India: Compliance Of Competition Act, 2002 - The Need Of The Hour

The legislative intent to prescribe punishments is to ensure that the provisions of the enactments are rigorously followed by the fellow citizens. The punishments are either "Reformative" or "Deterrent" in nature. An endeavour is made to show, how over the years the Competition law in India has transformed from Reformative punishments to Deterrent punishments and therefore, the compliance of the Competition law by an enterprise is the need of the hour.

The Competition law in India is in vague since June 01, 1970. At that time it was known as the Monopolise and Restrictive Trade Practices Act, 1969 (the MRTP Act) which was administered by the Monopolise and Restrictive Trade Practices Commission (the MRTP Commission). The MRTP Commission passed the final orders by directing the delinquent party(s) to refrain from the prohibited trade practices (cease) and not to indulge in such prohibited practices in future (desist) which were in the nature of Reformative punishment.1 However, certain penalties were provided in relation to various procedural offences under the MRTP Act but those were tried before the Court of Session on a compliant in writing by a Public Servant and not before the MRTP Commission. Thus, the MRTP Commission had no power for such offences except the power of passing Cease and Desist order as above.  

In the pursuit of globalization, in the year 1991, India had responded by opening up its economy, removing control and resorting to liberalization so that its markets should be geared to face competition from within the country and outside. Slowly, it was found that MRTP Act was not sufficient to prevent practices having an adverse effect on competition, to promote and sustain competition in the markets, to protect the interest of the consumers and to ensure freedom of trade carried on by competitors. Therefore, the Competition Act, 2002 (the Competition Act) was enacted and notified on March 31, 2002. The substantial provisions of the Competition Act were finally enforced w.e.f. May 20, 20092 and June 01, 2011.3 However, the MRTP Act was repealed and the MRTP Commission was dissolved w.e.f. September 01, 2009.4

The Competition Commission of India (the CCI) was established to administer the Competition Act5 and vested with ample powers to investigate6 and to impose heavy penalties in the nature of deterrent punishment for the violation of the provisions of the Competition Act. Under the Competition Act deterrent punishment can be imposed (i) before completion of inquiry and (ii) after completion of inquiry. Now, an attempt is made herein below to highlight the provisions relating to deterrent punishments in the Competition Act:

I  Deterrent Punishments before completion of Inquiry

The CCI or the Director General (the DG) under the Competition Act can direct any person to furnish certain information and/or documents for the purpose of investigation of violations of the provisions of the Competition Act. However, any failure to comply with such directions, without reasonable cause, attracts a penalty which may extend to rupees one lakh for each day during which such failure continues subject to a maximum of rupees one crore.7 The nature of such an offence is a continuing one and not the one which is committed for once and for all. 

Further, in complying the above directions of the CCI or the DG, if any person (a) makes any statement or furnish any document which he knows or has reason to believe to be false in any material particulars; or (b) Omit any material fact knowing it to be material; or (c) Wilfully alters, supresses or destroys any document which is required to be furnished, may attract a penalty which may extend to Rs. one crore.8

Under the Act, any person who is a party to a combination is required to give Notice of such combination to the CCI, failure to which attract a penalty which may extend to one percent of total turnover or the assets whichever is higher of such a combination;9

Further, in giving a Notice of combination as above any person (a) makes a statement which is false in any material particular or knowing it to be false or (b) omits to state any material particular knowing it to be material, attracts a penalty which shall not be less than fifty lakhs but which may extend to one crore.10

II  Deterrent Punishments after completion of Inquiry

After completion of the inquiry, the CCI under the Act can direct the delinquent party (a) to discontinue (cease) and not to re-enter such agreement or discontinue abuse of dominant position (desist); (b) impose penalty up to three times of the profit or ten percent of average turnover of the last preceding three financial years, whichever is higher; (c) direct the amendment/ modification of the agreement;11 (d) direct division of undertaking of such delinquent party.12

Further, in case of violation, individual officers of company responsible for the conduct of business of company are also deemed to be guilty of that violation  and are liable to be proceeded against and punished accordingly;13

Additionally, affected party(s) can approach the Competition Appellate Tribunal for award of compensation,14 which can be quite large depending on the kind of violation involved.

It is seen that the CCI has come heavily on the violators of the Competition Act by imposing a penalty of more than Rupees Nine Thousand Eight Hundred Crore, during the last three financial years.15 Thus, the focus of competition laws in India has changed from the earlier "Reformative punishments" under the MRTP Act where no penalties were imposed to "Deterrent punishments" under the Competition Act where hefty penalties are being imposed.

How to avoid such hefty penalties under the Competition law is always a moot question for a law abiding enterprise.  It is well said that preventive actions are always advisable as the ignorance of law is no excuse (ignorantia juris non excusat). Therefore, the Compliance of the Competition law becomes necessary as a legal obligation for every enterprise.

Competition law compliance implies a systemic and active approach to run a business in compliance with the written legal and unwritten ethical rules of competition and minimise risk of infringement of the law. When the enterprise takes certain necessary and concrete steps to ensure that knowingly or unknowingly it does not infringe the provisions of the Competition Act, it can be stated to maintain a Competition Compliance Programme (CCP). The main objectives of CCP are (i) Prevent violation of competition law; (ii) Promote a culture of compliance; and (iii) Ensure good corporate citizenship.

CCP should contains the basic principles of competition law that impacts the relationships with competitors, agents, suppliers, distributors, customers and other third parties. It also contains guidelines that are designed to help officials to distinguish between permissible business conduct and illegal anti-competitive behaviour under the Competition law.

CCP can be implemented by (i) constitution of high "Competition Compliance Committee" to drive the compliance agenda in the enterprise; (ii) putting in place a voluntary "Competition Compliance Manual"; (iii) carrying competition active risk management which includes- internal audit of procedures and documents and internal audit of commercial agreements. (iv) reviewing compliance programme periodically by Board of Directors; (v) evaluating the compliance programme regularly; (vi) training and education programme.

CCP may yield innumerable benefits such as (i) helps avoid the risk/cost associated with non-compliance; (ii) helps early detection of violation and take corrective measures; (iii) helps educate employees to confidently handle business as per "rules of game"; (iv) inculcates culture of compliance and enhances business credibility; (v) save precious time of top management; (vi) save damage to reputation and goodwill; (vii) save significant legal cost etc.

In conclusion, the Competition laws in India have seen a sea change from year 1970 to 2014 by transforming from Reformative theory of punishment to Deterrent theory of punishment and pursuant thereto imposition of hefty penalties by the CCI for the violation of the provisions of the Competition law. Therefore, in order to avoid violations of the provisions of the Competition law it is high time for the enterprises in India to consider having a compulsory "Competition Compliance Programme".

Footnotes

1  For the first time, vide Amending Act no. 30 of 1984, with effect from August 01, 1984, the MRTP Commission was empowered to award compensation as a result of prohibited trade practices carried on by any person/undertaking for any loss or damage caused to any person/consumer. In addition to this, MRTP Commission was also empowered to punish for its contempt under the provisions of the Contempt of Courts Act, 1971 vide Amending Act no. 58 of 1991 with effect from September 27, 1991.

2  Section 3- Anticompetitive Agreements of the Competition Act, 2002 and Section 4- Abuse of Dominant Position of the Competition Act, 2002

3  Section 5- Combination and Section 6- Regulations of Combinations of the Competition Act, 2002

Vide Notification No. S.O. 2204(E), Dated August 28, 2009, Issued by Ministry of Corporate Affairs

5  Section 7 of the Competition Act, 2002

6  Section 26 of the Competition Act, 2002

7  Section 43 of the Competition Act, 2002

8  Section 45 of the Competition Act, 2002

9  Section 43A of the Competition Act, 2002

10  Section 44 of the Competition Act, 2002

11  Section 27 of the Competition Act, 2002

12  Section 28 of the Competition Act, 2002

13  Section 48 of the Competition Act, 2002

14  Section 53N of the Competition Act, 2002

15  In FY 2011-12, Rs 858,38,05,261/-; in FY 2012-13, Rs. 7156,11,96,257/- and in FY 2013-14, Rs. 9817,18,19,911/- (approx.)

* Atul Dua, Senior Partner, Seth Dua & Associates, New Delhi, Dr. Vijay Kumar Aggarwal, Partner, Seth Dua & Associates, New Delhi

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.