Comparative Guides

Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.

Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.

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4. Results: Answers
Investigations – step by step
What initial steps do the enforcement authorities take to commence a cartel investigation?

Answer ... The Competition Commission may inquire into an alleged violation of provisions of the Competition Act:

  • on its own motion;
  • on receipt of any information;
  • on a reference made by the central or state government or any statutory authority to the commission; or
  • on receipt of a leniency application.

Once the commission takes cognisance of a matter, it must form a prima facie opinion whether there has been a violation of Section 3 of the act. If the commission is of the opinion that there exists a prima facie case, it will direct the director general to commence a detailed investigation into the matter. Before the formation of its prima facie opinion, the commission may, if it deems this necessary, call the informant or any other person for a preliminary conference (hearing) to form an opinion on whether a prima facie case exists.

If the commission is of the opinion that no prima facie case exists, it will close the matter and pass such orders as it deems fit.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES
Are dawn raids commonly conducted in your jurisdiction? If so, what are the pre-conditions for conducting a dawn raid? When, where and by whom are they conducted? Do the enforcement authorities have the power to search private as well as company premises?

Answer ... Yes, dawn raids are conducted in India and are becoming increasingly common. According to public sources, the director general has conducted six dawn raids so far, three of which were in 2019. The sectors and parties raided are as follows:

  • Construction equipment: JCB India;
  • Dry cell batteries: Eveready, Nippo and Panasonic;
  • Breweries: United Breweries, Carlsberg and Anheuser-Busch InBev;
  • Commodity trade: Glencore, Africa’s Export Trading Group and Edelweiss Group;
  • Carbon brushes: Mersen and Assam Carbon Products ; and
  • Tarpaulins: Climax Synthetics, Shivalik Agro Poly Products, Arun Manufacturing Services and Bag Poly International.

The preconditions for conducting a dawn raid are as follows:

  • The director general cannot conduct a dawn raid without procuring a search warrant from the chief metropolitan magistrate of Delhi in advance. The director general may make an application for the issue of a search warrant where he believes that books and papers of a company which are necessary for the investigation may be destroyed, altered or hidden.
  • Before commencing the search, the director general must ensure the presence of two independent witnesses who are respectable inhabitants of a locality around the premises to be searched.

Dawn raids are conducted by the personnel of the director general’s office at the premises of companies which are likely to have violated the Competition Act. A raid generally starts in the morning of a working day and may last the whole day. The raid may continue until late in the night and may sometimes continue into the following day. The director general has the power to search the premises of a company or an individual.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES
What powers do officers have during the dawn raid? Are there any limitations on these powers?

Answer ... The director general has wide powers during a dawn raid, including the following:

  • using reasonable force to access the premise to be searched;
  • sealing the premises;
  • examining books and other records related to the business in physical and electronic form;
  • seizing any documents, taking possession of the originals and making copies;
  • keeping possession of seized books and papers for six months;
  • returning seized documents with identification marks;
  • asking for such books and papers again after their return;
  • seizing and making copies of electronic devices, including storage devices;
  • examining any person on oath and directing such a person to appear before him; and
  • using the notes from deposition as evidence against the person deposed.

If any person fails to follow the directions of the director general, he or she can be punished with imprisonment for up to six months and/or a fine.

There are certain limitations on the powers of the director general to avoid any possible abuse of such powers during a dawn raid. The director general cannot:

  • conduct a dawn raid without a search warrant or without the presence of two independent witnesses;
  • search any area outside the scope of the search warrant;
  • access documents protected by attorney-client privilege;
  • conclude the search without providing a list of all documents/devices seized to the company raided; and
  • retain seized original documents if certified copies of the same are submitted.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES
What are the rights and obligations of the target company and any individuals targeted during a dawn raid?

Answer ... The rights of the target company or individuals during a dawn raid include the following:

  • requesting the search warrant and identity cards of the personnel from the director general’s office for inspection before the raid;
  • refusing access to the premises if the search warrant or identity cards are incomplete, defective or not presented;
  • ensuring the presence of independent witnesses before the search commences;
  • ensuring that the raid is limited to the scope of the search warrant;
  • obtaining a list of all material (physical and electronic) seized during the raid, which is signed by the director general and the two witnesses;
  • making and retaining copies of all documents seized by the director general; and
  • ensuring that the notes of examination (deposition) are written, read and signed by the person examined.

The obligations of the target company and individuals during a dawn raid include the following:

  • assisting the director general with the investigation;
  • producing all books and papers relating to a company in its custody;
  • not concealing, destroying or hiding any material information or documents; and
  • not furnishing any information knowing it to be false.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES
What evidence can be seized during a dawn raid? Do the enforcement authorities have the power to interview witnesses and take statements during a dawn raid?

Answer ... The director general is empowered to seize any evidence which is necessary for the investigation, except legally privileged documents. Such evidence generally includes documents (physical and electronic), emails and other correspondence, agendas and minutes of board meetings, meeting notes, internal memoranda, travel information and communication/storage devices.

The director general has the power to interview witnesses and take their statements during a dawn raid. He can also use the notes from depositions as evidence against the person deposed.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES
How can a company best prepare itself for dawn raids? What best practices should it follow in the event of a dawn raid?

Answer ... Given that dawn raids are becoming common in India, it is important to ensure that staff are properly trained on how to handle such raids and educated on their legal rights which can be exercised during such raids.

Best practices which may be followed in the event of a dawn raid include the following:

  • ensuring that the key staff (including receptionists, heads of the company/premises, legal team, IT team and PR team) are at all times well trained in how to handle a dawn raid;
  • having a prior dawn raid strategy and response team (internal and external) in place;
  • educating staff on their rights and obligations during the raid;
  • in case of a raid, immediately informing in-house counsel and external lawyers;
  • shadowing each official on the premises to check what is being searched and seized;
  • taking detailed notes of the search conducted by the director general and preparing a record of all employees, documents and devices examined;
  • designating a senior person to liaise with the director general and communicate with company employees;
  • keeping all privileged documents (physical and electronic) properly marked as ‘legally privileged’ and asserting privilege on such documents during the raid; and
  • ensuring that all objections of the company during the raid are included in the record of the raid and that a copy of the record, duly signed by the director general and witnesses, is provided to the company.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES
What are the next steps in the cartel investigation following a dawn raid? What timeframe do these typically follow?

Answer ... After the dawn raid, the director general proceeds with his investigation and prepares an investigation report recommending whether there has been a contravention of the Competition Act. While the director general is expected to complete his investigation within 60 days, it generally takes much longer to complete the investigation. Investigation timelines vary significantly from case to case and may take several months to years.

The investigation report is submitted to the Competition Commission, which then shares it with the parties, inviting comments. The parties must file their objections within 15 days of receiving a copy of the investigation report from the commission. This timeline is generally extended by a few weeks, to give the parties the opportunity to inspect all documents relied upon by the director general during the investigation.

On receipt of the parties’ comments, the commission will grant them an oral hearing. The commission must decide the matter within three weeks of conclusion of the final oral arguments. The commission will then pass and publish its final order. A certified copy of the final order will be served on the parties within four weeks of the date of the order.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES
What factors will the enforcement authorities consider in assessing whether cartel activity has taken place?

Answer ... The primary requirement to establish the existence of a cartel is an agreement (or understanding) among competitors to fix prices, limit market/technical development, share markets or rig bids. If such an agreement is established, the Competition Commission can presume that the agreement is likely to cause an appreciable adverse effect on competition (AAEC). The parties can, however, rebut the presumption by demonstrating that the agreement would not cause an AAEC based on the factors mentioned in Section 19(3) of the Competition Act. These include:

  • creation of entry barriers;
  • foreclosure of competition;
  • benefits to consumers; and
  • improvements in production and distribution.

To establish an agreement, the commission takes into account both direct and indirect evidence. Direct evidence includes communications between competitors (ie, emails, telephone records, messages and minutes of meetings), other materials communicating an agreement and statements on oath. Indirect (or circumstantial) evidence includes analysis of:

  • price movements of various players (including price correlation and regression analysis);
  • the impact of cost and demand/supply on prices;
  • capacity utilisation; and
  • the dates of meetings and price changes.

If the economic analysis indicates any pattern in the conduct of parties which is commercially untenable, the commission may apply the ‘but for’ principle to conclude that such behaviour is not possible in the absence of an agreement among the parties.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES
In case of a finding of cartel activity, can the company seek to negotiate a settlement, plea bargain or similar resolution? If so, what is the process for doing so?

Answer ... There is no provision in the Competition Act which allows the parties to negotiate a settlement or similar resolution with the Competition Commission in cartel cases.

Although the commission’s position is that the act does not allow settlements in cartel cases, in Tamil Nadu Film Exhibitors Association v Competition Commission of India (Writ Appeal No 1806/2013), the Madras High Court directed the commission to consider the settlement proposal of the parties, either with or without modifications. It further stated that, since a settlement had been reached, further proceedings by the commission would be futile. The case related to a decision of an exhibitors’ association banning the screening of films released via direct-to-home television. A review petition has been filed by the commission challenging the High Court’s order.

In the past, the National Company Law Appellate Tribunal has allowed settlements of disputes between parties in cases relating to vertical agreements and abuse of dominance, but not cartelisation.

For more information about this answer please contact: Vivek Agarwal from DMD® ADVOCATES