New dawn for CCI’s investigation techniques

By Karan Chandhiok and Lagna Panda, Chandhiok & Mahajan
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Dawn raids are unannounced search and seizure operations conducted by the director general (DG) of the Competition Commission of India (CCI), or investigators acting under the DG’s authority in accordance with the Competition Act, 2002.

During an investigation, if the DG has “reasonable grounds to believe” that a company may destroy, mutilate, alter, falsify or conceal books and papers of the company, they may conduct dawn raids.

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Karan Chandhiok
Partner
Chandhiok & Mahajan

Six dawn raids have been conducted by the DG so far, according to publicly available information. The first related to an allegation of abuse of dominance, but subsequent dawn raids arose from investigations on allegations of cartelization. The DG has been increasingly using dawn raids as an investigative tool to break apart cartels. This is evident from four dawn raids conducted during the past year, in all of which the DG was investigating allegations of the formation of cartels, and in which more than a dozen companies across India were raided.

Some dawn raids conducted by the DG were the result of leniency applications by cartel participants. Where such an application discloses to the CCI that cartels are in operation, a dawn raid ensures that the cartel participants do not tamper with information and documents that could be used as evidence.

Companies’ obligations

Lagna Panda
Lagna Panda
Senior associate
Chandhiok & Mahajan

During a dawn raid, investigators have wide-ranging powers. They may take sworn statements from the staff of the company being raided; they can disconnect electronic devices, including personal devices of the company’s staff; they can seal rooms or cabinets overnight; they may temporarily block email accounts of staff during the investigation; they can ask for certificates for the electronic documents that they collect; and they may seize documents and electronic devices, and take copies of documents including confidential or proprietary papers.

Dawn raids are unannounced operations and it is imperative that companies have action plans and internal procedures setting out what the staff should and should not do when they are raided. This is to ensure that the staff know what steps they should take to protect the interests of the company during the raid. Companies should establish competition compliance programmes and training. These will go a long way in preparing the staff on how to respond in case of a dawn raid.

Companies’ rights

Among other things, the staff can ask the investigators for a copy of the warrant and the court order to check the scope of the dawn raid. The staff can record their protests if the dawn raid exceeds the scope of the warrant.

The presence of at least two independent witnesses during a dawn raid is important as it ensures that investigators follow procedures. The first step that the staff must take during a dawn raid is to call their internal legal team and external counsel. The staff should also request investigators not to begin their search until the legal team and external counsel arrive.

Companies must co-operate with investigators as dawn raids have the backing of the law. Not co-operating may be deemed to be an obstruction of justice. However, companies can and must ask for identification details of the investigators to create a written record.

Companies can also request investigators to: (1) allow their staff to make copies of all records seized; (2) allow their staff to identify and exclude any legally privileged communications; (3) allow their staff to access electronic devices and systems in accordance with the usual practice of the company; (4) allow IT personnel of the company to be present when the investigators access electronic devices and systems; and (5) supply copies of the statements of staff that the investigators have recorded. Companies must also ask for a copy of the panchnama (the seizure memo and inventory list).

The increasing use of dawn raids demands that companies are fully aware of their obligations and rights during the raids. Dawn raids can be overwhelming and stressful. Companies must, therefore, develop and practise standard operating procedures, including identifying and training key officers, before they suffer a raid.

Dawn raids can cause damage to companies’ reputations. Therefore, companies should ensure that they comply with the provisions of the act at all times. Where they have become part of any cartel, companies can consider filing leniency applications in order to reduce penalties, or even receive immunity.

Karan Chandhiok is a partner and Lagna Panda is a senior associate at Chandhiok & Mahajan. Salman Qureshi, an associate, also contributed to the article.

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