The Competition Commission of India (CCI) released the long-awaited Competition Commission of India (Determination of Monetary Penalty) Guidelines, 2024 (Penalty Guidelines) on 6 March 2024. Prior to the Penalty Guidelines, there was no formal guidance for the CCI to impose penalties on contravening enterprises and / or individuals under the Competition Act, 2002 (Act). Back in 2017, the Supreme Court of India in Excel Crop Care Ltd. v. CCI,1 emphasised the need of penalty guidelines. This requirement was reiterated in 2019 in the report of the Competition Law Review Committee, tasked to review and recommend changes to make the Indian competition regime more robust. The Penalty Guidelines are a welcome introduction, especially with the increase in the maximum penalty that can be imposed on enterprises under the Act.
The Penalty Guidelines provide a list of factors (without clarifying which factors are mitigating and aggravating) that the CCI may consider for the purpose of adjusting the penalty amount. These factors include (i) duration of the contravention; (ii) cooperation extended by the enterprise during the investigation by the Director General; (iii) repeated contravention; and (iv) implementation of a competition compliance program (CCP) within the enterprise. These formalised aggravating and mitigating factors have already been considered by the CCI in its jurisprudence, and this article explores the relevance of a CCP in penalty calculations.
CCI's jurisprudence on CCPs as a mitigating factor
The CCI noted in In Re: Cartelisation by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters, that a violation of competition law occurring despite there being a robust CCP in place is normally considered as a mitigating factor. However, it further clarified that assertion by the contravening enterprise that it will implement a CCP is not eligible as a mitigating factor.2 In In Re: Director, Supplies & Disposals, Haryana vs Shree Cement Limited & Ors.3 and In Re: Fx Enterprise Solutions India Pvt. Ltd. v Hyundai Motor India Limited,4 the CCI considered the existence of a CCP as a mitigating factor and reduced the penalty amount imposed on the contravening enterprises. The orders do not elaborate on the extent of reduction in penalty awarded to the enterprises, and it solely depends on the discretion of the CCI. The Penalty Guidelines also remain silent on the impact of mitigating and aggravating factors upon the penalty amount as the CCI retains sole discretion on adjusting the penalty amount.
The authors suggest that an effectively applied CCP should be considered as a mitigating factor by the CCI, and enterprises would benefit from the CCI setting out what an effective CCP looks like.
We start by considering the treatment of CCPs globally.
CCP - as a mitigating factor (subject to terms and conditions)
United States of America (USA): The United States Sentencing Commission has formulated the United States Sentencing Guidelines, which is also applicable to antitrust law. While these guidelines consider an "effective compliance and ethics program" as a mitigating factor during sentencing of organizations, there are certain conditions imposed on the same. There is a rebuttable presumption that if an individual (i) in a high-level managerial position of a small organization; or (ii) with substantial managerial authority, but not in a high-level managerial position, of any organization, participated in, condoned, or was willingly ignorant of the competition law violation, then the organization did not have an effective compliance and ethics program. Therefore, compliance program is rarely considered as a mitigating factor by the authorities in the USA.
Brazil: The Administrative Council for Economic Defense may consider the implementation of a CCP as evidence of good faith on part of the enterprise and treat it as a mitigating factor while imposing penalty if the general criteria as laid down in the Guidelines on the structuring and benefits of adopting competition compliance programs is met. However, the guidelines fall short on explaining the reduction in penalty.
China: The Amended Anti-Monopoly Compliance Guidelines for Business Operators also considers CCP as a mitigating factor. The guidelines also list down the conditions to be met and the detailed process for credit to be granted for CCP of an enterprise, at different stages of investigation.
Singapore: The Competition and Consumer Commission of Singapore (CCCS) has introduced the CCCS Guidelines on the Appropriate Amount of Penalty in Competition Cases which includes CCPs as a mitigating factor. These guidelines also lay down a list of factors that the CCCS will consider when deciding the mitigation value to be attributed to the CCP.
South Korea: The Korean Fair Trade Commission (KFTC) has released Regulations on the Operation and Evaluation of the Fair Trade Voluntary Compliance Program. The benefits of implementing an effective CCP, subject to the criteria laid down in the regulations CCP granted by the KFTC, include inter alia the reduction of penalty. Notably, the CCPs will be granted an evaluation rating by the KFTC under the regulations.
Where CCP is viewed as neutral
European Union (EU): The Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003 issued by the European Union (EU) does not list the implementation of the CCP as a mitigating or aggravating factor when considering the penalty to be imposed on the contravening enterprise. The EU appears to have taken a neutral view with respect to CCPs. However, in some jurisdictions in the EU, such as, Germany5 and Italy, CCPs are generally considered to be a mitigating factor while setting penalty on enterprises.
United Kingdom (UK): In 2021, the Competition and Markets Authority (CMA) has removed CCP as a mitigating factor in CMA's guidance as to the appropriate amount of a penalty post a consultation process. While stakeholders who submitted responses were against this exclusion, the CMA responded that while it is in full support of promotion of competition law compliance across the UK, it is a legal obligation on all businesses. The implementation of CCP should not rest on the availability of it as a mitigating factor leading to reduction of penalty for an infringement. The CMA further noted that businesses have sufficient incentives to adopt compliance programs without it being considered a mitigating factor for reduction of penalty as well.
Russia: Federal Law No. 135-FZ "On the Protection of Competition" came into force in March 2020, introducing antitrust compliance into Russian law. It sets down the factors that a CCP must contain and enables an enterprise to send its draft internal CCP to the Federal Anti-monopoly Service for review and verification, to determine its compliance with the antitrust legislation. This introduction may set the groundwork for the consideration of CCP as a mitigating factor under certain circumstances in Russia.
CCP – as an aggravating factor
While CCPs are generally considered to be either neutral or mitigating factors, in certain exceptional circumstances, the violation of competition laws despite the existence of a CCP may be viewed as an aggravating factor. For example, in Canada, the existence of a CCP may be viewed as an aggravating factor when a manager participated in, condoned or was wilfully ignorant of the violation of competition laws.6 In Italy, if a CCP is used to facilitate or conceal an infringement of competition law, or prevent, hinder or delay the investigation of the competition authority, then in these limited circumstances, the implementation of a CCP may be considered as an aggravating factor.7
Conclusion
It appears that while more mature jurisdictions are leaning towards treating CCPs as a neutral factor in determining the penalty amount, developing nations are beginning to or continue to treat effective CCPs as a mitigating factor to encourage competition compliance. That being said, more jurisdictions are publishing guidelines for CCPs to ensure their effectiveness and active implementation, and imposing conditions on enterprises for being able to benefit from CCPs as a mitigating factor during setting of penalties. Another emerging trend seems to be the prior approval/ evaluation system for an organization's CCP. This reflects a stricter approach towards the consideration of CCPs as a mitigating factor.
In contrast, the CCI has only now explicitly included CCP as a factor during determination of penalty, without further elaboration. However, it is a welcome move that can set the groundwork for considering CCP as a mitigating factor. While the CCI has not published a detailed formal guideline laying down the criteria for a CCP so far, its publication, Compliance Manual for Enterprises, provides some guidance on the broad contours of a CCP. It is important for an enterprise to note that the mere existence of a CCP is unlikely to provide any value. To increase chances for an enterprises' CCP to be considered a mitigating factor by the CCI, enterprises should effectively implement their programs. Enterprises must ensure that their CCP is effective with appropriate compliance policies and procedures, actively implemented in good faith to ensure compliance and is not merely a program 'on paper' to attract reduction in penalties.
Footnotes
1. Excel Crop Care Ltd. v. CCI, (2017) 8 SCC 47.
2. In Re: Cartelisation by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters, Suo Motu Case No. 02 of 2013.
3. In Re: Director, Supplies & Disposals, Haryana vs Shree Cement Limited & Ors., Ref. Case No. 05 of 2013.
4. In Re: Fx Enterprise Solutions India Pvt. Ltd. v Hyundai Motor India Limited, Case Nos. 36 and 82 of 2014.
5. Section 81d of the (German) Competition Act.
6. Competition Bureau Canada (2015), Corporate Compliance Programs.
7. Autorita' Garante della Concorrenza e del Mercato (2018), Guidelines on Antitrust Compliance.
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