The buck stops here

Individuals at the helm of companies in India may be held personally liable in case of violations of competition law rules

Avirup Bose explains why it pays to tread carefully

The job of directors and senior managers in charge of India’s companies – already a challenge on account of a grim economic environment and increased scrutiny by stakeholders and the media – may have become even more complex now that the country’s antitrust regime is in place.

The Competition Act, 2002, provides that “every person who … was in charge of, and was responsible to the company for the conduct of the business of the company” may be held personally liable for anti-competitive acts committed by the company. The provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position came into force in May 2009.

Both the company and its officers are responsible for violations of the act and may be proceeded against by India’s antitrust regulator, the Competition Commission of India (CCI). Under the act, a company includes a partnership firm or an association of persons. Therefore, a partner in charge of the affairs of a partnership or the president of a trade association is responsible for such violations.

This means that directors reviewing a merger proposal before a board meeting not only have to keep in mind their traditional fiduciary duties of loyalty, good faith and due care, but also have to ensure that the merger is not anti-competitive in nature.

Complying with competition law rules can be a challenge in industries where anti-competitive practices (such as price fixing or collaborative bid-rigging) may have been prevalent.

While adopting a company-wide compliance programme should help create a culture of competition law compliance within a company, it is essential to understand that the buck stops with the company’s officers who are squarely responsible for its actions. (For an analysis of putting in place a compliance programme, see Playing by the Rules in the July/August 2012 issue of India Business Law Journal.)

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.