Introduction Of Settlement & Commitment Mechanism And Penalty Guidelines



In a key legislative development to the antitrust regime in India, various provisions of the Competition (Amendment) Act, 2023and their implementing regulations have been recently notified...
India Antitrust/Competition Law
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In a key legislative development to the antitrust regime in India, various provisions of the Competition (Amendment) Act, 2023and their implementing regulations have been recently notified:

  1. operationalizing the Settlements and Commitments mechanism; and
  2. empowering the Competition Commission of India ("CCI") to impose significantly higher penalties and introducing detailed Penalty Guidelines for violations of the Competition Act, 2002 (the "Act").

Settlement and Commitments

The new Settlement and Commitments regime introduces a time-bound process, allowing parties to offer commitments and settlements at different stages of an investigation without a formal finding of contravention. The salient features of this regime are as follows:

(a) Timeline and cut-off events

A commitment application may be filed within 45 days of initiation of CCI's inquiry (prior to receipt of the Director General ("DG") report) whereas a settlement application may be filed within 45 days of receipt of DG report (priorto the CCI final order).

The commitments proceeding is to be completed within 130 days, and the settlements proceeding is to be completed within 180 days (from the filing of the respective applications). The CCI may however extend these timelines, if required.

(b) Eligibility of applicants

Entities accused of abusing their dominance or engaging in anti-competitive agreements may apply. However, entities which are under cartel investigations,cannot seek settlements or commitments.

A settlement proposal must cover all contraventions identified in the DG report. In a commitment proposal however, an applicant can choose to submit commitments only in respect of some alleged violations, i.e., partial commitments (and the investigation will continue in respect of the other allegations for which no commitments are offered).

Along with their proposals for settlements or commitments, applicants must file an undertaking inter alia to: (i) submit to CCI's jurisdiction; (ii) not contest the findings of fact and conclusion of law in the settlement or commitment order; (iii) not seek a review of or appealthe settlement or commitment order; and (iv) not challenge restoration of proceedings upon violation of the settlement or commitment order.

(c) Imposition of penalty and finding of guilt

Successful applicants will not be held to have contravened the provisions of the Competition Act. Settlement applicants, however, would be liable to a penalty (reduced by 15%)and may be exposed to damages claims.

(d) Assessment of application

Once an application is considered to be complete in accordance with the provisions of the Act, the CCI will pause its on-going inquiry or investigation against the applicant. In case of a settlement application (which is after receipt of a DG report), the CCI can also issue interim directions.

To assess the application, the CCI is required to consider whether the proposal would be easy to monitor, increase contestability in the market, lead to procedural efficiencies, and early correction of market distortions.

Prior to rejection of an application, the applicant will be given an opportunity of being heard.

(e) Role of informant & third parties

The parties, and the DG office, will be given an opportunity to submit their comments and objections to a settlement or commitment proposal. The CCI may also publish details of commitments for public consultation, but not in the case of settlements.

(f) Revocation

The CCI also reserves the right to revoke its settlement or commitment order if an applicant fails to comply, make full and true disclosures, or if there is a material change in facts. In such cases, the applicant will also be liable to pay the legal costs incurred by the CCI, to a maximum of INR 1 crore (USD 0.12 m).

Issuance of Penalty Guidelines

The CCI can now impose penalties of up to 10% of the average 3 years' global turnover of errant parties. The guidelines prescribe the methodology for calculation of penalties by the CCI, starting with: (a) an amount of up to 30% of the average relevant turnover of the errant entity; (b) adjusted for aggravating and mitigating factors, increased for deterrence; and (c) subject to the maximum legal limit of 10% of global turnover.

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.

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