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60
Legal Focus
JULY 2013
Competition Commission of India & Competition Law
With a recent transportation company coming under suspicion for freight rigging and another investigation involving a group of general insurers, the CCI has been highly active in recent months. To find out more, Lawyer Monthly benefits from an exclusive article from Samir Gandhi, a partner at AZB & Partners’ New Delhi offices. Samir deals with a range of competition, antitrust, international trade and WTO issues. Who’sWhoLegal 2013 lists him as a leading competition practitioner in India, and Who’sWhoLegal 2010 as a leading trade and customs practitioner.
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ZB & Partners are closely associated with the development and practice of competition law in India. They
participated in the consultation process leading up to the framing of merger control regulations under the Competition Act 2002 (‘CA02’). They have since interacted closely with the Ministry of Corporate Affairs, Government of India (‘MCA’) and the Competition Commission of India (‘CCI’), India’s competition regulator. The firm’s lawyers have also acted as counsel to the CCI in its early litigation to overcome the initial roadblocks to its functioning.
With the opening up of Indian markets to foreign trade, the CCI’s role has become increasingly important. The CCI is a pan-sectoral regulator and no sector is exempt from its purview.
It has a threefold
responsibility, (i) prevent anticompetitive activities (ii) discipline defaulters, and (iii) protect the end consumer. Proposed amendments to the CA02, currently awaiting approval from the Indian Parliament, would enable the MCA to prescribe sector-specific thresholds, potentially giving the CCI greater oversight over sensitive sectors like pharmaceuticals.
Enterprises operating in the Indian market must ensure they are fully compliant with the CA02. Collaborations with competitors, imposition of vertical restraints upon suppliers/distributors, and conduct of dominant enterprises necessarily need to be within the bounds of the CA02. It is mandatory for a merger, acquisition or amalgamation to be notified to the CCI on crossing certain asset/turnover thresholds, if it cannot avail of any of the prescribed exemptions.
The CA02 and its ancillary regulations apply equally to foreign enterprises. However, there is some confusion with respect to offshore transactions by multi-national companies. Under the merger control regulations, an offshore transaction with insignificant local nexus in India need not ‘normally’ notify the CCI. However, the CCI’s decisional practice shows it is unlikely to allow overseas deals the benefit of this exemption if the parties cross the prescribed asset/turnover thresholds in India. In the face of such uncertainty, parties are urged to tread with caution when deciding whether or not to notify any offshore deal.
The CCI may institute proceedings against an enterprise for any infringement
of the provisions of the CA02, either of its own accord or on the basis of information from any party. Erring enterprises could face significant penalties of up to 10% of the average annual turnover for the past three preceding years. For cartels, this penalty may be the higher of up to three times the participant’s profit or 10% of its turnover for each year of the agreement. Failure to notify a combination may attract a penalty equivalent to the higher of 1% of the total assets or turnover of the combination. Finally, follow-on actions for compensation may be brought before the Competition Appellate Tribunal. LM
Contact:
Samir Gandhi AzB & Partners Plot no. A 8
Sector 4, noida, India – 201301. tel: +91 120 4179999