Provisions in Indian Competition Law for Tackling Cartels

1
Provisions in Indian Competition Law
for Tackling Cartels

• A Presentation by Dhanendra Kumar,
  Chairperson,Competition Commission of India
• BRIC International Competition Conference, Kazan
• 2nd September, 2009

2
Competition Act in India - an overview

• Competition Act, 2002 initially notified in
  January, 2003. However enforcement delayed due to
  certain legal issues raised in courts.
• With the passage of Competition (Amendment) Act,
  2007, and notification of sections relating to
  anti-competitive agreements and abuse of
  dominance, the Commission is now ready for
  enforcement.
• Based on international norms, the act has been
  called close to state-of-the-art (OECD,
  Economic Survey of India Report 2007).
• It is broadly comparable to those of other
  jurisdictions with effective laws in this area
  and, for the most part, embodies a modern
  economics-based approach (WTO Trade Policy
  Review of India, 2007).

3
Cartels and their impact on Competition

• Cartels are agreements between enterprises not to
  compete on price, product or customers.
• Objective of cartel is to raise price above
  competitive levels, resulting in injury to
  consumers and to economy.
• Cartel formation impacts consumers as it results
  in higher prices, poor quality and restricted
  choice.

4
Cartels under the Indian Competition Act

• Section 2 (c) of Indian Competition Act, 2002 has
  an inclusive definition of Cartels.
• Section 2 (c) defines Cartel to include an
  association of producers, sellers, distributors,
  traders or service providers who, by agreement
  amongst themselves, limit, control or attempt to
  control the production, distribution, sale or
  price of, or , trade in goods or provisions of
  services.
• The Indian Competition Act prohibits any
  agreement which causes, or is likely to cause,
  appreciable adverse effect on competition in
  markets in India. Any such agreement is void.
• Agreement has an inclusive definition and
  includes any arrangement or understanding or
  action in concert. It also includes formal or
  informal, written or oral agreements.

5
Cartels under Indian CA - Contd.

• Any agreement entered into between enterprises
  engaged in identical or similar trade of goods or
  provision of services, including cartels, shall
  be presumed to have adverse effect on competition
  and therefore void as per Section 3(3) of the
  Indian Competition Act if it
• directly or indirectly determines purchase or
  sales prices.
• limits or controls production, supply, markets,
  technical development, investment or provision of
  services.
• shares the market or source of production or
  provision of services by way of allocation of
  geographical area of market, or type of goods or
  services, or number of customers in the market or
  any other similar way.
• directly or indirectly results in bid rigging or
  collusive bidding.

6
Cartels under Indian CA - contd.

• Cartels are in the nature of prohibited
  horizontal agreements and are presumed to have
  appreciable adverse effect on competition.
• Law treats cartels as per se violations, not
  requiring actual proof of harm.
• Burden of proof on the defendant.
• Section 32 of Indian Competition Act also takes
  into account cartel related activities taking
  place outside India having effect on competition
  in India extra-territorial reach.

7
Anti-Cartel Enforcement under Indian CA

• The Commission is empowered to inquire into
  activities of cartel.
• In case the Commission is convinced that prima
  facie case exists against a cartel, it shall
  direct the Director General to inquire and
  furnish report.
• Director General for the purpose of inquiries is
  vested with the powers of civil court besides
  powers to conduct search and seizure.
• If after inquiry the Commission finds that any
  anti-competitive agreement was entered into by
  cartel, it 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, which ever is
  higher.

8
Other powers of Commission under Indian CA in
respect of Cartel

• In addition, the Commission under Section 27 also
  has the power to pass, inter-alia any or all of
  the following orders
• Direct the parties to a cartel agreement to
  discontinue and not to re-enter such agreement.
• Direct that the agreements shall stand modified
  to the extent and in the manner as may be
  specified in the order of the Commission.
• Direct the enterprises concerned to abide by such
  other orders as the Commission may pass and
  comply with the directions, including payment of
  costs, if any.
• Pass any other order or issue directions as it
  may deem fit.

9
Power to issue interim order and leniency

• During the pendency of an inquiry, the
  Commission, may by order, temporarily restrain
  any party from carrying on such act until the
  conclusion of such inquiry or until further
  orders, without giving notice to such party,
  where it deems it necessary.
• The Indian Competition Act also empowers the
  Commission to grant leniency by levying a lesser
  penalty on a member of the cartel who provides
  full, true and vital information regarding the
  cartel. (Section 46)
• The scheme is based on the premise that
  successful prosecution of cartels may require
  evidence supplied by a member of the cartel.
• However, in case report of DG on investigations
  carried out by him is received before making of
  such disclosure, lesser penalty cause does not
  apply.

10
Provisions of Lesser Penalty

• Lesser penalty shall be imposed by the Commission
  only in respect of a producer, seller,
  distributor, trader or service provider included
  in the cartel, who first made
• the full, true and vital disclosures .
• In case any member of cartel, in course of
  proceedings,
• had not complied with the condition on which the
  lesser penalty was imposed by the Commission
• or had given false evidence
• or the disclosure made is not vital
• the Commission may try such a member for the
  offence with respect to which the lesser penalty
  was imposed and such member shall also be liable
  to the imposition of penalty to which such person
  has been liable, had lesser penalty not been
  imposed.

11
Effectiveness of CCI in tackling cartels

• Evidence of cartels in certain sectors noted in
  MRTP regime.
• However, since there were no penal powers with
  MRTP, no effective deterrence could be enforced.
• CCI is in position to tackle activities of Cartel
  effectively due to following factors
• Explicit definition of Cartel in the Act.
• Adequate powers of inquiry and investigation.
• Leniency programme for members of a cartel to
  defect.
• Deterrent penal provisions linked with profits
  or turnover on each member of the cartel during
  the continuance of cartel.
• Effective extra-territorial reach.
• Provisions to enter into co-operation agreement
  with contemporary overseas competition agencies.
• Provisions of ensuring confidentiality on
  information.

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• Thanks
• Indian Competition Act, Rules and Regulations
  are available at website
• www.cci.gov.in