This is part 1 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.
Part1: General
General attitudes
What is the general attitude of business and the authorities to competition compliance in India?
The Competition Act 2002 (the Competition Act) was passed by Parliament in 2002, replacing the Monopolies and Restrictive Trade Practices Act 1969, to which the President assented in January 2003. The provisions of the Competition Act governing abuse of dominant position and anticompetitive agreements, including cartels, came into force on 20 May 2009. The Competition Act became fully operational on 1 June 2011 with the coming into force of the provisions relating to the regulation of combination and merger control provisions. Given that the Competition Act is a relatively new legislation, corporate entities are not very well aware of the implications and the rationale behind competition law. However, in recent years, owing to the constant advocacy initiatives of the Competition Commission of India (CCI) and the advent of technology driven economy, conscious competition compliance has gained momentum among companies. Recent statistics of competition cases, in particular leniency applications, indicate the increasing effectiveness of the competition authorities. Companies have proactively started to adopt competition compliance programmes. Smaller and less organised businesses, however, still lack complete awareness of the significance of competition law and the consequences of non-compliance.
Government compliance programmes
Is there a government-approved standard for competition compliance programmes in India?
There are no government-approved standards for competition compliance programmes. However, the Compliance Manual for Enterprises, which was published by the CCI in 2017, comprehensively contains, among other things, a dedicated and separate chapter on ‘Building a Compliance Framework’, which offers substantial guidance on how a competition compliance programme may be formulated.
Applicability of compliance programmes
Is the competition compliance in India guidance generally applicable or do best practice and obligations depend on company size and the sector of the economy it operates in?
Company size (in terms of market share) is considered, among other things, when formulating compliance for dominant enterprises or those capable of exercising appreciable adverse effects on competition. Although the Compliance Manual for Enterprises, as released by the CCI, has separate subheadings dealing with vertical agreements and the behaviour of dominant enterprises, it unambiguously recognises that compliance programmes for enterprises (including the focus of those programmes) may vary depending on the market position and nature of the industry in which a particular enterprise operates. Therefore, it is standard practice to prepare competition compliance programmes or guidance based on the sector, industry and operations of the company (while keeping industry and global best practices in mind). Most importantly, a compliance manual must be revised depending on changes to the facts and circumstances of the company and applicable laws (for example, changes in business environment and market share and amendments to competition law) for which it is tailored in first place.
If the company has a competition compliance programme in place, does it have any effect on sanctions?
Having an internal competition compliance manual may be a mitigating factor if the company is found to be in violation of the provisions of the Competition Act; however, it will depend on the facts and circumstances of each case. In the past, the CCI has considered the existence of a competition compliance manual as a mitigating factor while imposing penalties under section 27 of the Competition Act.
Other practices
Does competition law in India specifically regulate anticompetitive practices that are not typically covered by antitrust rules?
The Competition Act has specific provisions that regulate anticompetitive agreements (both at the horizontal and vertical levels), abuse of dominance and mergers and acquisitions. However, the competition regulators have, at various times, come across and dealt with practices that do not strictly fall under any specific definition of a strict horizontal or vertical agreement under the Act but are inherently anticompetitive and adversely affect competition dynamics in the market or are detrimental to the interest of consumers at large. For instance, the agreements entered between associations and enterprises, which in a pure sense do not qualify as a vertical or horizontal relationship under section 3(3) or section 3(4) of the Competition Act, are sought to be regulated by the CCI by invoking section 3(1) of the Act, which provides that no enterprise or association of enterprises or person or association of persons shall enter into any agreement that causes or is likely to cause an appreciable adverse effect on competition (AAEC) within India, thus expanding the scope of the existing provision to look beyond what has been specifically provided in the Competition Act. The issue of whether the provisions of section 3(1) can be extended to cover such agreements is pending adjudication before the Supreme Court in Cadila Healthcare Limited v Competition Commission of India (SLP No. 30641 of 2018).
Further, even practices such as excessive pricing have not been specifically covered under abuse of dominance provisions. The difficulty of ascertaining pricing as excessive had been highlighted by the CCI in Kapoor Glass India Private Limited v Schott Glass India Private Limited. The CCI, speaking through R Prasad in his dissenting opinion, however, held that excessive pricing is in violation of section 4(1) read with subsection (2)(a)(ii) of section 4 of the Competition Act. Therefore, the decisional practice of the CCI indicates that in unprecedented situations, the CCI has and is willing to expand the scope of existing provisions to capture any and all anticompetitive practices that in its opinion are likely to have an AAEC in the market.
Future reform
Are there any proposals for competition law reform in India? If yes, what effects will it have on the company’s compliance?
The Competition (Amendment) Bill 2020 (the Competition Bill) has broadened the scope and applicability of the current Competition Act. For instance, the Competition Bill widens the scope of the Competition Act to, inter alia, capture buyers’ cartels and any other enterprise engaged in economic activity and combination in addition to what are traditionally envisaged under section 5 of the Competition Act. Therefore, the compliance requirements for a company under the Competition Bill will become wide and extensive.