlike its predecessor, the MRTP Act, prescribes heavy penalties for the violation of its provisions. In the case of anti-competitive agreements and abuse of dominance, the CCI may impose fines of up to 10 percent of the average turnover for the last three preceding financial years upon each of such persons or enterprises that are parties to such agreements or abuse. In the case of cartels, the CCI may impose the higher of the amount equal to three times the total profits for each year of the continuance of such agreement or 10 percent of turnover for each year of the continuance of the agreement. The CCI may also require parties to an anti-competitive agreement or enterprises abusing their dominant position to “cease and desist” from continuing with such agreements or practices. The CCI may also sanction modification of agreements, which are found to be anti-competitive. In the case of abuse of dominance, the CCI has the power to order the division of the dominant enterprise. During the last few years, the CCI has sent out a strong message to the industry that it will not hesitate to use its considerable fining powers available under the Competition Act, if the gravity and the nature of infringement so demands. The CCI has imposed penalties up to the highest permissible level of 10 percent of the average annual turnover of the past three years, including a cartel case involving seven regional film bodies for forming a cartel. As indicated earlier, in another cartel case involving 11 cement companies, the CCI fined companies 50 percent of the profit made during the cartel period. One issue that remains unclear is how the CCI is likely to determine the quantum of fine that may be imposed on parties for contravening the provisions of the Competition Act. While most jurisdictions across the world, such as the European Union, consider the degree of involvement of a party, as well as the mitigating factors at the time, to determine the quantum of fine, the CCI has been silent in its orders till date in this regard. However, news reports have indicated that the CCI may soon come out with regulations/guidelines on the method of quantifying fines in light of the gravity of the infringement. With regard to combinations, if the CCI is of the opinion that the combination will cause or is likely to cause an AAEC within India, the CCI may either pass an order prohibiting the proposed combination or may permit the combination subject to modifications in the scheme of merger, acquisition or amalgamation. Failure to notify a combination to the Commission can result in a fine of up to 1 percent of the combined value of the turnover or the assets of the enterprises involved, whichever is higher. The CCI has exercised such powers in a number of instances. For belated notification, the CCI has imposed penalties up to INR100 million in a transaction involving Titan International and Titan Europe. Further, in cases where parties have consummated (whole or part of) a transaction, prior to receiving approval from the CCI (gun-jumping), the CCI has, further to its powers under the Competition Act, imposed penalties in two cases amounting to INR10 million and INR30 million, respectively (significantly less than the maximum amount it is empowered to impose). Till date the CCI has not exercised its power to impose the highest allowable penalty under the Competition Act. Further, non-compliance with orders passed by the CCI or directions of the DG may also attract a penalty of INR100,000 for each day of non-compliance subject to a maximum of INR10 million. Failure to pay the fine could result in imprisonment for up to a period of three years, or a fine of up to INR250 million. The CCI had for the first time imposed a fine of INR10 million on Kingfisher Airlines Limited (Kingfisher) for not furnishing information it sought during the ongoing investigation into Kingfisher’s proposed strategic agreement with Jet Airways. Though the fine was later reduced to INR7.25 million by the COMPAT, this particular CCI order sent out a strong message to the industry that the CCI may use its power to impose fines for non-compliance with CCI/DG’s direction.

7.           Leniency

The Competition Act has certain leniency provisions, including those aimed at encouraging the flow of “insider information” regarding cartels. The CCI has the power to impose lower penalties if a cartel participant has made a disclosure which is full, true and vital to expose the cartel. To this end, and in addition to the lesser penalty provision in the Competition Act, the CCI has notified and put into effect the Competition Commission of India (Lesser Penalty) Regulation (Lesser Penalty Regulations) with effect from 13 August 2009. The objective of the Lesser Penalty Regulations is to encourage a cartel member to help the CCI detect and investigate cartels, which usually is a challenge on account of the secrecy under which the cartels operate. The Lesser Penalty Regulations follows a “first-come, first-served” approach. The first member to approach the Commission who makes a vital disclosure to the CCI on the existence of a cartel may receive a waiver of penalty up to 100 percent. Members who subsequently contact the CCI are eligible for partial penalty waivers, up to 50 percent and 30 percent, respectively, on the condition that they provide additional valuable information which was not known to the CCI earlier. However, such reductions are absolutely discretionary. It is solely up to the CCI to decide whether the information provided by the concerned member was vital or not. The Lesser Penalty Regulations require the CCI to either reduce or waive the monetary penalty only after duly considering (a) the stage at which the applicant has approached the CCI, (b) the evidence already in possession of the CCI, (c) the quality of information provided by the applicant and (d) the overall facts and circumstances of the case. According to news reports, the CCI has, in at least two cases, received leniency applications.

8.           Reform

In an attempt to plug in existing lacunas in the Competition Act, in 2012, the Government of India issued a set of draft amendments. Based on the recommendations of the expert committee, the government introduced the Competition Amendment Bill, 2012 (Bill) in the lower house of the Indian Parliament, the Lok Sabha. While these amendments are yet to be notified, once implemented, they are likely to introduce significant changes to competition in India. Most notably, the Bill seeks to introduce the concept of “joint dominance” under section 4 of the Competition Act. With this amendment, the CCI will be able to assess dominance on the basis of the combined ability of two or more enterprises to act independently of the competitive forces in the relevant market, in cases where one enterprise doesn’t qualify as being dominant on its own. The Bill also provides an enabling provision which will give the government the flexibility to specify sector-specific asset/turnover thresholds. This will then determine whether the pre-merger notification requirement is triggered in the relevant sector. In terms of procedure, one of the most controversial amendments sought to be introduced in the Bill is in relation to the CCI’s power of “search and seizure” or dawn raids. The Bill replaces the existing requirement of the DG to seek prior sanction from the Chief Judicial or Metropolitan Magistrate for conducting a search or seizure operation with a requirement to seek prior sanction from the Chairperson of the CCI instead. This will most likely ease the process for conducting “dawn raids” and it is expected this power will be exercised frequently during investigations. The Bill also seeks to introduce several other small yet significant changes to the Competition Act. These include providing an opportunity to parties to be heard before imposing a penalty, reducing the “waiting period” for merger clearance from the existing 210 days to 180 days and clarifying the definition of the term “turnover” to exclude the taxes on the sale of goods or provision of services. [wpdm_package id=’4258′]