Playing by the rules

Companies should implement compliance programmes to ensure they don’t fall foul of India’s increasingly stringent competition law

by Avirup Bose

On 20 June, the Competition Commission of India (CCI) imposed a penalty of over ₹60 billion (US$1 billion) on 11 cement producers and the Cement Manufacturers’ Association after finding them guilty of cartelization under section 3 of the Competition Act, 2002.

Two days later, the CCI announced that it had begun investigating certain milk producers and co-operatives for alleged price cartelization after they had raised milk prices several times in unison over a short period of time. On the same day, the chairman of the CCI, Ashok Chawla, stated that the regulator had “taken note” of oil companies that acted in unison to raise oil prices.

The CCI is soon expected to pass an order on alleged cartelization by several major tyre manufacturers. It has said that similar investigations are pending against companies in the aviation, real estate and pharmaceuticals sectors.

Increasingly aggressive

Since coming into full operation in May 2009, the CCI has shown a growing intolerance of anti-competitive collusion between firms. As one of the few Indian regulators with such a large ambit and fining powers, it has not hesitated to impose hefty monetary penalties.

In June, the CCI imposed penalties of more than ₹2.5 billion on United Phosphorus and ₹600 million on Excel Corp Care for collusive bidding for tenders floated by the Food Corporation of India. Before that the CCI had imposed a penalty of approximately ₹600 million on 10 manufacturers of explosives that it found guilty of forming a cartel. In 2011, the CCI found a major real estate developer, DLF, and the National Stock Exchange of India guilty of abusing their dominant position and imposed penalties of ₹6.3 billion and ₹555 million respectively.

The CCI has accumulated a considerable stock of case law and some valuable precedents in a relatively short time. However, an environment of uncertainty remains especially for two reasons. First, the regulator has not provided any formal guidance to businesses on sensitive topics such as: means of collaborating with competitors; structuring mergers, joint ventures or other commercial transactions; or trade association activities. Such guidance is provided by antitrust regulators in some other jurisdictions, including the UK and Canada.

Second, several appeals against orders passed by the CCI have not yet been ruled on by the Competition Appellate Tribunal. An order of the Competition Appellate Tribunal can be further appealed before the Supreme Court.

In this environment of heightened regulatory scrutiny and in the absence of substantial formal guidance, Indian companies need to be proactive in ensuring that their business practices comply with competition law and are in sync with the enforcement priorities of the CCI.

Avirup Bose is an expert in competition law with the Competition Commission of India. He is qualified to practise law in India and New York. This article reflects his personal views and not the official views of the CCI.