Overview of the law and enforcement regime relating to cartels

Competition law in India is governed by the Competition Act, 2002 (Competition Act) and the related rules and regulations.  The Competition Act aims to prevent anti-competitive practices, promote and sustain competition, protect interests of the consumers and ensure freedom of trade in markets.

The Competition Commission of India (CCI) is the statutory authority tasked with the enforcement of the Competition Act.  The CCI adjudicates cases relating to anti-competitive agreements, abuse of a dominant position and also regulates combinations (merger control).  Orders of the CCI can be appealed to the National Company Law Appellate Tribunal (NCLAT),1 with a further appeal to the Supreme Court of India (Supreme Court).

Law relating to cartels

Section 3 of the Competition Act prohibits anti-competitive agreements which cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India, and treats these as void.  Such agreements include cartels, which are presumed under the Competition Act to have an AAEC.

The term “agreement” has been very broadly defined under the Competition Act, and includes any arrangement, understanding or action in concert, irrespective of whether it is formal, written or intended to be enforceable by legal proceedings.  Even a nod or a wink is enough to show the existence of an agreement.

Section 3(3) of the Competition Act provides that certain categories of agreements between enterprises or persons engaged in identical or similar trade of goods or provision of services, i.e., at the same level of the production chain (horizontal agreements) are presumed to have an AAEC.  The presumption of an AAEC is a rebuttable presumption and the parties to the agreement have the opportunity to prove that their agreement does not, or is not likely to cause, an AAEC.  This shifting of the burden of proof on to the defendants is an important weapon in the CCI’s anti-cartel armoury.

There are four categories of horizontal agreements that are covered by the presumption of an AAEC.  These are agreements which:

  1. directly or indirectly determine purchase or sale prices;
  2. limit or control production, supply, markets, technical development, investment or the provision of services;
  3. share the market or source of production or provision of services by way of allocation of the geographical area of the market, type of goods or services, or number of customers in the market or in any other similar way; or
  4. directly or indirectly result in bid rigging or collusive bidding.

In determining whether an agreement causes an AAEC in India, the CCI is required to consider a number of “negative” and “positive” factors listed under Section 19(3) of the Competition Act.  The “negative” factors are: (i) the creation of barriers to entry; (ii) driving existing competitors out of the market; and (iii) foreclosing competition by hindering entry into the market.  The “positive” factors are: (i) accrual of benefits to customers; (ii) improvement in production or distribution; and (iii) promotion of technical, scientific and economic development.

Treatment of efficiency-enhancing joint ventures

The presumption of an AAEC for horizontal agreements does not apply to “any agreement 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”.  The onus to prove that the joint venture agreement is efficiency-enhancing lies on the parties to such agreement.

Brief summary of the process before the CCI

An investigation into alleged anti-competitive conduct can be initiated by the CCI either: (i) on its own motion (suo moto); (ii) on the basis of a complaint (in Indian competition law parlance, known as an “Information”) filed by any party; or (iii) following a reference from the government, or a statutory authority.  Cartel investigations can also be initiated pursuant to a leniency application where the CCI would typically treat the case as a suo moto case (the leniency regime in India is discussed separately below).

If, on the basis of the evidence available before it, the CCI forms a prima facie view that a contravention of the Competition Act has taken place, it will order a detailed investigation into the matter through its independent investigative wing, the office of the Director General (DG).  In the absence of a prima facie case being made out, the CCI will close the case at this threshold stage itself.

When the DG receives a direction to investigate from the CCI, it must conduct the investigation in a timely manner and submit a report containing its findings on the allegations to the CCI (DG’s Report).  The DG typically conducts an in-depth and invasive investigation and will not shy away from asking for detailed and historic information, including voluminous documents and records (including emails and telephone records) from the concerned parties.  The DG will also issue summons for individuals for recording their statement on oath and can conduct cross-examinations.  The Competition Act imposes a penalty for failure to comply with the directions of the DG and non-furnishing of information (discussed separately).

Upon receipt and review of the DG’s Report, the CCI will forward the DG’s Report to the parties concerned, and, if there is a reference by a statutory authority, to that authority, giving them an opportunity to respond to the DG’s Report.  Upon receiving a response from the parties/statutory authority, the CCI conducts oral hearings.  Note, if the CCI is not satisfied with the DG’s Report, it may require the DG to conduct further investigation before forwarding the final report to the parties.

Once oral hearings in the matter are concluded, the CCI must, as far as practicable, pass its decision on the matter within 21 days of the date of final arguments.  However, this is rarely adhered to in practice, and the CCI often takes much longer in issuing its final orders. 

Sanctions imposed by the CCI

There are no criminal sanctions for a cartel violation under the Competition Act.  However, the CCI is empowered to impose monetary penalties.  If the CCI concludes that an agreement is in breach of Section 3 of the Competition Act, it can pass any or all of the following orders:

  1. direct the parties involved to discontinue and not re-enter into an anti-competitive agreement – a “cease and desist” direction;
  2. impose a penalty of up to 10% of the average turnover of the contravening enterprise for the three preceding financial years.  Specifically where the CCI finds a cartel, it has the option to impose a penalty amounting to up to three times the cartel participant’s profits, or 10% of its turnover, for each year of the continuance of such agreement, whichever is higher;2
  3. direct the modification of the terms/clauses of an anti-competitive agreement; and/or
  4. pass any other order, including directing the payment of costs.

Contravention of the orders of the CCI can lead to further penalties and the CCI can file a criminal complaint in case of such contravention, which could result in imprisonment for up to three years.

Personal liability for contraventions done by a company

For violations of the Competition Act by a company, every person who, at the time the contravention was committed, was in charge of, and was responsible of the company for the conduct of its business, is deemed to be guilty of the contravention and can be punished.  However, that person will not be liable if the person is able to prove that the contravention was committed without the person’s knowledge or that the person exercised all due diligence to prevent the commission of the contravention.

Further, if it is proved that a contravention of the Competition Act has taken place with the assistance or consent of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, that person is also liable for the breach and can be punished by the CCI.

Overview of investigative powers in India

The DG and the CCI have been vested with wide powers which include powers of a civil court relating to summoning and enforcing the attendance of any person and examining them on oath, requiring the discovery and production of documents, receiving evidence by way of an affidavit, issuing commissions for the examination of witnesses or documents, and requisitioning any public record or document, or copy of a public record or document from any office.

In addition to the informant/complainant and the enterprise(s) accused of contravening the Competition Act, the DG typically sends information requests to competitors, suppliers, and customers for the purposes of its investigation.

Summons and depositions of individuals

Both the DG and the CCI have the power to obtain statements from individuals on oath.  The depositions are, however, typically conducted by the DG for the key officials of the cartel participants and third parties.

Failure to appear for these depositions or to provide information requested may result in the CCI initiating separate penalty proceedings for non-cooperation.  The CCI has the power to impose monetary penalties of up to INR 100,000 (approximately US$ 1,600)3  for each day of failure to comply subject to a cap of INR 10 million (approximately US$ 160,000).  The CCI has recently become quite strict against individuals who failed to appear for deposition at the stipulated date and time, without prior intimation to the DG, or those who have failed to provide the requisite information sought during the deposition and has penalised them for this failure.

Dawn raids

The DG has the power to carry out unannounced search and seizure inspections of an enterprise, popularly referred to as a “dawn raid”.  The DG’s powers of search and seizure are quite extensive and parties being “raided” have an obligation to cooperate with the DG’s officials during the search. 

However, the DG may invoke these powers only with the approval of the Chief Metropolitan Magistrate, New Delhi, and in cases where the DG has reasonable grounds to believe that documents which are useful for evidentiary purposes may be destroyed, mutilated, falsified or secreted.  The requirement to obtain a warrant from the Chief Metropolitan Magistrate, New Delhi, is a means to ensure that the dawn raids are conducted in exceptional circumstances and the powers are not misused by the DG.

On the basis of publicly available information to date, only two dawn raids have been conducted.  The first was against J. C. Bamford (JCB) in an abuse of dominance case.  JCB had challenged the DG’s raid in the Delhi High Court as the warrant did not permit the DG to seize the documents of JCB and only permitted a search.  Further, the dawn raid was conducted despite JCB cooperating with the investigation and therefore was not warranted.  The Delhi High Court did not permit the DG to rely on the information gathered during this raid on the ground that by seizing documents relying on a warrant that only allowed the DG to search the premises, the DG had misused its dawn raid powers and went beyond the directions stipulated in the warrant.  The matter is now pending before the Supreme Court.  The second dawn raid was conducted against several battery manufacturers who were alleged to be members of a cartel.

Overview of cartel enforcement activity during the last 12 months

Since the provisions of the Competition Act governing anti-competitive agreements came into force on 20 May 2009, the CCI has been extremely active in the investigation and prosecution of cartels.  As of December 2017, there have been a total of sixty (60) orders (nine of which are in 2017) passed under Section 27 of the Competition Act, where infringements were found after a detailed investigation, usually resulting in financial penalties and/or behavioural remedies.  

While the CCI initiated several cartel investigations when Section 3 was enforced, almost none of these were disposed of in the first two years.  Most of these investigations reached fruition only in 2011, with twenty-seven (27) orders containing substantial discussions on cartelisation.  Since then, the CCI has maintained a consistent pace in disposing of cases relating to cartelisation, albeit with a brief dip in 2016, where an unusually low number of orders (2) were passed.  As mentioned above, in the year 2017, the CCI has passed nine orders.  It cannot, however, be assessed as to how many cartel investigations are ongoing as the prima facie orders in cartel cases are typically not published on the CCI website.

On penalties, the CCI has been adopting a more cautious approach, as previously many orders were remanded back to the CCI by the erstwhile COMPAT, on the grounds that the penalty imposed was not supported by reasons and mitigating factors argued by the parties were not taken into consideration.  In the orders passed in the year 2017, the CCI has been providing more detailed reasons for imposing penalties, and has also carefully considered the mitigating factors.  The total penalty imposed by the CCI in all cartel matters in the year 2017 was INR 226 crores (approximately US$ 35.5 million), as against INR 147 crores (approximately US$ 23 million) in the year 2016, which was in respect of only two infringements demonstrating that CCI has become more conservative while levying penalties. 

The year 2017 has also been interesting as the CCI passed its first leniency decision,4 and has come down hard on enterprises that were held to be colluding in the supply of public procurement contracts,5 though it was argued that some of these enterprises belong to the same parent.6  While the CCI’s tryst with trade associations in the pharmaceutical sector7  and the film industry continued,8 the scrutiny also expanded to container trailer associations.9

Key issues in relation to enforcement policy

Issues in enforcement policy

While there are several issues with the CCI’s enforcement policy, some of the significant ones are set out below:

(a)  Absence of a case prioritisation policy

Under the present structure of the Competition Act, the CCI has a legal duty to consider and issue orders in relation to all information and references received by it.  CCI does not have the power to prioritise cases like the Competition Markets Authority (CMA) in the UK, where the “Prioritisation Principles for the CMA” prescribe a range of factors that the CMA is required to consider before commencing an investigation.  These include: (i) impact on consumers; (ii) strategic significance; (iii) risks; and (iv) resources.  Under the Competition Act, where the CCI determines that a prima facie case of contravention is made out, the CCI must issue an order to the DG to investigate the matter irrespective of the DG’s existing case load, importance or de minimis nature of the issues in question, etc.  This creates a situation where the DG has to simultaneously investigate a plethora of existing cases.  Due to the scarcity of investigative resources and short timelines given to the DG by the CCI for conducting the investigation, the DG often fails to apply itself completely to any case and is forced to send out extremely broad information requests which can be challenged as a fishing and roving exercise in High Courts.  Further, heavy caseloads also lead to inconsistencies in investigations which are later challenged, leading to CCI findings being overturned.  This results in unnecessary litigation leading to wastage of time and resources.  This also adversely affects the productivity of business which has been recognised by the Hon’ble Delhi High Court in a decision.10 

(b)  Lack of penalty guidelines

While the Supreme Court in the Excel Crop Care case settled a pressing issue in relation to the turnover to be considered while calculating the quantum of penalty (it has to be “relevant turnover” and not “total turnover”), there are still no guidelines issued by the CCI on the factors to be taken into account when calculating the penalty.

(c)  Over-reliance on circumstantial evidence

In a cartel, there are only two clear ways of obtaining direct evidence of an agreement, i.e. dawn raids and through information provided by a leniency applicant, both of which are yet to have a resounding success in India.  Due to the challenges in obtaining any “smoking gun” evidence, the CCI is admittedly constrained to rely heavily on circumstantial evidence, assumptions, and conjecture.  This reliance on circumstantial evidence is regularly challenged in appeal and CCI orders have been set aside for the lack of clear evidence.

(d)  Hearing timelines

The CCI typically gives very limited time to the parties to file submissions as well as make oral arguments.  This is a serious natural justice violation and several cases of the CCI have been overturned on account of these procedural concerns.  If the CCI undertakes better case management and provides a reasonable amount of time to the parties to make submissions/argue their case, it would result in better decisions, addressing the various arguments raised by appellants, and save a lot of time and costs in the long run, as decisions will not be remanded back for a fresh consideration and only substantive legal issues would be addressed in appeal.

Sectors under the focus of investigation

Since the provisions of the Competition Act governing anti-competitive agreements came into force on 20 May 2009, the highest number of infringement decisions (16) were in the entertainment sector, which is not usually regarded as being prone to cartelisation.  Public procurement through online tendering saw fifteen (15) cases with eight (8) infringement findings, and transport (excluding railways) saw fourteen (14) cases with seven (7) infringement findings.  Another sector is pharmaceuticals distribution, with thirteen (13) cases and eleven (11) infringements.

In 2017, the entertainment sector saw one of the first substantive decisions on the merits by the Supreme Court in Competition Commission of India v. Coordination Committee of Artists and Technicians of West Bengal Film and Television & Ors.11  The Supreme Court held that threats to boycott issued by trade associations, in the event their demands were not fulfilled, amounted to a violation of Section 3 of the Competition Act.  The Supreme Court noted that where trade unions espoused the economic interests of their members, who in this case were engaged in the production, distribution and exhibition of films and TV serials, they could not use the guise of ‘collective bargaining’ or ‘industrial action’ to justify their conduct. 

In the same case, the Supreme Court also noted that in every cartel case the first step should be to define a relevant market.  This will increase the burden on the DG and CCI while dealing with cartel cases where, so far, the CCI has not conducted any assessment of the relevant market (on account of the presumption of anti-competitive effects in horizontal agreements).

The CCI has taken a keen interest in regulating the pharmaceutical sector and is investigating various practices including excessive pricing, anti-competitive conduct of chemist and druggist associations and cartels between pharmaceutical companies.  The CCI is currently also in the process of engaging a third party for conducting a study on the pharmaceutical and healthcare sector in India to understand the nature and magnitude of anti-competitive practices in the sector.12  This is a result of the continued trend of repeated violations on part of the Chemists and Druggists Associations.  Recently, the CCI, in a case penalising the druggist association and its office bearers, encouraged the pharmaceutical companies to complain against the continuing anti-competitive practices of these associations.13   Separately, it is believed that a similar study is being considered for airline ticket pricing.

The CCI’s cartel investigations have also been focused on bid rigging in public procurement cases, as public procurement accounts for 30% of Indian Gross Domestic Product, owing to continued government involvement in sectors like railways, healthcare and telecommunications, which in many developed economies are dominated by private players.14  Out of the nine (9) cartel cases decided in the last year, four (4) of them were related to bid rigging in public procurement.15

Key issues in relation to investigation and decision-making procedures

Whilst the CCI has the power to regulate its own procedure, it is to be guided by the principles of natural justice.  Unlike more mature jurisdictions, there is no equivalent of a “hearing officer”, where grievances of procedural irregularities can be raised.  In exceptional cases, the courts may interfere in ongoing investigations using their extraordinary writ jurisdiction to stay investigations.  However, this is not exercised on a regular basis.  Unfortunately, often defendants in an investigation are rendered without any recourse other than to engage with the DG on a without prejudice basis, so as to avoid the separate penalty proceedings for non-cooperation.

Issues with investigation procedure

(a)  Expansive powers of the DG

The Competition Act and the regulations thereunder do not lay down clear guidelines on the scope of the DG’s powers and the procedure for investigation.  The Supreme Court in the Excel Crop Care case has clarified that the DG has the power to expand the scope of the investigation beyond the allegations mentioned in the prima facie order, provided that the prima facie order is worded broadly enough.  As a result, the CCI’s prima facie orders are now worded not only to allow the DG to investigate into the role of individuals before arriving at a finding of contravention on part of the company, but also allows the DG to extend the investigation to parties not even mentioned in the order.  This excessive delegation of power by the CCI to the DG is arguably contrary to the intent of the legislature as the power to decide the scope of the investigation had been specifically taken away from the DG by the legislature when the Competition Act was enacted.

(b)  Inexperienced investigating officers

The staff at the DG’s Office is largely made up of officers on deputation from other government departments who join for a short duration of time.  This leads to a situation where there is no fixed base of officers who have training on procedures, issues of natural justice and the law itself.

Further, despite having an internal manual for conducting the investigations, there is evident inconsistency in the conduct of different investigation officers.  Refusal of the DG to supply a copy of the CCI’s prima facie order to the defendant, conducting a fishing and roving exercise and issuing notices to individuals before coming to a finding of violation by the enterprises are some of the common issues faced by the party being investigated.

(c)  Unrealistic timelines to respond to notices

It has become a practice of the DG Office to demand voluminous information from the parties often unrelated to the stated scope of the investigation, which raises jurisdictional concerns.  The DG unilaterally sets deadlines for providing voluminous and historical information which are usually difficult to comply with.  These unrealistic timelines are accompanied with threats of initiation of proceedings for non-compliance for failing to provide the information in time.

Leniency/amnesty regime

The CCI has the power to impose a “lesser penalty” on a member of an alleged cartel if such member has made a “full, true and vital disclosure” in respect of alleged violations of the Competition Act.  The grant of leniency is governed by the Competition Commission of India (Lesser Penalty) Regulations 2009 (Lesser Penalty Regulations).  Under the Lesser Penalty Regulations, up to a 100% reduction in administrative fines may be granted subject to certain conditions. 

The first applicant for leniency may be granted up to a 100% reduction in administrative fines if it satisfies the following conditions:

  1. the applicant makes a vital disclosure by submitting evidence of a cartel enabling the CCI to form a prima facie opinion regarding the existence of a cartel, where the CCI did not have the evidence to form such an opinion, or establish a violation of the Competition Act by providing evidence that the DG did not have;
  2. the applicant cooperates with the DG throughout the investigation;
  3. the applicant ceases participation in the cartel from the time of the disclosure unless directed otherwise; and
  4. the applicant does not destroy, conceal, manipulate or remove any relevant documents.

If, according to the CCI, the leniency applicant fails to comply with any of these conditions, they may not secure any leniency. 

There is a sliding scale of leniency under the Lesser Penalty Regulations.  Subsequent applicants may have their fines reduced on submitting evidence which may, in the opinion of the CCI, provide “significant added value” to the evidence already in the CCI/DG’s possession.  Applicants must also continuously cooperate throughout the investigation.  The second and third/subsequent applicant’s fines can be reduced by up to 50% and 30%, respectively. 

The biggest challenge while deciding whether to file for leniency in India is the fact that leniency is not guaranteed and is subject to the discretion of CCI.  Further, the requirement of complete cooperation with the CCI is very onerous.

Amendments to the leniency regime

The Lesser Penalty Regulations were amended on 24 August 2017 and the following changes have been made:

  1. individuals can also file for leniency.  However, it is unclear whether an applicant which is a company will be permitted to add names to the list of individuals provided in the original leniency application to cover those individuals whose involvement in a cartel is discovered by the applicant subsequent to filing such application;
  2. whilst the amendment has left unchanged the CCI’s discretion to reduce penalties for the first, second and third applicants, the amendments have clarified that any subsequent (i.e. after the third) leniency applicant will also be eligible for a reduction in penalty of up to 30%.  Of course, in order to avail of leniency, such subsequent applicant will have to satisfy the requirement of having provided “significant added value” to the evidence already in possession of the CCI or the DG (i.e. beyond what the first, second and third applicants have already provided) to establish the existence of a cartel;
  3. the amendment has explicitly provided that defendants will be permitted access to the non-confidential version of the information, documents and evidence furnished as part of the leniency application.  However, this will be allowed only after the investigation is complete and the CCI has provided a copy of the DG’s report to the defendants.  Despite the recognition of the right to access the case file, given the belated stage at which such access is permitted, it could raise natural justice concerns for the defendants; and
  4. the earlier leniency programme provided that the CCI would treat as confidential the identity of the leniency applicant or “the information obtained from it” (not necessarily as a part of the leniency application), unless the disclosure was required by law, or the applicant had agreed to the disclosure, or there had been public disclosure by the applicant.  Under the revised leniency programme:
    1. first, it appears (whether intentional or not) that confidentiality as provided above would only extend to information contained in the leniency application.  It may be the CCI’s position that any other information would be subject to the ordinary principles of confidentiality where the requirement of confidentiality must be asserted according to the Competition Commission of India (General Regulations), 2009 and grant of confidentiality is at the discretion of the CCI; and
    2. second, despite the leniency applicant not agreeing to the disclosure of any information, documents and evidence contained in its application, the DG has been granted the power to disclose it to parties to the proceedings provided he deems it necessary for purposes of the investigation after obtaining the prior approval of the CCI.

Decisional practice

The Brushless DC Fans case is the CCI’s first order in a leniency matter.  The case was initiated based on information received from the Central Bureau of Investigation, alleging cartelisation among three firms: Pyramid Electronics (Pyramid) and two others.  Based on this, the CCI passed a prima facie order directing the DG to investigate.  Following the receipt of a notice from the DG, Pyramid filed a leniency application. 

While holding the companies liable for being part of a cartel, the CCI determined a penalty of INR 62,36,634 (approximately US$ 98,000), being 100% of the net profit for FY 2012–13 for Pyramid.  However, the CCI granted a 75% reduction in penalty, and imposed a penalty of INR 15,59,159 (approximately US$ 25,000) on the leniency applicant.  In granting leniency to Pyramid, the CCI considered the following factors:

  1. Pyramid was the first and the only party to accept the existence of the cartel;
  2. the evidence submitted by Pyramid played a significant role in revealing the modus operandi of the cartel which substantiated the evidence in possession of the CCI;
  3. the cooperation extended by Pyramid during the investigation; and
  4. the stage at which Pyramid had approached the CCI (i.e., after the commencement of the DG investigation) and the evidence already in the CCI’s possession at the time of the leniency application.

The CCI also imposed penalties on the individuals in charge of the contravening parties, at the rate of 10% of their average income for the three preceding financial years.  The employee of Pyramid was granted a 75% reduction in the penalty.

Administrative settlement of cases

The Indian competition regime does not provide for settlement of cases.  Proceedings before the CCI are proceedings in rem.  Therefore, even if the parties settle their grievances and the informant seeks withdrawal of the information filed before the CCI, the CCI is empowered to continue to proceed with the case.

Third-party complaints

The Competition Act grants liberty to any person (whether directly aggrieved or not) to file information before the CCI, alleging infringement of the Competition Act.  In addition, the CCI has recently launched a module on its website where anonymous complaints can be uploaded.  Challenges on issues relating to natural justice, admissibility of untested and unchallenged evidence being relied upon to launch an invasive inquiry can be expected.

As discussed above, India does not have a case prioritisation policy.  Therefore, CCI has to undertake a prima facie assessment of the allegations and pass orders in every case filed before it.

Civil penalties and sanctions

In 2017, a highly contested issue pertaining to the penalties being imposed in the case of multi-product firms was settled by the Supreme Court.  The Supreme Court affirmed the COMPAT’s holding that under Section 27 of the Competition Act, the word turnover would refer to the “relevant” turnover and not the “total” turnover of the enterprise.  While relying on the principle of proportionality and purposive interpretation of the provisions of the Competition Act, the Supreme Court observed that when the violations arise from particular products or circumstances, imposing fines on products and circumstances unrelated to the violation would lead to unequitable and punitive outcomes.

The decisional practice of the CCI in the last 12 months shows that it is being more conservative in levying penalties.  CCI has gone through a phase where its orders were being challenged on the grounds that no reasoning has been provided for the quantum of penalty imposed by it and many such orders were remanded back to the CCI.  Perhaps learning from its mistakes, the CCI seems to be following a more cautious approach by passing more reasoned order on penalties and taking due note of the mitigating factors.

In the Cochin Port Trust case,16 the CCI found five container trailer associations and their office bearers guilty of price fixation by way of an imposition of a “turn system”.  The turn system created a single window for allocating work to the container trailer transporters, and implemented a uniform rate system for the work that was taken up by them.  The CCI did not impose any monetary penalty, taking into account the following mitigating factors: (i) the turn system was in operation for a limited period; and (ii) the anti-competitive conduct was discontinued even before the investigation was ordered in the case.  Also, in another case in the entertainment sector,17 the CCI, while holding the agreements and practices of associations of craftsmen in the film industry as anti-competitive, did not impose any monetary penalty on the association taking into account the following mitigating factors: (i) the practice adopted in the agreements existed since 1966; (ii) the objective of the agreements was not anti-competitive; (iii) only two clauses of the agreement were anti-competitive; and (iv) the associations were daily wage earners associations so the CCI did not want to impose an unnecessary burden on them.

We are also seeing an increasing trend of penalising individuals for participating in a cartel.  In most of the cartel cases in 2017, fines have been imposed on individuals involved in the decision-making process of the company, based on the average income for the last three years for such individuals.

Right of appeal against civil liability and penalties

Not all decisions of the CCI are appealable.  The Competition Act specifies the orders of the CCI which are appealable.  These include:

  1. orders where CCI closes a case at the prima facie stage;
  2. orders where CCI finds the parties guilty of contravention of the provisions of the Competition Act;
  3. interim orders of the CCI;
  4. rectification orders; and
  5. penalty orders.

The appeals before the erstwhile COMPAT have been majorly successful.  An appeal under the Competition Act is a full merits appeal.  After examining the facts and evidence, the NCLAT can either dismiss the appeal or set aside the order in whole or in part, substitute the CCI’s findings with its own, or remand the case back to the CCI.  COMPAT has remanded many penalty cases such as the Cement Cartel case and Coal India case back to the CCI for fresh hearings.

Whilst appeals of the orders of the CCI mentioned above may be filed as a statutory right, orders not specified as appealable under the Competition Act such as an order of the CCI finding a prima facie case or orders related to confidentiality can only be challenged in a writ before the constitutional courts.

Further appeals may be made before the Supreme Court.

Criminal sanctions

As indicated above, the CCI has no jurisdiction to impose criminal sanctions on the entities for cartel infringements.

The only situation where the Competition Act allows for criminal sanctions is on the non-payment of fines imposed.  Such non-payment is punishable by imprisonment for a maximum term of three years or a maximum fine of INR 250 million (approximately US$ 4 million), or both.  But this does not make the Competition Act a criminal statute as the power to imprison defaulters is only with the Chief Metropolitan Magistrate, New Delhi and the CCI can only act as a litigant in such a case.

Cross-border issues

The CCI has extraterritorial powers under Section 32 of the Competition Act.  Notwithstanding whether an agreement referred to in Section 3 of the Competition Act has been entered into outside India or the party(s) to the agreement are outside India, the CCI can inquire into such agreements if they cause or are likely to cause any AAEC in India. 

The CCI has issued prima facie orders against Japanese spare auto-parts companies where, in some instances, although the alleged anti-competitive conduct was committed in Japan, there may have been AAEC in India.  The process followed by the CCI and the DG during the course of the investigation is presently under challenge before the Delhi High Court.

Developments in private enforcement of antitrust laws

The Competition Act does not provide for private standalone enforcement actions to be pursued before the courts.  Parties are free to bring cases before the CCI and, where a prima facie case of contravention is made out, the private party may participate in the DG’s investigation.  Thereafter, once the investigation report has been circulated by the CCI for seeking responses, the private party may participate in the proceedings and hearings before the CCI.

Separately, the appellate tribunal has the power to adjudicate on a claim for compensation that may arise from the orders of the CCI or the orders of the appellate tribunal in an appeal against the CCI’s orders.  The government, or local authority, or any enterprise or any person, may make an application to the appellate authority to adjudicate upon a claim of compensation.  However, such a person or enterprise or government authority should be able to demonstrate the loss or damage which has been suffered on account of a contravention of the provisions of the Competition Act.  Further, class action suits are also permissible.

It is important to note that the Competition Act makes explicit that an application for compensation must be made only after either the CCI or the NCLAT, on appeal, has determined that a violation of the Competition Act has taken place.  Since the enforcement of the Competition Act, there have been no reported compensation claims following cartel decisions. 

Presently, two compensation applications are pending before NCLAT in abuse of dominance cases.  However, given that the defendants in these cases have preferred appeals before the Supreme Courts impugning the findings that result in follow-on actions for damages in compensation proceedings, the Supreme Court is presently considering whether these proceedings should be allowed to continue pending the appeal before it.

Reform proposals

Although there are no specific amendments that are expected in the near future, as practitioners we believe that the following reforms should be undertaken.

Adoption of prioritisation principles

The CCI should be given the power to prioritise cases so as to ensure the most efficient allocation of investigative resources.

Penalty guidelines

Following more mature jurisdictions such as the UK and the EU, the CCI should frame guidelines on the imposition of penalties.  These guidelines will provide helpful guidance to enterprises when they are determining their exposure to liability and will also reduce the appeals that are being filed purely on the question of reasonableness of the quantum of penalty being imposed and the treatment of aggravating and mitigating factors.

Guaranteed leniency

While the amendment of the Lesser Penalty Regulations has bought about some long-awaited changes to the leniency regime, the regulations still don’t provide for guaranteed leniency, which leaves a lot of discretion with the CCI and uncertainty for applicants.  This reform is necessary to make the leniency regime more effective in attracting cartel participants to become leniency applicants.  Absence of guaranteed leniency results in a high level of uncertainty for cartel participants when considering leniency.  The leniency regime needs to be effective so that cartels can be caught based on direct evidence rather than circumstantial evidence, which often makes the CCI’s decisions vulnerable to appeal.

Procedural guidelines for the CCI and the DG

Detailed procedural guidance should be provided for carrying out enquiries and proceedings by the CCI, which should be in line with the principles of natural justice.  Whilst the DG has an Investigation Manual, the same is not available in the public domain; therefore, it is not possible for parties to point out specific irregularities with the investigation process.  The procedure for investigations conducted by the DG should be outlined and available to the advocates/parties.  These guidelines should cover issues including the nature and period of information that can be sought by the DG with reasons therefor, the manner of collecting and submitting information, the procedure for dawn raids, the manner of taking depositions and conducting cross-examination, etc.  Additionally, the DG should have staff that are properly trained in conducting investigations.


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  1. The Competition Appellate Tribunal (COMPAT) was constituted under Section 53A of the Competition Act as an appellate tribunal to hear appeals against specific orders passed by the CCI.  However, the Finance Act, 2017 vested all functions and powers of the erstwhile COMPAT with the NCLAT.
  2. In Excel Crop Care v. Competition Commission of India, [(2017) 8 SCC 47] (Excel Crop Care case), the Supreme Court held that while levying a penalty involving multi-product firms, the “relevant” turnover relating to the products or services covered by the infringement must be considered, rather than the “total” turnover.
  3. Exchange rate used USD 1 = INR 63.72.
  4. Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items (Brushless DC Fans case), Suo Moto Case No. 03 of 2014, CCI.
  5. Western Coalfields v. SVS Enterprises, Case No. 34 of 2015, CCI.
  6. Delhi Jal Board v. Aditya Birla Chemicals Limited & Ors., Reference Case No. 03 & 04 of 2013, CCI.
  7. The Belgaum District Chemists and Druggists Association v. Abbott India Ltd. & Others, Case No. C-175/09/DGIR/27/28-MRTP, CCI; Sudeep P.M. v. All Kerala Chemist and Druggist Association, Case No. 54 of 2015, CCI.
  8. In re: Shri Vipul A. Shah v. All India Film Employee Confederation Others, Case No. 19 of 2014, CCI; In re: T. G. Vinayakumar (also known as Vinayan) v. Association of Malayalam Movie Artists and Others, Case No. 98 of 2014, CCI.
  9. Cochin Port Trust v Container Trailer Owners Coordination Committee and Others, Reference Case No. 06 of 2014, CCI.
  10. Google Inc. v. Competition Commission of India, LPA No.733/2014, decided on 27th April 2015.
  11. Competition Commission of India v. Coordination Committee of Artists and Technicians of West Bengal Film and Television & Ors. ((2017) 5 SCC 17), Order dated 7th March 2017.
  12. Request for Proposal for the engagement of an Agency for conducting a Study on the Pharmaceutical and Health Care Sector, September 6th, 2017, No. 7 (213)/AW/PHARMA/2017-CCI.
  14. http://www.cci.gov.in/sites/default/files/presentation_document/p4.pdf?download=1.
  15. Delhi Jal Board v. Aditya Birla Chemicals Limited & Ors., Reference Case No. 03 & 04 of 2013; CCI Western Coalfields v. SVS Enterprises, Case No. 34 of 2015, CCI;  Director, Supplies & Disposals Haryana v. Shree Cements, Reference Case No. 05 of 2013, CCI; Brushless DC Fans case.
  17. Shri Vipul A. Shah v. All India Film Employee Confederation and Others, Case No. 19 of 2014, CCI.

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