OECD kpcdb

1. The Competition Act, 2002 

The Competition Act, 2002 (the “Act”) was enacted in January 2003 but came into effect on 20th May, 2009.

 

The Act regulates anti-competitive agreements, abuse of dominance, and anti-competitive business combinations.

 

General exclusion: Any activities relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space are exempted from the Act. 

State-owned enterprises are not exempt from the application of the Act when conducting commercial activities in competition with private firms.

 

However, under section 54 of the Act, the Central Government can, by notification, exempt from the application of the Act for such period as specified in such notification-

 

a)  any class of enterprises if such exemption is necessary in the interest of security of the State or public interest;

b)  any practice or agreement arising out of any obligation assumed by India under any treaty, agreement, or convention with any other country or countries;

c)  any enterprise which performs a sovereign function on behalf of the Central Government or a State Government. 

 

Through the exercise of this power, the following two sectors have been exempted from the provisions of the Act:

 

a)  Vessel sharing agreements of Liner Shipping Industry, and 

b)  Merger and acquisition of loss-making and failing banks.

 

Extra-territorial application: The Act applies to firms located outside India whose behaviour directly affects competition and/or consumers in domestic markets. Merger control rules also apply to foreign mergers.

 

2. Competition Commission of India

The Competition Commission of India (the “CCI”) is the authority that enforces competition law in India. 

 

According to Sections 27 and 28, the CCI investigates and adjudicates on suspected anti-competitive behaviour. 

 

Under Section 18, the role of the CCI is to eliminate practices having adverse effect on competition, to promote and sustain competition, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets in India. 

 

Organisational structure of the CCI: Located in New Delhi, the CCI has 66 professional officers and 58 support staff as of 2014. 

 

According to Section 8, the CCI consists of a Chairperson as well as not less than two and not more than six members to be appointed by the Central Government. The Central Government chooses from a panel of names recommended by a Selection Committee consisting of the Chief Justice of India or his nominee, the Secretary in the Ministry of Corporate Affairs, the Secretary in the Ministry of Law and Justice, and two experts of repute who have special knowledge of, and professional experience in international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs or competition matters including competition law and policy. 

 

The Central Government may, by order, remove the Chairperson or any member for reasons such as insolvency, being convicted of an offence which the Central Government deems to involve moral turpitude or becomes physically or mentally incapable of acting as a member, amongst others. 

 

Decisions are taken by a majority vote in the Commission. 

 

Other regulators with competition powers:  A number of sectoral regulators have been given mandates to promote competition in their respective sectors. However, once anti-competitive behaviour contravening the provisions of the Act are noticed, the CCI has jurisdiction. Some of the regulators which have competition powers are named below:

 

• Central Electricity Regulation Commission (CERC) – Power (electricity) Sector regulator

• Telecom Regulatory Authority of India (TRAI) - Telecom Sector regulator

 

Competition advocacy: As per Section 49, the CCI is an active advocate for competition, and has statutory duty to review regulations implemented by Governmental and Legislative Entities (“GLE”), by issuing advisories. However, its advice is not binding for GLEs.

 

The CCI also conducts market studies in its jurisdiction and has performed at least one market study over the last five years. When the market study identifies obstacles or restrictions to competition caused by an existing public policy, the study includes opinions and recommendations to the government to remove/reduce such obstacles or restrictions.

 

International co operation: The CCI has Memorandums of Understanding with the following five jurisdictions:

 

• Federal Antimonopoly Service (Russia)

• Federal Trade Commission and Department of Justice (USA)

• Australian Competition and Consumer Commission

• Directorate General for Competition of the European Commission Competition Bureau (Canada)

 

3. Investigation

Initiation of investigation: According to Section 19, the CCI may inquire into any alleged contravention of the provisions related to anti-competitive agreement or abuse of dominance either on its own motion or on-

 

a)  receipt of any information, in such manner and accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association; or

b)  the reference made to it by the Central Government or a State Government or a statutory authority.

 

Powers of investigation: Should the CCI consider that there is a prima facie violation of the act it directs the Director General (DG) to investigate under Article 26(1) and the DG then submits an Investigation Report back for consideration by the Commission. 

 

Under Sections 36(2) and 41(3) the DG (CCI’s investigative arm) shall have the following investigative powers:

 

a)  summoning any person and examining him or her on oath;

b)  requiring the discovery and production of documents; 

c)  receiving evidence on affidavit;

d)  requisitioning any public record or document or copy of such record or document from any office

e)  Carrying out search and seizure operation after obtaining warrant from Chief Metropolitan Magistrate of Delhi, when the Director General reasonably suspects the possibility of relevant evidence being destroyed or falsified. 

 

Failure to comply with investigation: If any person fails to comply, without reasonable cause, with a direction given by the CCI, such person shall be punishable with fine which may extend to 100,000 rupees (one lakh rupees) for each day during which such failure continues subject to a maximum of 10,000,000 rupees (one crore rupees), as may be determined by the CCI.

 

Procedural fairness: The CCI published procedural guidelines explaining its investigative procedures under General Regulation 2009. 

 

The Investigation Report of the DG is shared with Parties for their replies or objections.

 

The Commission then organises a hearing of the arguments of parties before a final decision is taken.

 

Confidentiality: According to Section 57, the CCI may not disclose information obtained by or on behalf of the CCI or the Appellate Tribunal for the purposes of the Act, without prior permission in writing of the enterprise, unless in compliance with or for the purposes of the Act or any other law.

 

4. Remedies and sanctions

India has an administrative system. This means that the CCI undertakes investigations into suspected anti-competitive behaviour and may adjudicate on the matter, imposing fines amongst other sanctions.

 

Sanctions are mainly civil in nature except in cases of non - compliance of orders of the Commission, where criminal sanctions may apply. 

 

Remedies and administrative sanctions: If the CCI finds that any enterprise is in contravention of section 3 (anti-competitive agreement) or section 4 (abuse of dominant position), it may impose a monetary penalty which shall be not more than ten percent of the average turnover for the last three preceding financial years, upon each person or enterprise participating in such an agreement or abuse. In the case of a cartel, the CCI may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten percent of its turnover for each year of the continuance of such agreement, whichever is higher.

 

Currently, there are no guidelines on how the CCI sets fines.

 

Under Section 27 of the Act, the Commission can pass various kinds of other orders such as cease and desist orders, order for modification of agreements, payment of costs, and any other orders or directions it deems fit.

 

The Act contains provisions of vicarious liability for individuals who are in charge of the conduct of the company or with whose consent or connivance, the contravention by the company takes place.

 

As per Section 43, if any person fails to comply, without reasonable cause, such person shall be punishable with fine which may extend to rupees one lakh for each day during which such failure continues subject to a maximum of rupees one crore, as may be determined by the Commission.

 

Criminal sanction: In cases of contravention/non-compliance of orders of the CCI, the CCI may choose to file a complaint before Chief Metropolitan Magistrate under section 42(3) of the Act which may be punishable with imprisonment up to 3 years or fine up to two hundred fifty million rupees or both.

 

Injunctions: During an enquiry should the CCI be satisfied that a contravention of Section 3 or Section 4 of the Act has taken place, it may temporarily restrain any party from carrying out such an act until conclusion of the enquiry. 

 

5. Appeal

Section 53B of the Competition Act stipulates that the Central Government or the State Government or a local authority or enterprise or any person, aggrieved by any direction, decision or order may appeal to the National Company Law Appellate Tribunal (NCLAT).

 

As per Section 53B (2), every appeal to the NCLAT shall be filed within a period of sixty days from the date on which a copy of the direction or decision order made by the Commission is received by the Central Government or the State Government or a local authority or enterprise or any person. Appeals from the NCLAT lie with the Supreme Court of India.

 

6. Private enforcement 

As per section 53N of the Act, the NCLAT can be approached for compensation for any loss or damage shown to have been suffered by the applicant as a result of any contravention of the provisions of anti-competitive agreements by the enterprise from whom compensation is being claimed. Therefore for damages claims there must be a prior finding of a violation of the substantive provisions of the Act has been determined by the CCI and NCLAT. There are no standalone actions in India