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Part 9: Competition Compliance in India - investigations

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This is part 9 of a ten part series - that was authored by AnantLaw and published by Lexology on 30 April 2020. All laws stated in this series were accurate on 24 February 2020.


Part 9: Investigation & Settlement

Legal representation

Under which circumstances would the company and officers or employees need separate legal representation? Do the authorities require separate legal representation during certain types of competition law investigations?

The Competition Act does not contain provision for mandatory separate legal representation for the company and its officers or employees. Even in terms of section 48 of the Competition Act, which provides for the liability of officers or employees of the company, there is no mandatory requirement of separate legal representation, and the officers or employees can also be represented by the legal representative who is representing the alleged company. The proceedings of the Competition Commission of India (CCI) being quasi-judicial in nature, a party to the proceedings has a right of legal representation. The High Court of Delhi in Oriental Rubbers (LPA 607/2016) held that a party is required to give statements on oath either before the CCI or the Director General (DG) is entitled to proper legal representation. 


Dawn Raids

For what types of competition law infringement would the regulatory authority launch a dawn raid? Are there any specific procedural rules for dawn raids?

Section 41(3) of the Competition Act empowers the DG to conduct dawn raids with respect to the matters that are under investigation (ie, behavioural matters, anticompetitive agreements and abuse of dominance). The DG is required to obtain a warrant from the Chief Metropolitan Magistrate, Delhi before conducting a dawn raid on a company’s premises. The Supreme Court of India, referring to its order dated 15 January 2019 in CCI v JCB India Ltd and Others (Criminal Appeal Nos. 76–77 of 2019) held that the seized material during a dawn raid can be used for the purpose of investigation. According to information available in the public domain, the DG has conducted six dawn raids, five of which were in matters relating to cartels or anticompetitive agreements, and one of which was with respect to an abuse of dominance matter.

Failure to comply with the directions of the DG during a dawn raid, without reasonable cause, may attract significant penalties under the Competition Act, which may reach up to 100,000 rupees for each day the failure continues, subject to a maximum of 10 million rupees.

What are the company’s rights and obligations during a dawn raid?

The party to the proceedings must not disturb the course of a dawn raid by the authorised authorities. In that regard, a legal representative and other employees or persons hired by the enterprise are obliged to:

  • enable authorised persons of the CCI to enter the premises (as mentioned in the warrant);

  • enable authorised persons of the CCI to access business documentation and other requested documents, regardless of the manner in which these documents are kept;

  • enable authorised persons of the CCI to access computers and other electronic devices found on the business premises of undertakings, which implies the provision of passwords to access computers, servers, etc;

  • provide answers to authorised persons to inquiries in relation to the premises, belongings and documents relating to the subject matter of the inspection;

  • actively cooperate with officials of the CCI in other manners; and

  • cooperate fully and actively in all other manners with authorised persons of the CCI with the dawn raid investigation.

An indicative list of rights of a company during a dawn raid are listed below:
  • Legal professional privilege – the communications and correspondence between the client and the attorney or advocate is privileged under sections 126 and 129 of the Evidence Act 1872 and, accordingly, they need not be shared with the authorised persons of the CCI.

  • Privilege against self-incrimination and the right to silence – the individual can choose to remain silent if in his or her opinion, answering any question posed by the authorised persons of the CCI may potentially result in self-incriminating. It is a fundamental right protected under article 20(3) of the Constitution of India 1950.

  • The right to privacy – an individual can refuse to answer the question if it is irrelevant and interferes with his or her privacy. It is a fundamental right protected under article 20(3) of the Constitution of India 1950

  • Guard against fishing expeditions – the authorised persons of the CCI conducting the dawn raid cannot go beyond the scope and purpose of the investigation (as stipulated in the warrant). However, CCI officials may insist upon reviewing and taking documents or materials that may not be relevant to the investigation (being undertaken by the DG). In such a scenario, it is advisable to record an objection with the CCI team (conducting the investigation) and write to the CCI. 

  • Judicial review of the inspection decisions – the parties can always challenge the inspection decisions of the authorised persons of the CCI as well as their conduct during dawn raids (including excessive use of power) in writ jurisdiction before the High Courts.

  • Documents and objects seized by the authorities must be returned to the company within 180 days as provided under section 27(3) of the Companies Act 2013.


Settlement mechanisms

Is there any mechanism to settle, or to make commitments to regulators, during a competition law investigation?

Unlike in the European Union, there are currently no provisions in the Competition Act that provide for a settlement or commitment mechanism for conduct pertaining to anticompetitive agreements and abuse of dominance. However, in relation to combinations with an appreciable adverse effect on competition in the market, section 31(6) of the Act provides an option for the parties to suggest modification to the combination if they do not accept the modifications suggested by the CCI. In multiple cases, parties have tried to seek permission from the competition authorities to settle the case on their own.

The Madras High Court in Tamil Nadu Film Exhibitors Association v CCI (Writ appeal Nos. 1806 and 1807 of 2013) gave some reprieve on the settlement of cases. Two major questions of law arose: first, whether it is possible, in the context of the Competition Act, for two adversaries to reach a settlement, thereby closing the doors for an investigation or inquiry; and second, whether the Court can record a memorandum of settlement like the one that the parties reached in this case. The High Court of Madras, while dealing with the issues raised, held that under the Competition Act, it is possible to allow settlements and compromises to be reached between the parties if three basic conditions are met: (1) the settlement and the compromise would not lead to the continuance of anticompetitive practices; (2) the settlement and the compromise would not allow the abuse of dominant position to continue; and (3) the settlement and the compromise would not be prejudicial to the interest of consumers or to the freedom of trade. Keeping in line with this judgment, as long as those conditions are fulfilled, with the assent of the CCI, a collective settlement is permitted between the complainant and the defendant.

However, The Competition (Amendment) Bill 2020 (the Competition Bill) inserts two new sections, 48(A) and 48(B), that introduce provisions in relation to settlement and commitment respectively. Section 48(A) and section 48(B) of the Competition Bill provide that any person allegedly infringing section 3(4) or section 4 of the Competition Act and against whom an inquiry in that regard has been initiated under section 26(1) of the Competition Act, can submit an application in writing proposing for the settlement or commitment of the proceeding initiated for the alleged contraventions. Commitment and settlement decisions of the CCI have been made non-appealable, and the benefit of settlement and commitment has not been extended to contraventions under section 3(3) of the Competition Act (ie, horizontal agreements and cartels) as those contraventions are presumed to be anticompetitive unless proven otherwise.

What weight will the authorities place on companies implementing or amending a competition compliance programme in settlement negotiations?

Considering that the Competition Act does not provide for settlement proceedings, the CCI has not yet entered into any settlement proceeding. However, considering that the CCI has taken competition compliance programmes as a mitigating factor when imposing penalties under section 27 of the Competition Act, it is likely that (after notification of Competition Bill) the CCI will take compliance programmes as a mitigating factor when entering into settlements with companies. 


Corporate monitorships

Are corporate monitorships for Competition Law used in India?

The Competition Act does not currently provide for corporate monitorships to monitor corporate compliance.


Statements of facts

Are agreed statements of facts in a settlement with the authorities automatically admissible as evidence in actions for private damages, including class actions or representative claims?

The Competition Act currently does not provide for settlement of cases. However, the Competition Act provides for private damages claims (under section 53N) and an application for compensation can be filed before the National Company Law Appellate Tribunal (NCLAT). Under section 53N, the applicant or claimant is not required to re-establish the violation of the Competition Act, and the claimant may rely on the order of the CCI for seeking compensation or private antitrust damages. The NCLAT is likely to rely on statement of facts in a settlement proceeding while examining applications for compensation.


Invoking legal privilege

Can the company or an individual invoke legal privilege or privilege against self-incrimination in a competition law investigation?

The privilege against self-incrimination is a constitutional right protected under article 20(3) of the Constitution of India 1950 and is available to every citizen of India irrespective of whether the investigations or proceedings are civil or criminal in nature. Hence, a person can choose to remain silent if, in his or her opinion, answering any question posed during an investigation may result in self-incrimination. Further, legal professional privilege is afforded under sections 126 and 129 of the Evidence Act 1872, and accordingly, the communications and correspondence between the client and the attorney or advocate need not be shared.


Confidentiality protection

What confidentiality protection is afforded to the company or individual, or both, involved in competition law investigations?

Section 57 of the Competition Act provides that information of any enterprise obtained by the CCI shall not be disclosed without the prior permission of the enterprise in writing, otherwise than in compliance with the provisions of the Competition Act or any other law that is in force. Regulation 35 of the General Regulations further narrows the scope of protection granted under section 57 of the Competition Act, clarifying that only in cases where public disclosure would (1) result in the disclosure of trade secrets; (2) result in the destruction or appreciable diminution of commercial value of the information; or (3) reasonably be expected to cause serious injury would confidentiality be granted.

The General Regulations further provide a set of factors that the CCI and the DG may consider at the time of deciding a request for confidentiality, namely: (1) the extent to which the information is known to the public; (2) the extent to which the information is known to employees, suppliers, distributors and others involved in the party’s business; (3) the measures taken by the party to guard the secrecy of the information; and (4) the ease or difficulty with which the information may be acquired or duplicated by others. The CCI can be approached contrary to any confidentiality conferred by the DG; however, the confidentiality order of the CCI is non-appealable.

Further, while dealing with leniency applications, in terms of Regulation 6 of the Lesser Penalty Regulations, the CCI and the DG are obliged to treat the identity of the applicant and the information, documents and evidence provided by the leniency applicant as confidential. However, the Competition Commission of India (Lesser Penalty) Amendment Regulations 2017 introduced Regulation 6(A), which allows the inspection of documents filed by the leniency applicants. Hence, the leniency applicants are required to submit applications in accordance with Regulation 35 of the General Regulations.


Refusal to cooperate

What are the penalties for refusing to cooperate with the authorities in a competition law investigation?

Chapter VI of the Competition Act prescribes penalties for refusing to cooperate with the authorities during an investigation. Section 43 of the Competition Act prescribes a penalty of up to 10 million rupees for non-compliance with the directions of the CCI and the DG given under sections 36(2), 36(4) and 41(2) respectively. Further, the failure to comply with the orders or directions issued by the CCI or pay fines imposed for non-compliance may result in imprisonment for a maximum term of three years or the imposition of a maximum fine of 250 million rupees, or both, as determined by the Chief Metropolitan Magistrate of Delhi.


Infringement notification

Is there a duty to notify the regulator of competition law infringements?

The Competition Act does not cast a mandatory duty on any person under section 2(l) of the Competition Act to notify the CCI of any infringements of its provisions.


Limitation period

What are the limitation periods for competition law infringements?

The Competition Act does not prescribe any period of limitation for investigating anticompetitive agreements under section 3 or abuse of dominance under section 4 of the Competition Act. However, the CCI’s power to investigate a combination or initiate any inquiry is restricted to one year from the date on which the combination took effect.

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