Compliance & Investigation
Notification of Provisions related to Investigations by Serious Fraud Investigation Office
On August 24, 2017, the MCA issued a notification for bringing into force subsections (8), (9) and (10) of Section 212 of the Companies Act. Section 212 deals with investigation into affairs of a company by the Serious Fraud Investigation Office (‘SFIO’). The newly notified subsections deal with the powers of arrest given to the designated officers of the SFIO.
The MCA has also notified the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 (‘SFIO Rules’) on August 24, 2017, which SFIO Rules are to be read with Section 212 and 469 of the Companies Act and inter alia elaborate the powers and manner in which arrests are to be made by SFIO officers pursuant to Section 212.
Changes in Conditions for Issuance and Transfer of Offshore Derivative Instruments
SEBI has, by way of a circular dated June 10, 2016, introduced the following key changes in the conditions for issuance and transfer of Offshore Derivative Instruments (‘ODI’), effective from July 1, 2016:
i. Beneficial owners of corporate subscribers are to be verified on a look-through basis, as per the thresholds set out in the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, i.e., 25% in the case of a company and 15% in case of partnership firms/ trusts/ unincorporated bodies, and Know Your Customer documentation has to be obtained from beneficial owners exceeding these thresholds. If no entity’s holding is in excess of the thresholds, the ODI issuer must obtain the identity and address proof of the relevant natural person who holds the position of senior managing official of the material shareholder/ owner entity;
ii. Any transfer of ODIs, issued by or on behalf of the ODI issuer, is to be made to only persons eligible to deal in ODIs, with the prior consent of the ODI issuer (unless the transferee is pre-approved by it) and reported to SEBI on a monthly basis;
iii. ODI issuers must file suspicious transaction reports (if any) with the Indian Financial Intelligence Unit;
iv. ODI issuers must reconfirm ODI positions on a semi-annual basis, and report any deviations from the monthly reports to SEBI; and
v. ODI Issuers must carry out a periodical review and evaluation of its controls, systems and procedures with respect to ODIs, and their chief executive officer must submit a certificate in this regard to SEBI annually.
SEBI Order in the matter of Price Waterhouse relating to the case of Satyam Computer Services Limited.
An order was passed by SEBI in relation to the financial fraud perpetrated by the senior management of Satyam Computer Services Limited (‘Satyam’).
PriceWaterhouseCoopers, Chartered Accountants (‘PWC’) were the statutory auditors of Satyam since April 1, 2000. When the financial irregularities at Satyam came to light, SEBI issued notices to 11 entities in the PWC group and the 2 signatories of the auditors’ report of Satyam on behalf of PWC, namely, Mr. S Gopalakrishnan and Mr. Srinivas Talluri (collectively, the ‘Noticees’). The Noticees were accused by SEBI of (i) acting in violation of certain provisions of the SEBI Act and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (‘FUTP Regulations’) and in gross violation of their duties and responsibilities as auditors while certifying the financial statements of Satyam for the period from 2000 to 2008; and (ii) being complicit or acquiesced in the fraud perpetuated at Satyam.
In its order of January 10, 2018 (‘Order’), SEBI observed that there had been a total abdication by PWC of its duty to follow minimum standards of diligence (including PWC’s own manual), which inter alia required external confirmation of bank balances and fixed deposits. Further, PWC failed to reconcile discrepancies in the records of Satyam, which it had full knowledge of and which had been flagged by Satyam’s internal auditors, and its report certified the fairness of Satyam’s financial statements, forming a vital component of the prospectus inducing investors to trade in the scrip of Satyam believing it to be in a sound financial position.
SEBI inferred that their involvement was mala fide, and that the only reason for such a casual approach taken by PWC could be either complacency or complicity, and that PWC’s acts amounted to commission of fraud for the purposes of the SEBI Act and the PFUTP Regulations. In SEBI’s view, while PWC group entities are separate entities, they functioned as a single unit for all practical purposes in the context of the fraud at Satyam, and therefore, SEBI directed: (i) debarment from directly or indirectly issuing certificates of audit of listed companies, compliance of obligations of listed companies and intermediaries registered with SEBI for a period of two years for all PWC entities practicing as chartered accountants in India, and for a period of three years for the Noticees; (ii) disgorgement of wrongful gains of approximately Rs. 13.09 crore (approx. US$ 2 million) (joint and several liability) by PWC, Bangalore and the Noticees, with interest; and (iii) all listed companies and intermediaries registered with SEBI not to engage audit firms forming part of the PWC network for issuing any certificate with respect to compliance of statutory obligations for a period of two years.
An appeal against this Order filed by PWC is pending before the Securities Appellate Tribunal (‘SAT’). SAT has refused to grant a stay on the two-year audit ban imposed by SEBI, but has clarified that PWC is permitted to service its existing clients for the fiscal year 2017-2018 and is also permitted to complete assignments already undertaken for listed entities that follow the calendar year as their fiscal year, but is not permitted to undertake any new listed assignments.
The Competition Commission of India Amends Lesser Penalty Regulations
On 22 August 2017, the Competition Commission of India (‘CCI’) introduced certain amendments to the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’) (‘Amendment’)1. The Amendment will impact multiple ongoing, as well as fresh cartel proceedings initiated by the CCI. Broadly, the Amendment expands the scope of the Lesser Penalty Regulations by allowing individuals to approach the CCI with evidence on collusion; abolishing the earlier upper limit on the number of leniency applicants who could benefit from the penalty waiver (i.e. three), and significantly changing the provisions on confidentiality and file inspections. Below, we provide a brief background of the leniency program in India, a summary of the changes introduced by the CCI, and their possible implications on the cartel proceedings in India.2
A. Brief Background
The Competition Act, 2002 (‘Competition Act’) allows the CCI to impose lesser penalty on any member of a cartel, alleged to have contravened Section 3 of the Competition Act. In applying these provisions, the CCI follows the “first come-first serve approach” – i.e., the first member to approach the CCI who fulfills the requirements laid down by the Lesser Penalty Regulations may be eligible for a waiver of penalty up to 100%. Successful applicants who subsequently contact the CCI are also eligible for penalty waivers up to 50% and 30% respectively only if they provide additional valuable information which was previously unknown to the CCI.
B. Individuals can now approach the CCI under the Lesser Penalty Regulations
Section 46 of the Competition Act allows, “any producer, seller, distributor, trader or service provider included in any cartel, which is alleged to have violated Section 3” to apply for imposition of lesser penalties. The Lesser Penalty Regulations, until now, only permitted an “enterprise” to disclose anti- competitive conduct, and seek the benefit of lesser penalty under Section 46.
The Amendment now allows even an “individual” to approach the CCI to seek benefit of the Lesser Penalty Regulations – thereby expanding the reach of the leniency program to individual whistleblowers – who could be employees, or even former employees involved in such anti-competitive conduct on behalf of the enterprise. Allowing individuals to come forward to the CCI with incriminating evidence of collusion will allow the CCI to strengthen its leniency program and effectively identify more cartels, with better quality of evidence and expending lesser amount of resources.
C. Enterprises seeking the benefit of the Lesser Penalty Regulations will now additionally need to submit details of individuals involved in the cartel
The Lesser Penalty Regulations, until now, required an applicant seeking to benefit from the provisions of leniency provision, to: (a) provide vital disclosure in respect of the contravention; (b) provide all relevant information, documents and evidence as required by the CCI; (c) co-operate with the CCI throughout the proceedings; and (d) not conceal, destroy, manipulate or remove documents which are relevant to the proceedings, and may contribute to establishment of a cartel.
The Amendment, by insertion of Clause 1A, to Regulation 3, brings an additional requirement for enterprises applying for leniency to also furnish details of individuals who have been involved in the cartel on behalf of such enterprise, and for whom lesser penalty is sought. Consequently, even Regulation 4, which is the operative regulation for lessening the penalty applicable, has been extended to individuals. By implication, therefore, while filing a leniency application, the applicant enterprises will also be allowed to seek immunity for their employees, and former employees who may have been involved in a cartel.
Earlier, lack of clarity on whether individual employees could benefit from the leniency regime was one of the reasons why enterprises were not forthcoming in seeking the benefit of the Lesser Penalty Regulations. The Amendment marks a welcome development, and now, enterprises will be able to seek lesser penalties for itself, as well as for the individuals who may have contributed to a cartel.
However, since the Amendment makes it mandatory for enterprises to provide details of individuals involved in the collusive conduct, the applicant enterprises will now be subject to the onerous requirement of interviewing employees, and former employees in respect of conduct – which, in many instances, could even go back to many years in the past, and subject them to proceedings under Section 48 of the Competition Act, albeit with full or partial immunity from penalty.
D. No cap on the number of applicants who may benefit from the Lesser Penalty Regulations
Earlier, the Lesser Penalty Regulation capped the number of applicant who were eligible to secure immunity to three. The Amendment now expressly allows the CCI to accept (and grant immunity to) more than three applicants. The third, and any subsequent applicant will be eligible for a penalty waiver for up to 30%. From CCI’s perspective, this amendment is aimed at encouraging all cartel participants to come forward and seek leniency.
E. Confidentiality on identity of the applicant, and the confidential information submitted under Regulation 6 of the Lesser Penalty Regulations diluted: the Director General may now disclose such information to other parties subject to certain checks.
Until now, the identity of an applicant seeking immunity, as well as the evidence submitted by it under the Lesser Penalty Regulation was not permitted to be disclosed by the Director General or the CCI – unless such disclosure was required by law, was consented by the applicant, or such information was publicized by the applicant itself. The Amendment dilutes this provision, and grants the Director General the flexibility to disclose such information to other parties on an additional ground. We clarify the revised position on confidentiality below:
· What can be claimed as confidential? The identity of the applicant, and the information, documents and evidence furnished by it can be claimed as confidential under the Lesser Penalty Regulations.
· Can confidential information be disclosed? Information which has been claimed as confidential under the Lesser Penalty Regulations can be disclosed if (a) the disclosure is required by law; (b) the applicant has agreed to such disclosure in writing; or (c) there has been a public disclosure by the applicant. While there has been no change to these grounds, the following bullet explains the proviso which has now been inserted.
· Can the Director General disclose the confidential information to other parties? Yes. The Amendment allows the Director General to disclose such confidential information to “any party” for the purposes of investigation if it “deems necessary”. However, if the applicant does not consent to such disclosure, the Director General will have to necessarily (a) record its reasoning for disclosure in writing; and (b) seek the approval of the CCI.
· What will guide the Director General’s, or the CCI’s discretion in making such disclosure? The Amendment does not clarify this. This Amendment appears to be intended to (a) ensure that the parties against whom a negative finding may be made are afforded a fair opportunity to controvert evidence; and (b) allow the Director General to test such evidence (or collect further evidence) by putting it to other parties. Therefore, the Director General may be guided by these factors while evaluating the need to make such a disclosure. Notably, an opportunity to rebut evidence is also available to the parties before the CCI – after the report of the Director General is forwarded to the parties.
· Will the applicant be allowed to contest disclosure? The Amendment does not clarify this. Principles of natural justice may, however, require the CCI to allow the parties whose identity and information is being disclosed to make a representation to the CCI. It remains to be seen whether the CCI will indeed allow such an opportunity.
· Will confidentiality under the Lesser Penalty Regulations be lifted after the Director General completes its investigation? The Amendment also introduces Regulation 6A which extends the provisions of the Competition Commission of India (General) Regulations, 2009 (‘General Regulations’) relating to file inspection by parties, to the information submitted by the applicants under the Lesser Penalty Regulations. Notably, this overrides the confidentiality provision of the Lesser Penalty Regulations.
With this, after the CCI forwards the report of the Director General to the parties concerned, the “non-confidential” version of the report of the Director General shall become available to inspection to the parties. It appears that the reference to “non-confidential” version refers to the version which redacts non-public, commercially sensitive information and business secrets which have been allowed confidential treatment under Regulation 35 of the General Regulations, read with Section 57 of the Competition Act. Resultantly, the identity of the applicant, and the evidence and documents furnished by is likely to be revealed in the Report of the Director General which is available to inspection to parties.
· Does this impact confidentiality sought, or granted, over commercially sensitive information, business secrets etc.? No. The Amendment only governs confidential treatment under the Lesser Penalty Regulations. Therefore, if confidentiality has been claimed, or allowed under the General Regulations read with Section 57 of the Competition Act (which are the key provisions governing confidentiality over commercially sensitive information), the Amendment is unlikely to have an impact on such confidential treatment.
F. Limiting the information requirement in respect of volume of business affected by the alleged cartel to India
The Schedule to the Lesser Penalty Regulations enlisted the items which each application for lesser penalty must contain.3 One of the items that the CCI required earlier was to furnish an estimate of the
Volume of business affected by the alleged cartel. The Amendment limits this requirement to furnishing this estimate to the volume of affected business in India.
This is a significant development, and brings the requirement of furnishing the affected volumes in consonance with Section 32 of the Competition Act, which allows the CCI to have jurisdiction over extra- territorial conduct having an appreciable adverse effect on competition in India.
Leniency programs are among the most effective tools used by competition authorities to collect high quality evidence in establishing cartels. Given that cartels are typically very difficult to detect, the CCI’s extension of India’s leniency program to individuals will significantly strengthen the regime, and allow the CCI to get additional evidence on cartels. Reportedly, there are many leniency cases pending investigation. While the change to the confidentiality provisions brings much needed clarification on the temporal and scope of disclosure permissible, allowing the Director General to disclose such information during the course of the enquiry could be of some concern. It remains to be seen how frequently, and on what legal grounds, will the Director General invoke this provision.
1 The Amendment is dated 8 August 2017, but was published in the Gazette of India on 22 August 2017.
2 AZB, in its “Inter Alia…” edition of March, 2017 had published a broad overview of the leniency regime in India titled “Leniency Programs: What can India do to Achieve the World’s Best Practice?”.
3 The application for lesser penalty shall, inter-alia, include the following, namely;- (a) name and address of the applicant or its authorized representative as well as of all other enterprises in the cartel; (b) in case the applicant is based outside India, the address of the applicant in India for communication including the telephone numbers and the e- mail address, etc. ; (c) a detailed description of the alleged cartel arrangement, including its aims and objectives and the details of activities and functions carried out for securing such aims and objectives; (d) the goods or services involved; (e) the geographic market covered; (f) the commencement and duration of the cartel; (g) the estimated volume of business affected in India by the alleged cartel; (h) the names, positions, office locations and, wherever necessary, home addresses of all individuals who, in the knowledge of the applicant, are or have been associated with the alleged cartel, including those individuals which have been involved on behalf of the applicant ; (i) the details of other Competition Authorities, forums or courts, if any, which have been approached or are intended to be approached in relation to the alleged cartel; (j) a descriptive list of evidence regarding the nature and content of evidence provided in support of the application for lesser penalty; and (k) any other material information as may be directed by the Commission.
Prevention of Corruption (Amendment) Act, 2018
With the objective of reviewing anti-bribery and anti-corruption laws in India, the Prevention of Corruption Act, 1988 (‘PCA’) has recently been amended by the Prevention of Corruption (Amendment) Act, 2018 (‘Amendment Act’). The Amendment Act has come into force with effect from July 26, 2018. Some of the key amendments are summarized below:
1. Giving Bribes to a Public Servant is now a Direct Offence: Prior to the amendment, a bribe giver could be penalized under the PCA only for abetment of an offence committed by the bribe receiver. The Amendment Act has now made the act of giving any undue advantage to another person (directly or through a third party) to induce or reward any public servant to perform or improperly perform any public duty, an offence by itself. The term “undue advantage” includes any gratification (other than legal remuneration) and is not limited to pecuniary gratifications or gratifications capable of estimation in monetary terms. Some exceptions have been built in, for example, for persons who claim that the bribe is given under coercion, in which case, they have to inform the investigating agency within seven days of giving the bribe. The immunity previously available under Section 24 of the PCA grants an immunity to a bribe giver from prosecution for any statement made by the bribe giver during a corruption trial against a bribe receiver. This protection granted to the bribe has been done away with pursuant to the Amendment Act.
2. Offences by Public Servants: Under the Amendment Act, a public servant obtaining, accepting or attempting to obtain any undue advantage will be held guilty, if the act is done: (i) with the intent to perform or cause the performance of public duty improperly or dishonestly; (ii) as a reward for improper or dishonest performance of any public duty; or (iii) for inducing another public servant to improperly or dishonestly perform a public duty. It has been further clarified that, obtaining, accepting, or the attempting to obtain an undue advantage will itself constitute an offence by a public servant, even if the performance of public duty is not improper by the public servant. For example, if a public servant accepts an amount of INR 5000 in order to process a routine ration card application on time / expeditiously, he will be guilty of an offence under the PCA. Further, misuse of the earlier Section 13(1)(d)(iii) of the PCA is now being plugged by the Amendment Act, which recognizes only two forms of criminal misconduct by a public servant, being: (a) misappropriation of property entrusted to a public servant; and (b) possession of disproportionate assets to intentionally enrich oneself illicitly. Under the Amendment Act, except when a public servant is caught red-handed, the police cannot arrest or begin an enquiry or investigation without the approval of the relevant Governmental authority. These amendments are aimed at protecting bona fide performance of duties by public servants and enabling them to take bona fide decisions without fear of harassment under the PCA.
3. Offence under PCA by Commercial Organizations: A commercial organization will now be liable, if any person associated with it offers any undue advantage to induce or reward any public servant in exchange of any advantage for the business or conduct of the business. In addition to Indian companies, commercial organizations also include foreign entities carrying on business in India.
An associated person, for this purpose, includes any person who performs a service for the commercial organization. The test to determine an associated person in respect of a commercial organization would be by reference to all the relevant circumstances and not merely by reference to the nature of relationship between such person and the commercial organization. Further, where the offence is committed by a commercial organization with the consent or connivance of any director, manager, secretary or any other officer of such commercial organization, pursuant to the Amendment Act, such persons will also be liable to face punishment with imprisonment and fine. Commercial organizations may prove innocence by demonstrating that it had adequate procedures which were in compliance with prescribed guidelines to prevent persons associated with it from undertaking such conduct. However, guidelines in this regard have not yet been prescribed under the PCA.
4. Timeframe for Trial of Offences: The Amendment Act provides that trial by the special judges under the PCA will be conducted on a day-to-day basis, with an endeavor to complete such trial within a period of two years. This period may be extended by an additional six months at a time, for reasons to be recorded in writing. However, in aggregate, the proceedings should ordinarily be concluded within four years.
5. Attachment and Confiscation of Properties: The Amendment Act grants the ability to the Government to attach or confiscate any money or property which has been procured by means of an offence under the PCA, in accordance with Criminal Law Amendment Ordinance, 1944.
6. Amendments to PMLA: The scheduled offences under the Prevention of Money Laundering Act, 2002 now include within its ambit, the offences listed under Sections 7 to 14 of the PCA (including the offence of bribing of public servant and the offence of bribing of public servant by a commercial organization).
7. Penalties Prescribed:
Know Your Client Requirements for FPIs
SEBI has, by way of its circular dated April 10, 2018, prescribed the following key changes to the existing Know Your Client (‘KYC’) requirements for FPIs:
i. Identification and verification of beneficial owner (‘BO’) should be in accordance with Rule 9 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (‘PMLA Rules’). Accordingly, the BOs of FPIs having a company or trust structure should be identified on controlling ownership interest and control basis, and in case of partnership firms and unincorporated association of individuals, should be identified on ownership or entitlement basis.
ii. The materiality threshold for identification of BOs on controlling ownership interest will be: (i) 25% in case of a company; and (ii) 15% in case of a partnership firm, trust and unincorporated association of persons. In respect of FPIs from ‘high risk jurisdictions’, intermediaries may apply lower materiality threshold of 10% for identification of BOs and also ensure compliance with KYC documentation as applicable for category III FPIs. This threshold will first be applied at the FPI level, and next look through principle will be applied to identify the BO of the material shareholder / owner entity level. When no BO is identified, the BO will be the senior managing official of the FPI
iii. Non Resident Indians (‘NRIs’) / Overseas Citizens of India (‘OCIs’) / resident Indian cannot be BOs of FPIs. However, if an FPI is Category II investment manager of other FPIs and is a non-investing entity, it may be promoted by NRIs / OCIs.
Clubbing of investment limits for FPIs will also be based on the abovementioned manner of identification of BOs.
Clarification on Clubbing of Investment Limits of Foreign Government / Foreign Government related entities
SEBI has, by way of its circular dated April 10, 2018 (‘Circular’), issued certain clarifications in relation to clubbing of investment limits of foreign Governments and their related entities viz. foreign central banks, sovereign wealth funds and foreign Governmental agencies registered as foreign portfolio investors (‘FPIs’) in India. The key clarifications are set out below:
i. In case of the same set of underlying beneficial owner(s), the holding of all foreign Government and its related entities from the same jurisdiction, as well as foreign Government agencies forming part of the same investor group, is required to be cumulatively below 10% of the total paid-up capital of the Indian company;
ii. If the Government of India enters into treaties with other sovereign Governments specifically recognizing certain entities to be treated distinctly, SEBI may, during the validity of such treaties, recognize them as such for the purpose of investment limits applicable to FPIs;
iii. The investment by foreign Government/ its related entities from provinces/ States of countries with federal structure will not be clubbed if such provinces/ States have different beneficial owners identified in accordance with the Prevention of Money Laundering (Maintenance of Records) Rules, 2005.
Lastly, the Circular clarifies that in case of a breach of the investment limits, the FPIs are required to divest their holdings within five trading days from the date of settlement of trades causing the breach. Alternatively, at the FPI’s option, such investment may be considered as a foreign direct investment.
Government Notifies the Fugitive Economic Offenders Act
The Government of India has, on August 1, 2018, notified the Fugitive Economic Offenders Act, 2018 (‘Economic Offenders Act’) to deter fugitive economic offenders from evading the process of law by staying outside the jurisdiction of Courts in India. For operationalising the Economic Offenders Act, the Fugitive Economic Offenders (Procedure for Conducting Search and Seizure), Rules, 2018 have also been notified with effect from August 24, 2018. Some of the key provisions of the Economic Offenders Act are as follows:
i. A ‘fugitive economic offender’ has been defined as an individual against whom an arrest warrant has been issued for committing any prescribed offence (where the value exceeds Rs. 1 billion (US$13.5 million)), and has left the country to avoid facing prosecution or has refused to return to face prosecution.
ii. If any person to against whom an application have been filed, fails to appear post a notice issued by the Special Court, then such person would be declared a ‘fugitive economic offender’. Any property of the fugitive economic offender can be attached for 180 days, unless further extended by the special court. The properties shall be released if the person is not found to be a fugitive economic offender at the conclusion of proceedings.
iii. The Special Court is entitled to confiscate properties, free of encumbrances, of any person declared as a ‘fugitive economic offender’ which: (i) are proceeds of a crime; (ii) are benami properties in India or abroad; and (iii) any other property in India or abroad. However, the Special Court is empowered to exempt from confiscation, any property in which a third party has a bona fide interest, without knowledge of the fact that the property is a proceed of crime.
CCI Directs Investigation Against Liquor Distributors in Uttar Pradesh for Alleged Discrimination in Procurement from Manufacturers of Country Liquor.
On July 9, 2018, CCI directed an investigation against Flora and Fauna Housing & Land Developments Private Limited (‘OP 1’), Patiala Kings Liquor Pvt. Ltd. (‘OP 2’), Royal Beverages Pvt. Ltd. Ltd. (‘OP 3’), Kiwi Wines And Beverages Pvt. Ltd. (‘OP 4’), Chadha Holdings Pvt. Ltd. (‘OP 5’) and Government of Uttar Pradesh (‘OP 6’) (collectively, ‘OPs’), alleging inter alia discrimination in procurement of country liquor in violation of Section 3 and Section 4 of the Act. As per the information, OP 1 to OP 4 are controlled by the same parent holding company, i.e., OP 5, which in turn is the holding company for the Chadha Group. OP 6 is the Government of the State of Uttar Pradesh which is responsible for framing policy for the manufacture, sale and distribution of liquor in the State of Uttar Pradesh under the powers granted by the United Provinces Excise Act, 1910 (‘UPE Act’). It is also empowered to grant licenses under the UPE Act.
Starlight Bruchem Ltd. (‘Informant’) is engaged in the business of manufacturing and trading liquor and is present in the states of Uttar Pradesh, Madhya Pradesh, Punjab and Haryana among others. The Informant alleged that the OPs have been abusing their dominant position by following a non-transparent policy of procurement, based on an arrangement/understanding to buy from only certain manufacturers who belong to the same group, or from some ‘favoured’ manufacturers. Since manufacturers/ distillers cannot sell liquor directly to the retailer or end-consumer, such conduct of denial of market access to the other manufacturers from selling their products. This has resulted in severe losses for the other manufacturers. They also allege that OP 6 has framed a policy stipulating that a single wholesaler would be granted license in each zone of the State, without any safeguards to ensure that not all the wholesale licenses are with a single group. Further, the conditions for eligibility to apply for licenses were so restrictive that only a certain business group could apply for license, thus creating conditions whereby OP 5 group became a monopsony.
While assessing the allegations of the Informant, CCI noted that that there was no credible evidence on record to show the existence of any agreement amongst OP 1 to OP 4 in violation of Section 3 of the Act. In examining the allegations under Section 4, CCI delineated five relevant markets, namely: (i) market for procurement of country liquor from licensed manufacturers within the Special Meerut Zone in the State of Uttar Pradesh; (ii) market for procurement of country liquor from licensed manufacturers within the Lucknow Zone in the State of Uttar Pradesh; (iii) market for procurement of country liquor from licensed manufacturers within the Gorakhpur Zone in the State of Uttar Pradesh; (iv) market for procurement of country liquor from licensed manufacturers within the Agra Zone in the State of Uttar Pradesh; and (v) market for procurement of country liquor from licensed manufacturers within the Varanasi Zone in the State of Uttar Pradesh. In all such markets, CCI was of the prima facie view that OP 1 to OP 4 are dominant. CCI observed that OP 1 to OP 4 have been procuring country liquor from more than one distillery. However, significant percentage i.e., around 25 to 55%, of the procurement by OP 1, OP 3 and OP 4 in this period was from two distilleries, namely, Wave Distilleries and Breweries Limited and Lords Distilleries Limited, which are group companies of OP 5.
CCI also noted several contradictions in the contentions put forward by the OPs. In addition, the facts of the case clearly demonstrated that procurement by each OP was not restricted by the zone to which the distilleries belonged.
Based on the above, CCI opined that the reasons given by the OPs appear to be an attempt to subvert the fact that procurement from various distillers/ manufacturers was being made in an arbitrary and discriminatory manner, thereby resulting in denial of market access to certain distillers/ manufacturers like the Informant. Given this, CCI was of a prima facie view that there was a violation of Section 4(2)(a)(i) and Section 4(2)(c) of the Act and directed an investigation into the matter.
 Case No. 53 of 2017 (Order dated July 9, 2018)
NCLAT Dismisses the Appeal Filed by the Cement Companies and Upholds INR 63 billion Fine Levied by CCI
On July 25, 2018, National Company Law Appellate Tribunal (‘NCLAT’) pronounced its judgment in upholding the order of the Competition Commission of India (‘CCI’) dated August 31, 2016 finding 10 cement companies and their trade association, Cement Manufacturers Association (‘CMA’), guilty of fixing prices and limiting supply in contravention of Section 3(3) of the Competition Act (‘Act’).
As evidence of an ‘agreement’ between the cement companies, NCLAT found that the companies used the CMA as a platform for exchanging ‘pricing and sensitive information relating to production, capacity, dispatch etc.’ Reviewing the minutes of CMA’s Managing Committee between 2007 and 2009 and three High Powered Committee meetings in 2011, NCLAT found CMA to have provided a platform to collect prices in minimum and maximum ranges for different regions in India. NCLAT also considered (i) ACC and Ambuja’s withdrawal from CMA activities; and (ii) CMA’s amendments to its regulations post initiation of the CCI investigation, as further proof that CMA provided a platform to coordinate amongst its members. Per NCLAT, CMA’s collection of business sensitive information further to directions of the Department of Industrial Policy and Promotion (‘DIPP’) was not adequate justification for such conduct. While DIPP requested information relating to retail and wholesale prices from different centers, NCLAT held CMA’s process of providing DIPP this information by collecting this information through its members, such that cement companies were able to access each others sensitive price and non-price information, may not be said to have been sanctioned by the government. Finding that “information exchange can constitute concerted practice if it reduces strategic uncertainty in the market thereby facilitating collusion,” NCLAT concluded that there was a meeting of minds between cement companies to fix the sale price of cement and regulating production and supply.
To determine whether the ‘agreement’ resulted in fixing prices or reduction in production or supply, NCLAT reviewed the data on record. On the basis of price charts, NCLAT found there existed price parallelism on the basis of absolute changes in cement prices in each state. This, NCLAT held, indicated that cement companies hiked prices without justification in departure from “normal trends over the previous years”.
NCLAT also found dispatch and production coordination amongst cement companies on the basis of reduced production and dispatch of cement despite increased demand over corresponding months (November – December 2010) and a subsequent increase in prices (January – February 2011). Relying on statements made by third party cement distributors, NCLAT concluded that this coordination amongst cement companies resulted in reduction in supplies. NCLAT also noted that while installed capacity increased in 2009-10 and 2010-11, production growth and capacity utilization decreased in 2010-11, along with corresponding price increases across all regions- south, central, north and eastern, while this was not the case in 2009-10.
Notably, NCLAT clarified the standard of evidence for cartel cases as being one of ‘balance of probabilities’ as distinguished from ‘beyond reasonable doubt’, unlike criminal law.
The NCLAT also referred to the Supreme Court (‘SC’) decision in Competition Commission of India v. Coordination Committee of Artistes and Technicians of West Bengal Film Television & Ors. (‘WBFT Case’) which held that it was necessary to delineate the relevant market in which competition may be said to be affected, and “in particular for determining if undertakings are competitors or potential competitors and when assessing the anti-competitive effect of conduct in a market”. Relying on the SC decision in the WBFT Case, NCLAT held that as market power analysis was key, it was necessary to delineate a relevant market in this case as well. Reviewing the price and non-price data collected and relied on by CCI, NCLAT clarified that CCI identified the relevant market as ‘all regional markets for cement.’
Finally, observing that CCI had imposed “mere minimum penalty,” NCLAT held there was no need to interfere with CCI’s penalty computation. On this basis, NCLAT dismissed the appeals filed by the cement manufacturers.
 ACC Ltd. (ACC), Ambuja Cement Ltd. (Ambuja), Binani Cement Ltd. (Binani) , Century Textiles & Industries Ltd. (Century Cement), India Cement Ltd. (India Cement), JK Cement Ltd. (JK Cement) , Nuvoco Vistas Corporation Limited (Lafarge), Ramco Cements Ltd, (Ramco), Ultra Tech Cement Ltd. (Ultra Tech) and Jaiprakash Associates Limited.
 (2017) 5 SCC 17
 We request our readers to note that by way of an order dated 7 May 2018 pursuant to a review application filed by CCI in the WBFT Case, the Supreme Court clarified that the “determination of ‘relevant market’ is not a mandatory pre-condition for making assessment of the alleged violation under Section 3 of the Act.”
Appellate Tribunal Sets Aside the Penalty Levied by CCI Against AKMN Cylinder
NCLAT on August 20, 2018 set aside a penalty of INR 1 million levied on AKMN Cylinder (P.) Ltd. (‘AKMN’) by CCI for failing to comply with the Office of Director General’s directions. On January 02, 2014, CCI directed the Office of Director General (‘DG’) to carry out a detailed investigation in respect of the allegations against AKMN in accordance with its order issued under the Section 26(1) of the Act. During the course of investigation issued by the DG, AKMN consistently failed to appear despite repeated notices. As a result, CCI initiated suo moto proceedings against AKMN and imposed a penalty of INR 10 lakhs.
Taking cognizance of the Appellant’s age and the fact that AKMN’s representative had (i) duly furnished the information requested by the DG on affidavit and no further information was required to be provided; and (ii) tendered an apology to the DG for failing to appear on an earlier occasion, the NCLAT set aside the penalty.
CCI Rejects Allegations of Abuse of Dominance Against Mondelez
In its order dated August 27, 2018, CCI rejected allegations of abuse of dominance against Mondelez India Foods Private Limited (‘Mondelez’) raised by its terminated distributor, Khemsons Agencies’ (‘Khemsons’/‘Informant’)). It was inter alia alleged that the dealership agreement was one-sided, without scope for negotiation and that Mondelez had terminated Khemson’s dealership on frivolous and false grounds. It was also alleged that Mondelez’s software was creating barriers for free flow of products and that its distributors were obligated to purchase visi-coolers from Mondelez to be eligible for various incentive schemes. Mondelez was also accused of engaging in resale price maintenance by controlling the price of goods sold and related discounts.
CCI held that as the Informant itself was desirous of becoming a distributor of Mondelez, it was fully aware of the terms and conditions of the agreement. Accordingly, it could not be said that it was coerced into executing the dealership agreement in 2010 with Mondelez. CCI also reviewed the termination notice and accompanying email correspondences between Mondelez and Khemsons, and concluded that the dealership was terminated on account of Khemsons unsatisfactory performance and could not be said to be without reason or unjustified.
Turning to allegations of abuse of dominance, CCI defined the market as the “market for chocolate in India”. In doing so, CCI referenced its earlier order in Sri Rama Agency v. Mondelez India Foods Private Limited in which it had defined the market as the “market for chocolates in the State of Karnataka”. CCI, however, acknowledged that with the introduction of the Goods and Services Tax, chocolates may be purchased across India at the same price. Accordingly, Mondelez’s conduct would have a pan-India effect.
On the basis of publicly available information, CCI noted that Mondelez’s market share in 2014 was 55.5% whereas its nearest competitor, Nestle SA had a market share of 17%. On this basis alone, CCI concluded that Mondelez was dominant in the relevant market for chocolates in India.
CCI, however, found that Mondelez had not abused its dominance in respect of any of the allegations raised by the Informant. Mondelez’s software that allowed sales to be made through registered distributors appeared to be an organized set up for data and inventory management and could not be said to be abusive. Similarly, CCI found the requirement for procuring vizi-coolers was to ensure that temperature sensitive perishable goods were appropriately stored to maintain the quality of chocolates and did not violate the provisions of the Act. On the issue of Mondelez allegedly requiring the Informant to provide pre-signed post-dated cheques, CCI held this was simply a payment mechanism that cannot be said to anti-competitive. CCI found the Informant’s allegations of Mondelez saddling its distributors with near expired products and failing to take back expired products was in the nature of a business dispute. Admittedly, the Informant was contesting this issue in other legal fora and was thus not a competition issue.
Finally, against allegations of Mondelez engaging in resale price maintenance (‘RPM’), CCI found that the Informant failed to provide any evidence or communication to support its allegations. CCI further observed that RPM is not a per se violation under the Act. Absent any information to suggest that Mondelez’s conduct resulted in an appreciable adverse effect on competition (‘AAEC’) in the market, no prima facie case of violation of Section 3 of the Act may be sustained.
Mondelez was successfully represented by AZB & Partners.
 Case No. 58 of 2015
ICLG: Corporate Investigations 2019 – India
1 The Decision to Conduct an Internal Investigation
1.1 What statutory or regulatory obligations should an entity consider when deciding whether to conduct an internal investigation in your jurisdiction? Are there any consequences for failing to comply with these statutory or regulatory regulations? Are there any regulatory or legal benefits for conducting an investigation?
The decision to conduct an investigation may be driven by one or more of a number of statutory or regulatory obligations that a body corporate in India is subject to. While these statutes may not expressly dictate that an “internal investigation” be conducted, compliance with obligations thereunder would often necessitate it.
Examples of such statutes are the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”), the provisions relating to internal controls and audits in the Companies Act, 2013 (“Companies Act”) and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) which applies to companies whose shares are listed on stock exchanges.
An amendment to the Prevention of Corruption Act, 1988 (“PCA”) has introduced an “adequate procedures” defence to an allegation of bribery against a body corporate. Guidelines with respect to these “adequate procedures” are yet to be notified by the Central Government. It is probable that such guidelines may include an internal vigil mechanism.
As a general statement, an appropriately conducted internal investigation would help ensure compliance with applicable law, remedial action and improve preparation for potential legal action. There may be statute-specific benefits to conducting such an investigation. For example, under the Companies Act, the requirement for a statutory auditor to report incidents of fraud to the Central Government may be mitigated if the fraud is first detected and remedied by the company.
1.2 How should an entity assess the credibility of a whistleblower’s complaint and determine whether an internal investigation is necessary? Are there any legal implications for dealing with whistleblowers?
There is no uniform bright-line test that dictates the level of response to a whistleblower’s complaint.
Where no guidance has been provided by the applicable regulation, the relevant function (legal, compliance, investigations, etc.) within the body corporate will need to make a qualitative assessment of the nature of the information provided by the whistleblower before launching a full-fledged investigation.
A costs and benefits analysis between responding to each instance of whistleblowing with a full-fledged investigation on the one hand and selectively acting on complaints could involve the following factors:
(i) the seriousness of the facts alleged in the complaint and the potential consequences of a failure to investigate extensively;
(ii) whether the complaint fits into a situation where complaints are frequent and risks are known to be typical;
(iii) if there is a delay in making the complaint and whether the facts alleged are still relevant; and
(iv) the completeness and accuracy of the disclosures made. Initial procedures such as limited interviews, random testing, and limited electronic searches could be applied before launching a full-fledged investigation.
Applicable law may in some cases provide some guidance. For example the POSH Act does not require a company to act on anonymous complaints, verbal complaints, or complaints made after a prescribed period of time.
The LODR requires a listed entity to devise an effective whistleblower mechanism which enables stakeholders including individual employees and their representative bodies to freely communicate any concerns about illegal or unethical practices.
In the case of any complaint relating to financial fraud, the relevant function (legal, compliance, investigations, etc.) may be able to take guidance from standards and practice applicable to internal audits which prescribe the exercise of “reasonable care” and “professional skepticism”.
1.3 How does outside counsel determine who “the client” is for the purposes of conducting an internal investigation and reporting findings (e.g. the Legal Department, the Chief Compliance Officer, the Board of Directors, the Audit Committee, a special committee, etc.)? What steps must outside counsel take to ensure that the reporting relationship is free of any internal conflicts? When is it appropriate to exclude an in-house attorney, senior executive, or major shareholder who might have an interest in influencing the direction of the investigation?
Identification of the client is an important aspect of an outside counsel’s role. This is driven by several factors which may include: (i) independence requirements imposed by statutes such as the POSH Act and the Companies Act; (ii) the need to preserve legal privilege and secrecy across multiple jurisdictions; (iii) identification of the department or function responsible for the relevant compliance and the implications that it might have for the relevant “client” constituent; and (iv) disclosure and reporting obligations in all relevant jurisdictions.
It is usually appropriate to exclude an in-house attorney, senior executive, or major shareholder who might have an interest in influencing the direction of the investigation. Sometimes an internal investigation may be required not for compliance or governance purposes but in order to assist outside counsel on defence strategy in a prosecution against the company and its executives. The analysis in such an investigation may be different from other situations.
Internal conflicts of interest at both the ends, i.e. the client as well as the outside counsel, need to be checked at the initiation of the engagement and regularly thereafter as facts emerge.
2 Self-Disclosure to Enforcement Authorities
2.1 When considering whether to impose civil or criminal penalties, do law enforcement authorities in your jurisdiction consider an entity’s willingness to voluntarily disclose the results of a properly conducted internal investigation? What factors do they consider?
There are some statutes that provide for leniency in the case of voluntary disclosures. Such disclosures should ideally be predicated on an appropriately conducted and robust investigation.
As an example, the Income Tax Act, 1961 and the Goods and Services Tax Act, 2016 provide for the establishment of “settlement commissions” who are empowered to take into account disclosures and cooperation made by a tax assessee and grant immunity from prosecution under those specific statutes.
As another example, the Competition Act, 2002 empowers the Competition Commission of India to impose a lesser penalty in cases where a participant in an anti-competitive cartel has made full and true disclosure regarding a cartel and where such disclosure has been found to be “vital”.
Examples of statutes that provide for leniency in return for disclosure and cooperation are, however, sparse under Indian law.
2.2 When, during an internal investigation, should a disclosure be made to enforcement authorities? What are the steps that should be followed for making a disclosure?
There is no bright-line test in this regard. As discussed above in question 2.1, a factor in considering whether or not to disclose (or when to disclose) is that examples of cooperation credit are sparse under Indian law.
There may be situations where the internal investigation discovers the commission of offences that are mandatorily reportable (such as offences provided for in Section 39 of the Code of Criminal Procedure, 1973).
There may be situations where outside counsel may be able to advise on tactical advantages to reporting to law enforcement authorities, such as fraud committed by renegade employees without the knowledge of management of a company.
2.3 How, and in what format, should the findings of an internal investigation be reported? Must the findings of an internal investigation be reported in writing? What risks, if any, arise from providing reports in writing?
There cannot be a “one size fits all” approach to the mode and format of reporting. Factors that will need to be considered are: (i) the purpose of the investigation; and (ii) the findings of the investigation.
It is always preferable to ensure that a sensitive investigation is conducted by outside counsel enrolled to practise in India or by experts engaged on the instructions of outside counsel enrolled to practise in India. The findings of an investigation should preferably be communicated within the folds of attorney-client privilege.
The risk of a written investigation report being leaked or seized by a law enforcement agency cannot be ruled out.
There have been instances of persons subjected to an internal investigation filing legal proceedings alleging defamation.
If a law enforcement agency is able to access an internal investigation report, it is usually possible to exclude such a report from being adduced in evidence. However, the “fruits of the poisonous tree” doctrine is not strictly applied in India and the law enforcement agency may be able to construct a case on the basis of other evidence to which they were pointed by the report.
3 Cooperation with Law Enforcement Authorities
3.1 If an entity is aware that it is the subject or target of a government investigation, is it required to liaise with local authorities before starting an internal investigation? Should it liaise with local authorities even if it is not required to do so?
Indian law does not mandate liaising with local authorities before starting an internal investigation. As a general rule, a lawful internal investigation with appropriate precautions should not require liaison. The requirements of a governmental investigation on production of documents, availability of witnesses, etc. will always take precedence over the requirements of the internal investigation.
3.2 If regulatory or law enforcement authorities are investigating an entity’s conduct, does the entity have the ability to help define or limit the scope of a government investigation? If so, how is it best achieved?
No, the entity does not have any ability to define or limit the scope of a government investigation.
3.3 Do law enforcement authorities in your jurisdiction tend to coordinate with authorities in other jurisdictions? What strategies can entities adopt if they face investigations in multiple jurisdictions?
Yes. Enforcement authorities in India frequently coordinate with authorities in other jurisdictions using formal and informal mechanisms. Formal mechanisms may include Mutual Legal Assistance Treaties, Extradition Treaties, regional cooperation arrangements and Tax Information Exchange Agreements. Informal mechanisms may include cooperation between intelligence and diplomatic services.
When faced with investigations in multiple jurisdictions, it is advisable to: (i) take the possibility of international cooperation as a given; (ii) ensure that the entity in question has strong legal advice and representation in each such jurisdiction where it is being investigated; (iii) ensure that due process rights and privilege rights are preserved in each jurisdiction; and (iv) simultaneously assess risks in each jurisdiction before deciding on a strategy rather than to adopt a piece-meal approach.
4 The Investigation Process
4.1 What steps should typically be included in an investigation plan?
A robust investigation plan should clearly identify the scope and the objective of the investigation. It should focus on the specific entities and functions within that entity, it should begin with an identified time period and move out radially if required.
Steps would depend on the object of the investigation.
Typically, steps in an investigation plan should include, in most cases, a thorough review of the entity’s corporate records, financial statements and observations drawn pursuant to a statutory audit. It must contemplate a review of the entity’s internal policies and practices along with the degree of compliance with such policies. The entity’s dealings with relevant third parties should also be analysed.
The investigation plan should contemplate a review of all correspondence previously made by relevant personnel and interviews with such relevant personnel.
A robust mechanism to ensure the preservation and storage of data, confidentiality of interviews and awareness of the legal rights of each stakeholder must also be put in place. While the plan may set out a roadmap for the activities going forward, it should also provide sufficient flexibility to address any unforeseen issues.
4.2 When should companies elicit the assistance of outside counsel or outside resources such as forensic consultants? If outside counsel is used, what criteria or credentials should one seek in retaining outside counsel?
As a matter of Indian law, it may be important to engage outside counsel at the very outset to preserve privilege over the work product generated during the investigation. The decision to retain forensic consultants would depend on whether the skills and technology required for the investigation are available to the entity in-house or to the external counsel.
Criteria and credentials for outside counsel would include: (i) expertise and past experience on similar mandates and familiarity with the “turf”; (ii) ability to work seamlessly with forensic consultants, statutory auditors, etc.; (iii) ability to seamlessly progress from the internal investigation to litigation roles; and (iv) ability to advise comprehensively on ancillary legal aspects that may arise as a result of the investigation. For example, an anti-corruption investigation may result in the entity requiring advice in relation to its previous tax filings.
5 Confidentiality and Attorney-Client Privileges
5.1 Does your jurisdiction recognise the attorney-client, attorney work product, or any other legal privileges in the context of internal investigations? What best practices should be followed to preserve these privileges?
In India, professional communication between a legal adviser and a client is accorded protection under the Indian Evidence Act, 1872, the Advocates Act, 1961 (“Advocates Act”) and the Bar Council of India Rules (“BCI Rules”). The issue regarding the position of an in-house counsel on the question of attorney-client privilege in India is not free from doubt – and has been subject matter of judicial interpretation. Hence, as stated above, as a matter of Indian law, it may be important to engage outside counsel at the very outset to preserve privilege over the work product generated by the investigation. Attorney-client privilege in India is a rule of evidence and is subject to exceptions (for example, communications made in furtherance of an illegal purpose are not covered by attorney-client privilege) – hence, the exact scope and coverage of attorney-privilege would depend on specific facts and circumstances. As an example, while there is no direct judicial precedent on this question, notes of interviews: (i) conducted by legal counsel or in the presence of legal counsel; and (ii) required by legal counsel in order to provide advice or to prepare for litigation may be covered by privilege. Best practice to be followed involves appropriate engagement with the outside counsel at every step of the investigation, right from the time the event which triggers the internal investigation occurs (e.g. receipt of a whistleblower complaint) till operationalising the decisions taken as an outcome of the investigation.
5.2 Do any privileges or rules of confidentiality apply to interactions between the client and third parties engaged by outside counsel during the investigation (e.g. an accounting firm engaged to perform transaction testing or a document collection vendor)?
While there is no direct judicial precedent on this question, as long as the third party (e.g. an accounting firm engaged to perform transaction testing) has been engaged by, and is working on the basis of instructions received from, outside counsel, and submits their work product to the outside counsel (the work product being relevant for the provision of advice or preparation for litigation), their work product may be covered by privilege.
5.3 Do legal privileges apply equally whether in-house counsel or outside counsel direct the internal investigation?
As stated above, the issue regarding the position of an in-house counsel on the question of attorney-client privilege in India is not free from doubt – and has been subject matter of judicial interpretation. The legal position is described in brief below:
Under the Advocates Act, an “advocate” is one who has been entered in the relevant state bar council (“SBC”) rolls. The BCI Rules stipulate that an advocate must not be a full-time salaried employee of any person, government, firm, corporation or concern. Therefore, an in-house lawyer (i.e. one who receives a salary) cannot practice as an advocate while employed full-time.
There does not appear to be any decision by the Supreme Court of India as to whether communications with an in-house counsel are on the same footing as those with an advocate. The Bombay High Court, in Municipal Corporation of Greater Bombay v. Vijay Metal Works (Bombay High Court), held that privilege should apply to in-house legal advisers. In Larsen & Toubro Ltd. v. Prime Displays (P) Ltd the Bombay High Court observed that where in-house counsel would, save for their employment with the concerned litigant, be otherwise qualified to give legal advice, then communication between the in-house counsel and the litigant would be privileged. The above was an observation of the Court, and the Court did not make any finding on this issue, due to lack of pleadings on the issue. Further, decisions of the Bombay High Court have only persuasive value before the high courts of other states.
5.4 How can entities protect privileged documents during an internal investigation conducted in your jurisdiction?
In addition to appropriate involvement of outside counsel as detailed above, we advise entities to protect privileged documents by expressly marking them as “Legally Privileged and Confidential – Attorney Client Communication” or with other similar legends, such that privilege is sought to be claimed up-front on the communication being exchanged. Physical and digital security of documents is also important. Privileged documents should be segregated and kept in safe custody with internal counsel to the extent possible. Electronic records should be password protected.
5.5 Do enforcement agencies in your jurisdictions keep the results of an internal investigation confidential if such results were voluntarily provided by the entity?
The enforcement agencies do not have a duty under law to keep the results of an internal investigation confidential even if such results were voluntarily provided by the entity. In fact, it is quite likely that such results may be shared between different agencies as part of the inter-agency cooperation arrangements.
6 Data Collection and Data Privacy Issues
6.1 What data protection laws or regulations apply to internal investigations in your jurisdiction?
As per the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data and Information) Rules, 2011, an entity is required to comply with prescribed security practices and procedures relating to “sensitive personal data or information of a person” (“SDPI”) such as bank account or credit card details, health condition, medical records and history and biometric information. Any wrongful gain or loss caused due to negligence in maintaining such procedures may result in the entity being liable to pay compensation.
Some of the obligations cast on the entity are:
(i) to obtain prior consent from persons providing sensitive personal data or information;
(ii) to make any person providing any information aware of the purpose, intended recipients and the agency collecting and retaining such information;
(iii) to keep all information received secure; and
(iv) to not disclose information to third parties without obtaining prior permission of the providers.
Additionally, if the internal investigation is conducted by a group or parent entity (e.g. as a part of a global whistleblowing programme), requiring transfer of the SDPI in question to another entity, this would require some additional safeguards to be maintained.
6.2 Is it a common practice or a legal requirement in your jurisdiction to prepare and issue a document preservation notice to individuals who may have documents related to the issues under investigation? Who should receive such a notice? What types of documents or data should be preserved? How should the investigation be described? How should compliance with the preservation notice be recorded?
The Indian Penal Code criminalises the secreting and destruction of any document or electronic record that may be required to be produced as evidence in legal proceedings. As a result, it is a common practice to prepare and issue a preservation notice. All individuals who may have documents or electronic records related to the issues under investigation should receive such a notice. The investigation should be described clearly to avoid ambiguity on what is required to be preserved. At the same time, the description should also avoid sensationalism and prejudgment of issues.
6.3 What factors must an entity consider when documents are located in multiple jurisdictions (e.g. bank secrecy laws, data privacy, procedural requirements, etc.)?
Compliance with local laws and established customs of each jurisdiction is of paramount importance, in addition to contractual requirements across the chain where the information is being shared.
6.4 What types of documents are generally deemed important to collect for an internal investigation by your jurisdiction’s enforcement agencies?
Internal investigations in India are those conducted by (or on behalf of) the entity itself, and are usually not guided by enforcement agencies. Entities should adopt practical and robust standards on document collection and on each aspect of the investigation.
6.5 What resources are typically used to collect documents during an internal investigation, and which resources are considered the most efficient?
In addition to work emails, the most efficient resource to collect data in an internal investigation is usually a forensic examination of devices where work-related data is stored. If the entity’s policies permit storage of work data on personal device(s) of an employee, such personal device(s) are also examined (subject to receiving consent of the employee in question).
6.6 When reviewing documents, do judicial or enforcement authorities in your jurisdiction permit the use of predictive coding techniques? What are best practices for reviewing a voluminous document collection in internal investigations?
The best practice to review voluminous document collection in an internal investigation is to prepare and pre-agree to an appropriate and sufficiently detailed list of key words which are likely to throw up the data in respect of which the investigation is being conducted, and then run the key-word search on the data in question (using appropriate software, if deemed necessary). The emails, documents and data then identified are physically reviewed, with the reviewers separately tagging (or identifying) the emails/documents/data that seems relevant to the matter being investigated, for further review and action.
7 Witness Interviews
7.1 What local laws or regulations apply to interviews of employees, former employees, or third parties? What authorities, if any, do entities need to consult before initiating witness interviews?
While there are no specific laws that govern employee interviews, general legal principles to be followed include the following: (i) the person being interviewed is clearly informed of the purpose of the interview, the identity of the interviewers and if there is an outside counsel, the presence of the outside counsel (and a disclosure that such outside counsel represents the entity, and not the employee); (ii) the interview should be conducted respectfully, with no intimidation, and in such manner and setting that the person being interviewed does not feel (and has no reason to feel) under undue pressure; (iii) if the interview is being recorded, the same should be specifically informed to the person being interviewed; and (iv) to the extent practicable, the interview notes should be drawn up in parallel with the interview and signed by the interviewee (in addition to the interviewee confirming that there was no coercion, the information represents the matters discussed during the interview accurately, etc.).
No authorities are required to be consulted before initiating witness interviews.
7.2 Are employees required to cooperate with their employer’s internal investigation? When and under what circumstances may they decline to participate in a witness interview?
Employees may be required by contract or internal policy of the employer to cooperate with an internal investigation. In appropriate cases, non-participation may entitle the employer to take disciplinary steps against the employee. However as a countervailing factor, participation in interviews is necessarily consensual, the employer has no coercive powers, and all individuals have a right against self-incrimination under Indian law.
7.3 Is an entity required to provide legal representation to witnesses prior to interviews? If so, under what circumstances must an entity provide legal representation for witnesses?
There is no general rule in this regard. It may be important to make a judgment call if there is a possibility that the witness may subsequently allege that she was coerced or if in the assessment of the entity, there is a danger of self-incrimination.
7.4 What are best practices for conducting witness interviews in your jurisdiction?
– The consent of the witness to participate in the process should be recorded up-front.
– The witness should be made aware of the identities and roles of the participants.
– The witness should be made aware of her contractual obligations AND her legal rights.
– Women witnesses should be interviewed within regular working hours and in the presence of another woman.
– Notes of the interview should be prepared by outside counsel or at the direction of outside counsel and securely held.
– At the conclusion of the interview the witness should be asked to confirm in writing that the interview did not cause any discomfort to her.
The principles set forth in response to 7.1 above should be read along with these best practices
7.5 What cultural factors should interviewers be aware of when conducting interviews in your jurisdiction?
An interview is a fact-finding exercise and should be conducted in a transparent manner without being an adversarial or accusatory process. The interviewee should be made aware of his contribution to the investigation process. It is helpful if such person is also provided adequate guidance on his/her conduct with investigation authorities in case a prosecution is initiated against the entity or its executives. In case of allegations regarding an interviewee’s conduct, he/she must be provided an opportunity to explain themselves.
The confidentiality of the discussions in the interview must be emphasised. Interviews with employees should commence with an “Upjohn” warning stating that any attorney-client privilege with an employee belongs solely to the entity and the entity may waive such privilege and disclose the discussions to a governmental agency or third party.
Interviewees (and in particular, employees of the entity) should also be assured of no adverse repercussions pursuant to any disclosure, except in case of disclosure regarding any misconduct by the interviewee which warrants action under the entity’s policies.
7.6 When interviewing a whistleblower, how can an entity protect the interests of the company while upholding the rights of the whistleblower?
While dealing with a whistleblower, it is important to ensure the anonymity of the whistleblower and his/her complaint. The entity must safeguard the whistleblower’s existing position and ensure no detrimental treatment is accorded. A preferred step would be to confirm the whistleblower’s current status and the level of protection accorded to him/her. He/she must also be made aware that the complaint may form part of any submission to an investigating authority and his/her rights (including anonymity and protection) in the event of a prosecution.
Certain companies are required to have a vigil mechanism under the Companies Act, which would need to be complied with. A listed entity will also need to comply with the whistleblower policy adopted by the entity pursuant to the provisions of the LODR.
7.7 Can employees in your jurisdiction request to review or revise statements they have made or are the statements closed?
As good practice, the entity should provide an employee with the opportunity to issue any clarification or supplement his/her statement with any additional information which the employee becomes aware of after the interview. However, the extent of any variation from statements previously given must be scrutinised and the veracity of any additional disclosure must be established to ensure that the investigation process is not jeopardised.
7.8 Does your jurisdiction require that enforcement authorities or a witness’ legal representative be present during witness interviews for internal investigations?
As stated in question 7.3 above, this is not a general rule. However, it may be important to make a judgment call if there is a possibility that the witness may subsequently allege that she was coerced or if in the assessment of the entity, there is a danger of self-incrimination.
8 Investigation Report
8.1 How should the investigation report be structured and what topics should it address?
As stated in question 2.3 above, there cannot be a “one size fits all” approach to the structure and the contents of reports. An investigation report should clearly outline the scope of the investigation and the steps undertaken in the course of the investigation. Any non-compliance with applicable law should be clearly spelt out along with recommendations for remedial action.
Any existing practices and policies adopted by the entity which address the subject matter of the investigation must be detailed, along with the degree of compliance. Any relevant findings pursuant to a review of corporate records, financial statements and observations pursuant to a statutory audit must be clearly spelt out. To the extent necessary, the extracts from witness’ interviews and correspondences may also be stated.
As stated in question 2.3 above, while documenting the findings of an internal investigation the entity must consider the risk associated with a report being leaked or seized by a law enforcement agency or a defamation proceeding by the person accused in the report.
The authors would like to acknowledge the invaluable assistance of Mr. Soumit Nikhra, Mr. Shantanu Singh, Ms. Jomol Joy and Mr. Anmol Suhane.]
1. Aditya Vikram Bhat, Senior Partner
2. Prerak Ved, Partner
CCI Imposes Penalty on Esaote S.p.A and Esaote Asia Pacific Diagnostic Private Limited
On September 27, 2018, CCI (by a majority of two out of three members) passed an order under Section 27 of the Act and imposed a penalty on Esaote S.p.A and Esaote Asia Pacific Diagnostic Pvt. Ltd. (‘EAPD’) (collectively, ‘Esaote’), for contravention of Section 4 of the Act. 
The information was filed by M/s House of Diagnostics LLP (‘HoD’), engaged in the business of medical diagnostics and diagnostic imaging services. The allegations of HoD pertained to the purchase of three ‘Dedicated Standing/ Tilting MRI machines’ manufactured by Esaote (‘G-Scan Machines’) for HoD’s diagnostic centers. It was alleged that Esaote was dominant in the defined market and had abused its dominance as: (i) Esaote misled HoD that new machines were being supplied to it; (ii) acted unfairly by refusing to supply ‘See through Perforated RF Cage’ and ‘Head Coils’ to HoD; (iii) insisted that the Comprehensive Maintenance Contract (‘CMC’) was to be paid for each machine supplied; and (iv) limited the provision of services in the after sale market and denied market access to third party service providers.
CCI after considering the information was of the view that a prima facie case of contravention of the provisions of Section 4 of the Act by Esaote was made out. Therefore, it passed an order under Section 26(1) of the Act, directing the DG to investigate the matter and submit its report to CCI (‘DG Report’). The DG Report came to following conclusions: (i) the relevant market was found to be the market for ‘Dedicated Standing/ Tilting MRI machines in India’; (ii) Esaote was dominant in the market for ‘Dedicated Standing/ Tilting MRI machines in India’; and (iii) Esaote abused its dominance in the defined market.
In its analysis, CCI observed that G-scan Machines are a distinct product that can tilt the patient up to 90 degrees which is not possible in conventional supine MRI machines. It was also observed that conventional MRI machines can scan the whole body of a patient whereas the dedicated standing/ tilting MRI is meant specifically for joint and spines. In addition, the fact that there are diagnostic centers which have both types of MRI machines indicate that the products are distinct. Therefore, CCI found the relevant market to be the ‘market for dedicated standing/tilting MRI machines in India’ (‘Relevant Market’). Further, CCI found Esaote to be dominant in the Relevant Market as Esaote had patent rights over its G-Scan Machines and due to the absence of other companies who manufacture such machines in the Indian market, Esaote is able to operate independently of competitive forces.
CCI observed that the G-Scan Machines supplied to HoD were not performing to the level as promised by Esaote and were more than a year old. CCI also held that Esaote acted unfairly by refusing to supply ‘See through Perforated RF Cage’ and ‘Head Coils’ to HoD despite HoD being promised these products by way of email correspondence.
On a reading of the relevant purchase order, CCI found Esaote to have abused its dominance by insisting that the CMC was to be paid for each machine. Further, the exclusive rights given to EAPD for supply of spare parts and for providing after sales services for G-Scan Machines in India limited the provision of services in the after sale market and denied market access to third party service providers. Based on the above, CCI found Esaote to have abused its dominance under Section 4 of the Act and imposed a penalty of Rs 9.33 lakhs while also directing Esaote to ‘cease and desist’ from the infringing conduct.
The CCI Chairperson wholly disagreed with the majority’s view on the delineation of the Relevant Market. The dissent note observes that the market cannot be narrowed to standing/ tilting MRI machines alone as any market delineation would have to necessarily include all MRI machines. Once the market is defined in this manner, the behavior of Esaote stands constrained by the presence of many other players as Esaote is a small player in the market of all MRI machines. Therefore, there was no question of dominance or abuse of dominance.
 Case No. 9 of 2016 (Order dated September 27, 2018)
Allegations against Sugar Mills Trading Association
Further, CCI assessed the role of ISMA and EMAI in facilitating collusions between the sugar mills through various meetings that were conducted with sugar mills at the time when tenders were released by PSU OMCs. It was noted by CCI that ISMA had attempted to conceal the fact of the meetings from CCI, and its officials failed to provide any justifiable reasons for organising such meetings. CCI further observed that the meetings also included Bajaj Hindusthaan (‘Bajaj’), the largest Ethanol manufacturer, even though Bajaj was not a member of ISMA. Moreover, officials of ISMA had been in constant touch with officials of sugar mill manufacturers. EMAI, on the other hand had also conducted meetings with its member sugar mills after the tenders had been released. Based on the above, CCI concluded that ISMA and EMAI had facilitated collusion in violation of Section 3(1), 3(3)(a) & 3(3)(b) and 3(1) & (3)(3)(a) of the Act, respectively.
In light of the above, CCI imposed a penalty of approx. Rs 37 crore (approx. US$5 million) on the sugar mills, computed at 7% of their relevant turnover of the preceding three financial years and approx. Rs 50 lacs (approx. US$65,000 ) on ISMA and EMAI computed at 10% of their average receipts of the preceding three years.
Allegations against Sugar Mills
As regards the allegations of bid rigging against the sugar mills situated in Uttar Pradesh and the sugar mills trade associations, CCI at the outset, rejected preliminary objections regarding DG’s jurisdiction to investigate sugar mills that were not specifically named as ‘Opposite Parties’ in the complaints (sugar mills situated outside Uttar Pradesh). As per CCI, irrespective of the above, details regarding such sugar mills were specified in the DG Order, and the DG Order was not limited to only the state of Uttar Pradesh in its scope.
On bid rigging, CCI observed that the selection of suppliers was based on the Basic Price (ex- factory) of Ethanol and the Net Deliverable Cost (‘NDC’) that was quoted by each bidder. NDC comprised of Basic Price along with tax and freight charges. In order to determine the prospective supplier, NDCs were to be compared to a benchmark price that was set by the OMCs, post closing of the bid, for each location after considering the landed cost of motor spirit, excise duty and cost of Ethanol blending.
As regards bidders situated in Uttar Pradesh, CCI was of the opinion that the bidders had quoted similar or narrowly distinguishable bids for most of the depots, in terms of both the basic price as well as the NDC. In its assessment, CCI rejected bidders’ contention that there was no collusion, considering that similarity in bids was limited to only few of the 110 depots within the tender. As per the CCI, this was because bidders were not competing for all the depots and were largely concentrated to the depots located near their respective distillery, and therefore, the bidders’ conduct was not to be judged on a pan-India basis. CCI further noted that the quantity quoted by the bidders matched the total required quantity in most of the depots. As regards bidders situated in Gujarat, and Andhra Pradesh, CCI recorded similar observations and further observed that similarities in bids up to decimal figures (basic price and NDC) could not be an outcome of price discovered through a competitive bidding process. In the end, it noted that although price parallelism per se did not amount to bid rigging, however, it may be considered as such, in the absence of any justifiable explanation for the bid quotations being same or similar in most of the cases. CCI also reiterated its observation that generally in cases involving cartels, documentary evidence is seldom available and investigating agencies rely largely on circumstantial evidence to deduce the existence of collusion and in the instant case, circumstantial evidence was enough for CCI to clearly establish the element of collusion.
Allegations against PSU OMCs
CCI in its assessment of the investigation report, at the outset, confirmed DG’s conclusion on the lack of culpability of PSU OMCs. In its opinion, CCI observed that the Government was a majority shareholder in each of the PSU OMCs. CCI primarily relied on the various efficiencies that resulted from the issuance of a joint tender. As per CCI’s observation, the issuance of joint tender by the PSU OMCs prevented wastage of money, time and resources that otherwise would have been spent, in the event that separate tenders would have been issued. More specifically, CCI observed that a joint tender ensured that the limited quantity of available Ethanol was equitably distributed among the OMCs. This was essential considering that in the event of inequitable distribution, certain OMCs would have been forced to procure Ethanol at higher prices (given the excessive demand and decreased availability of Ethanol). An inequitable distribution of Ethanol would also have resulted in potential anti-competitive effects, whereby OMCs with Ethanol may have sold Ethanol-blended petrol to the exclusion of the OMCs without Ethanol. Lastly, CCI re-affirmed the scheme of Section 3(3) of the Act, to the extent that it only raised a rebuttable presumption of AAEC that may be sufficiently offset by demonstrable efficiencies etc.
CCI Fines Film Associations Once Again
On August 30, 2018, CCI imposed a penalty on Karnataka Film Chamber of Commerce (‘KFCC’), Kannada Okkuta (‘Okkuta’) and their officials for indulging in practices that were in violation of Section 3(1) and Section 3(3)(b) of the Act. 
The information was filed by Mr. G Krishna Murthy, a former member of KFCC (‘Informant’). As per the information, the Informant is engaged in the business of production and distribution of films in Karnataka and KFCC is a society of producers, directors, technical staff, distributors and exhibitors of Kannada films in the State of Karnataka and Okkuta is an unregistered organization formed for the protection of Kannada language and culture. The Informant had alleged that KFCC and Okkuta had been consistently obstructing him from exhibiting and distributing, Tamil films namely, ‘Yennai Aridhal’ and ‘Sathyadev IPS’ (dubbed in Kannada) in the State of Karnataka. Further, KFCC and Okkuta had also threatened the Informant through social media and newspaper interviews, of retributive actions in the event that the films were released in theatres. In order to make his case, the Informant relied on CCI’s decision in Kannada Grahakara Koota and Anr. v. Karnataka Film Chamber of Commerce, penalizing KFCC for indulging in similar activities. The Informant also relied on the Supreme Court’s order in Competition Commission of India v. Co-ordinated Committee of Artists and Technicians of W.B. Film and Television and Ors. that upheld CCI’s penalty on an organization analogous to KFCC, based out of West Bengal, for indulging in anti-competitive activities similar to the ones that were impugned in the information. Based on its prima facie opinion of a violation, CCI directed a the DG to investigate the matter through an order dated September 14, 2017 and the DG submitted a detailed investigation report (‘IR’) to CCI on April 04, 2018.
In its decision, CCI relied on various social media statements made by KFCC and Okkuta, including through the medium of Twitter, YouTube, statements of officials of KFCC and Okkuta, third party statements, and other evidence adduced by the DG to determine that KFCC and Okkuta had been making incendiary remarks directed towards the films dubbed by the information. Based on the same, CCI was of the opinion that KFCC, Okkuta and their officials had been acting in agreement (tacit) with the objective of restricting the distribution and exhibition of dubbed films in Karnataka. CCI further noted that such conduct was anti-competitive, as it reduced consumer choice and created entry barriers for films dubbed in languages other than Kannada.
More specifically, CCI relied on the fact that KFCC and Okkuta officials had organized a press meet right before the release date of ‘Sathyadev IPS’, with the intention of hampering the release of the Informant’s film. In this regard, CCI rejected the contention that the purpose of the press meet was not as was recorded in the IR, and observed that in such cases the general nature of press meets needs to be pierced through to see the purpose behind them. As per CCI, this press meet was the ‘connecting link’ that showed the unity of cause and a meeting of minds of KFCC and Okkuta officials, as was required under Section 3(3) of the Act.
CCI also rejected KFCC’s contention that the ban on dubbed films was justified in order to protect Kannada language and literature and to ensure livelihood for artists active in Kannada film industry. As per CCI, irrespective the cause, the impugned activity of banning and obstructing the release of dubbed films within Karnataka was in violation of Section 3(1) and Section 3(3)(b) of the Act. CCI reiterated that the presumption of AAEC under Section 3(3) was rebuttable, and observed that KFCC had failed to provide any justifiable basis for the impugned activities. Additionally, based on the abovementioned observations, CCI also concluded that KFCC had also been continuously violating the directions of CCI as specified in Kannada Grahakara Koota and Anr. v. Karnataka Film Chamber of Commerce by way of its order dated July 27, 2015.
In its assessment of the penalty to be levied, CCI considered aggravating factors such as the fact that KFCC had consistently been violating the provisions of the Act and had been penalized by CCI on numerous occasions. CCI also noted the fact that KFCC had failed in bringing out a competition compliance manual in abrogation of CCI’s order in Kannada Grahakara Koota and Anr. v. Karnataka Film Chamber of Commerce. Accordingly, CCI imposed a penalty at 10% of the average of the income of KFCC, Okkuta and their officials for the past three years, respectively and also directed KFCC to bring out a competition compliance manual.
 Mr. G. Krishnamurthy v. Karnataka Film Chamber of Commerce (KFCC) & Others, Case No. 42 of 2017 (Order date August 30, 2018)
 Kannada Grahakara Koota and Anr. v. Karnatake Film Chamber of Commerce, Case No. 58 of 2012 (Order dated July 27, 2015)
 Competition Commission of India v. Co-ordinated Committee of Artists and Technicians of W.B. Film and Television and Ors., Civil Appeal No. 6691/2014
 Kannada Grahakara Koota and Anr. v. Karnatake Film Chamber of Commerce, Case No. 58 of 2012 (Order dated July 27, 2015)
 Case Nos. 25, 41, 45, 47, 48 of 2010; Case No. 56 of 2010 and Case Nos. 56 and 71 of 2011
 Kannada Grahakara Koota and Anr. v. Karnatake Film Chamber of Commerce, Case No. 58 of 2012 (Order dated July 27, 2015)
CCI Suo Motu Imposes Penalty on Geep Industries (India) Pvt. Ltd., for Participating in a Cartel, Concerning Institutional Sales of Zinc Carbon Dry-Cell Batteries
On August 30, 2018, CCI imposed a penalty on Geep Industries (India) Pvt. Ltd. (‘Geep’) and Panasonic Energy India Co. Ltd. (‘Panasonic India’) for participating in a cartel concerning institutional sales of zinc carbon dry-cell batteries, for the period from October 01, 2010 to May 30, 2016.  Panasonic India was a contract manufacturer of zinc carbon dry-cell batteries for Geep. CCI directed an investigation into the matter by the Director General (‘DG’) pursuant to a leniency application filed by Panasonic Corporation, Japan (‘Panasonic Japan’) on behalf of itself and its Indian subsidiary, Panasonic India (including the Directors, officers and employees). Notably, Panasonic in the past as well had been party to a cartel concerning zinc carbon dry-cell batteries (Panasonic was granted 100% immunity from penalty, for disclosing the cartel and also for providing vital evidence to the CCI). As per the Act, any member of a cartel can file a leniency application with the CCI, (at any time prior to the DG submitting its investigation report with the CCI) seeking immunity from penalty in exchange for vital information and evidence of substantial value as regards the existence of the cartel, its members, duration etc.
At the outset, CCI clarified that it did not err in identifying Panasonic Japan as an opposite party while directing and investigation into the matter, as it was in fact Panasonic Japan that had filed the leniency application with CCI. Moreover, in any case, DG had not made any observation as regards Panasonic Japan in its investigation report. On merits, CCI considered the provisions of the product share agreement executed between Geep and Panasonic India pursuant to which Geep was not to ‘take any steps which [were] detrimental to [Panasonic India’s] market interests particularly with respect to the market prices which [were to] be reviewed and maintained at agreed levels from time to time’. As per CCI, such clauses inherently impeded competition between two competitors such as Geep and Panasonic India. Thereafter, CCI also clarified that even unilateral dissemination of information (from Panasonic India to Geep) was sufficient for Geep’s liability in violation of Section 3(3). As per CCI, Geep could have refused to enter into any such agreements with such anti-competitive clause (as described above). Further, irrespective of the fact that Geep may not be sharing its strategic market information with Panasonic India, it was aware of Panasonic India’s existing cartel with other battery manufacturers and chose to maintain Market Operating Price (‘MOP’) co-ordination in line with the prices as determined by Panasonic’s existing cartel. DG, in its investigation, also relied on inculpatory evidence comprising e-mail communications and statements of representatives of Panasonic India and Geep.
CCI imposed a penalty of approximately Rs 74 crore (approx. US$10 million) (1.5 times the profit for each year of the continuation of the cartel) on Panasonic and a penalty of approx. Rs 10 lakhs (approx. US$12,000) (4% of the turnover for each year of the continuance of the cartel) on Geep. However, in consideration of the fact that Panasonic Japan had filed a leniency application on behalf of itself and Panasonic India (including their employees), disclosing vital information (including evidence on the modus operandi of the cartel) for CCI to form a prima facie opinion regarding existence of the cartel, CCI granted Panasonic a 100% penalty reduction.
 In Re: Anticompetitive conduct in the Dry-Cell Batteries Market in India v. Panasonic Corporation, Japan & Others, Case No. 02 of 2017 (Order dated August 30, 2018)
CCI Imposes Penalty on Members of the ‘Ethanol’ Cartel
On September 18, 2018, CCI imposed a penalty on various sugar mills and sugar mills trade associations (namely Indian Sugar Mills Association (‘INSA’), National Federation of Cooperative Sugar Factories Ltd. (‘NFCSF’) and Ethanol Manufacturers Association of India (‘EMAI’)),  operating in Uttar Pradesh, Gujarat and Andhra Pradesh, for rigging bids in relation to tenders floated by Public Sector Oil Marketing Companies (‘PSU OMCs’/ ‘OMCs’), for procurement of anhydrous alcohol (‘Ethanol’) pertaining to 110 depots of the OMCs, spread across the country. The tenders were floated pursuant to the Ethanol Blended Petrol Programme (‘EBP Programme’) that was initiated by the Government of India.
The violations came to light pursuant to two separate complaints filed by India Glycol Ltd. and Ester India Chemicals Ltd., respectively (‘Informants’). Notably, the Informants had also alleged that even the act of issuing a joint tender for the purposes of procuring Ethanol, by the PSU OMCs was in violation of Section 3(1) and 3(3)(a) of the Act, in light of it being an agreement amongst horizontal players. CCI, based on its prima facie view of violations having taken place, clubbed the complaints together and directed the DG to investigate the allegations raised in the complained, through an order dated May 27, 2013 (‘DG Order’). Pursuant to its investigation, DG submitted an investigation report to CCI, upholding the allegations raised in the complaints, however, NFCSF, PSU OMCs and Kisan Sahkari Chini Mills Ltd. were exonerated of the allegations.
 Sahakari Khand Udyog Mandal Ltd., Shree Ganesh Khand Udyong Mandali Ltd., Shri Kamrej Vibhag Sahaari khand Udyong Mandali Ltd., Shree Mahuva Pradesh Sahakari Khand Udyog Mandali Ltd., The Andhra Sugars Ltd., The Sarvarya Sugars Ltd., Bajaj Hindusthan Ltd, Triveni Engineering Industries Ltd., Simbhaoli Sugars Ltd., Avadh Sugar & Energy Ltd., Dhampur Sugar Mills Ltd., Balrampur Chini Mills Ltd., Mawana Sugars Ltd., KM Sugar Mills Ltd., Uttam Sugar Mills Ltd., Dalmia Bharat Sugar & Industries Ltd.., Seksaria Biswan Sugar Factory Ltd., Sir Shadi Lal Enterprises Ltd.
 India Glycols Limited v. Indian Sugar Mills Association & Ors., Case No. 21 of 2013; Ester India Chemicals Limited v. Bajaj Hindusthan Limited & Ors., Case No. 29 of 2013; Jubilant Life Sciences Limited v. Bharat Petroleum Corporation Limited & Ors., Case No. 36 of 2013; A B Sugars Limited v. Indian Sugar Mills Association & Ors., Case No. 47 of 2013; Wave Distilleries and Breweries Limited v. Indian Sugar Mills Association & Ors., Case No. 48 of 2013; and Lords Distillery Limited v. Indian Sugar Mills Association & Ors., Case No. 49 of 2013 (through common Order dated September 18, 2018)
 Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd.
 Subsequently, Case Nos. 36 of 2013, 47 of 2013, 48 of 2013 and 49 of 2013 were also clubbed with the ongoing DG investigation.
CCI Dismisses Allegations of Abuse of Dominance Against a Trading and Distribution Company of Mobile Handsets
On October 4, 2018, CCI dismissed allegations of abuse of dominance against Fangs Technology Private Limited (‘OP 1’) and Vivo Communication Technology Company (‘OP 2’) with respect to certain clauses in a VIVO Distributorship Agreement (‘Agreement’) entered into by the OP 1 with its distributors.
The distributors are members of Tamil Nadu Consumer Products Distributors Association (‘Informant’) which is registered under the Tamil Nadu Society Registration Act, 1975. The Informant pointed out several concerns with regards to the clauses of the Agreement, inter alia that the conditions imposed were unfair and unreasonable for the distributors, resulting in foreclosure of competition by creating barriers to new entrants. The Informant also alleged that the Agreement prohibited the distributors from doing business in Oppo and Honor brand of mobile phones. Thus, the Informant alleged that the conduct of the OPs was in violation of Section 3 (4) and Section 4 of the Act.
While assessing the allegations of abuse of dominance, CCI defined the relevant market as ‘market for smartphones in India’. Placing reliance on the GFK Report (‘Report’), prepared by GfK SE (Germany’s largest market research institute) for the year 2017-18, it was observed that the market for smartphones in India is highly competitive with several players. Moreover, the Report indicated that the brand share of Vivo in the Indian market declined from 14.4% to 12.1% during this period. Additionally, CCI observed that other competitors in the market such as Samsung and Xiaomi held close to 33% and 16.6% respectively. As a result, CCI opined that OP 1 is not dominant in the relevant market. In the absence of dominance, no case can be made against OP 1 in violation of Section 4 of the Act.
With regard to the allegation of resale price maintenance (‘RPM’) under provisions of Section 3(4) of the Act, CCI observed that the Informant had not submitted any evidence to prove that OP 1 has imposed RPM on the Informant. CCI also observed that there exists high inter-brand competition in the smartphone market in India. On this basis, CCI held that OP 1 does not have the significant market power required to impose anti-competitive vertical restrictions. In addition, CCI opined that the restriction imposed by the Agreement on doing business with Oppo and Honor was justified on the ground that it was to avoid leakage of intellectual property of Vivo. CCI also justified some of the other contentious clauses of the Agreement as being reasonable restrictions imposed by OP 1. Therefore, CCI ordered the matter to be closed under Section 26(2) of the Act.
 Case No. 15 of 2018 (Order dated October 4, 2018)
CCI Dismisses Allegations of Abuse of Dominance against Department of Agriculture and Farmers Welfare, Government of Haryana
On August 30, 2018, CCI dismissed allegations of abuse of dominance against the Department of Agriculture and Farmers Welfare, Government of Haryana (‘DAFW’) with respect to qualification criteria provided by DAFW for the bidders in its tenders.
Mr. G. P. Konar filed the information before CCI against DAFW alleging that DAFW had abused its dominant position by putting unfair qualifying requirements in its tender floated in the month of April 2018 for outsourcing of soil testing, data entry on portal and printing of cards services under the Soil Health Card (‘SHC’) scheme of the Government of India. As per the information, the Government had provided that all the National Accreditation Board for Testing and Calibration Laboratories (‘NABL Laboratories’) would be eligible for participation in the tender. However, DAFW through the impugned requirements had essentially restricted eligibility to only those NABL Laboratories that could inter alia, (a) provide data entry services as well as printing services for SHCs, alongside soil testing services (without outsourcing); and (b) were not involved in any legal disputes with any Government in relation to a similar business activity. CCI initiated its assessment by clarifying that DAFW was an ‘enterprise’ for the purposes of the Act that was active in the ‘market for provision of soil testing services in the Territory of India’. However, CCI observed that DAFW did not enjoy any dominance in the concerned market, even though it was the implementing authority under the SHC scheme simply because numerous enterprises in the agriculture sector procured soil testing services and any service provider could switch between such procurers. In the absence of dominance, CCI did not assess the allegations of abuse of dominance. Lastly, CCI reiterated that it is the procurer’s prerogative to determine tender conditions as per its requirements.
 Mr. G. P. Konar v. Department of Agriculture and Farmers Welfare, Government of Haryana, Case No. 22 of 2018 (Order dated August 30, 2018)
CCI Dismisses Allegations of Abuse of Dominance against Nutritia International Pvt. Ltd
On August 28, 2018, CCI dismissed allegations of abuse of dominance against Nutritia International Pvt. Ltd. (‘Nutritia’) with respect to the failure of Nutritia to supply goods to Mr. Prabhakhar Pandey, a stockist for Nutritia’s goods (‘Informant’). 
The Informant filed the information before CCI against Nutritia alleging that Nutritia had abused its dominant position by ceasing its business operations with the Informant and by not supplying goods even though the Informant had already deposited an advance towards the procurement of goods from Nutritia. CCI initiated its assessment by delineating the relevant markets as ‘(i) market for infant formula milk in India; (ii) market for baby food nutritional supplements in India; and (iii) market for protein based nutritional supplement products in India’, keeping in mind the business activities of Nutritia (protein based nutritional supplements, including ‘Protinex’) and the geographic scope of homogenous competitive conditions. As regards Nutritia’s dominance, CCI observed that Nestle was a market leader with 63% market share in the market for baby food in India and collectively held 83% market share, along with Gujarat Cooperative Milk Marketing Federation in this market (in 2017). It was further observed that Protinex too had numerous substitutes available in the market such as ‘Horlicks Protein Plus’ etc. In light of the same CCI did not considered Nutritia to be dominant either in the baby food market or nutritional supplements market in India. In absence of dominance, CCI did not assess the allegations of abuse.
 Mr. Prabhakar Pandey v. Nutricia International Private Limited, Case No. 28 of 2018 (Order dated August 28, 2018)
CCI Dismisses Allegations of Price Fixing and Abuse of Dominance against Arthur Flury AG Switzerland and PPS International, Delhi.
On August 27, 2018, CCI dismissed information filed by the Central Organisation for Railway Electrification (‘CORE’) under Section 19(1)(a) of the Act, alleging violations of Section 3 and 4 of the Act by PPS International, Delhi (‘PPS’). CORE operates under the Ministry of Railways, Government of India and is concerned with railway electrification of the entire network of the Indian railways. To carry out its functions, CORE procures Short Neutral Section Assembly (‘SNS Assembly’/ ‘phase break’) from the authorised Indian distributors of Research Design and Standards Organisation (‘RDSO’), an original equipment manufacturer namely, Arthur Flury AG Switzerland (‘Arthur’).
As per the information, PPS was alleged to have imposed unfair conditions and artificially increased the prices for sale of SNS Assembly in contravention of Section 4(2)(a)(i) and Section 4(2)(a)(ii) of the Act. It was also alleged that the price increase was pursuant to a concerted decision between Arthur and PPS, in violation of Section 3(3)(a) of the Act. CCI in its assessment at the outset dismissed allegations of violation of Section 3(3)(a) since Arthur (manufacturer) and PPS (distributor) were operating at different levels of the production chain in different markets and Section 3(3) is only applicable to concerted actions between competitors (enterprises active in the same market). As regards allegations of abuse of dominance, CCI identified the relevant market as the ‘market for supply of SNS Assembly in India’ given the specific physical characteristics of SNS Assembly and the geographic scope of homogenous competitive conditions. In the concerned market, CCI observed that PPS was a dominant enterprise since it was the only distributor for Arthur (and Arthur was the only RDSO approved original equipment manufacturer for SNS Assembly). However, as regards allegations of abuse, CCI observed that a case for violation of Section 4(2)(a)(i) was not made out. As regards excessive pricing, CCI analysed the prices charged by PPS over the period of 2006-2018 and observed that the price increase was not continuous and in fact decreased in 2016. For the above reasons, CCI dismissed the allegations of abuse of dominance as well.
 Central Organisation for Railway Electrification v. M/s PPS International, Case No. 05 of 2018 (Order dated August 27, 2018)
CCI Dismisses Swarna Properties’ Complaint Against Vestas Wind Technology India Private Limited
On August 7, 2018, CCI dismissed information filed by Swarna Properties (‘SP’) – owner of a wind energy generator system in Karnataka against Vestas Wind Technology India Private Limited (‘Vestas’). Vestas is engaged in the business of manufacture, sales, marketing and maintenance of wind power systems in India.
SP contended that Vestas made the supply of wind turbines equipment conditional upon executing an annual maintenance contract (‘AMC’) with Vestas. This exclusivity condition, SP alleged, resulted in a contravention of Section 3 and resulted in a denial of market access under Section 4 of the Act. It was also alleged that Vestas was using its dominant position in one market to enter into or protect other market in contravention of Section 4(2)(e) of the Act.
CCI noted that the generation of electricity using wind turbines, owing to their distinct way of functioning, cannot be substituted with any other form of power generating equipment. Accordingly, CCI defined the relevant market as the “market for supply of wind turbines in India”. As there existed several players in the market, many of which had a greater or similar market share as Vestas, CCI concluded that Vestas was not in a dominant position. Absent dominance, CCI found no case of abuse of dominance may be said to exist.
CCI also noted that there existed no prima facie case for an anti-competitive tie-in arrangement or exclusive supply agreement. CCI noted that even if Vestas made the sale of wind turbines contingent on entering into an AMC with it, there existed several other suppliers of wind turbines. SP therefore had the choice to procure wind turbines from vendors that didn’t require similar conditions to be satisfied. Noting that SP was restrained for a period of five years from procuring services or spare parts from other vendors, CCI held that SP had the additional option of terminating the agreement for non-performance of duties. As there existed several other vendors in the market, CCI held that SP was not precluded from switching to another vendor. Observing that vertical restrictions were not a per se contravention and having found no evidence of the agreement resulting in AAEC. CCI dismissed the information against Vestas.
CCI Dismisses Complaint Against Shoppers Stop
By way of an order dated July 30, 2018, the CCI dismissed information received against Shoppers Stop Limited (‘SSL’) alleging a contravention of Section 3 of the Act and unfair trade practices. The Informant was aggrieved by the requirement to meet a minimum purchase amount in order to successfully redeem a discount coupon issued on a previous purchase. It was further alleged that SSL failed to direct the Informant to a competent authority to address his grievance.
CCI held that the information was in the nature of an individual consumer dispute rather than a matter of competition concern and did not cause an adverse effect on competition. In arriving at its finding, CCI referred to its earlier decisions in Sanjeev Pandey v. Mahindra & Mahindra and Subash Yadav v. Force Limited in which it clarified that the scope of the Act is limited to curbing anti-competitive practices that have an adverse effect on competition, while the Consumer Protection Act, 1986 protects individual consumer interest against deficiencies in goods and services. On this basis, CCI held that the information did not make out a prima facie case against Shopper Stop and accordingly dismissed the information.
 Case No. 21 of 2018
 Case No. 17 of 2012
 Case No. 32 of 2012
CCI Dismisses Allegations of Anticompetitive Conduct and Abuse of Dominance Against UP Housing & Development Board
On August 14, 2018, CCI dismissed information filed by Mr. DK Srivastava (‘Informant’) against UP Housing & Development Board (‘UPHDB’). It was alleged that UPHDB arbitrarily charged higher prices for the sale of Lower Income Group (‘LIG’) residential flats after allotment and threatened to cancel allotment for failure to pay. Basis such threats, the Informant alleged that he was required to pay Goods and Services Tax (‘GST’) and restoration costs. Moreover, UPHDB had failed to deliver possession of the flat per the terms of the brochure. This, it was alleged, amounted to an abuse of dominance under Section 4 of the Act.
In order to define the relevant market, CCI noted that residential flat and commercial units were different in terms of end use and intent for which they are bought. CCI also distinguished between residential plots and residential flats in terms of end use. CCI observed that residential plots are purchased with intent to build and provide flexibility to purchasers with respect to floor plans, number of floors and space utilization. On the other hand, this kind of discretion is missing when it comes to purchasing a residential flat. In view of the above, CCI defined the relevant market as the market for “provision of services of development and sale of residential flat”.
While defining the geographic market, CCI noted that the consumer purchasing a residential flat in Ghaziabad may not prefer purchasing a residential flat anywhere else due to several factors such as price, availability of transport facilities, proximity to the places of frequent commute and locational preferences. Further, it was observed that conditions for demand and supply may change between Noida and Delhi and thus, may not be considered substitutable. However, as CCI found conditions within Ghaziabad to be homogenous, it identified the relevant geographic market as Ghaziabad. Accordingly, the relevant market was defined as the “market for provision of services of development and sale of residential flats in Ghaziabad”.
To determine whether UPHDB was dominant in the identified relevant market, CCI relied on its decision in Shri Masood Raza and Uttar Pradesh Avas Avam Vikas Parishadi. In this decision, CCI recognized that while the Ghaziabad Development Authority (‘GDA’) also developed residential flats of varying size in Ghaziabad and allotted them to the public under various schemes; it had the exclusive power to undertake development work in Ghaziabad. It also noted that GDA was larger than UPHBD in size. Noting the presence of several large private developers of residential flats in Ghaziabad, CCI observed that consumers may not be said to be dependent on UPHDB alone for the provision of real estate services.
Absent dominance, CCI dismissed allegations pertaining abuse of dominance against UPHDB.
 Case No. 09 of 2018
CCI dismissed allegations of resale price maintenance against Timex
On August 14, 2018, CCI dismissed information filed against the Timex Group India Limited (‘Timex’) filed by one of its non-exclusive online distributors, M/s Counfreedise (‘Informant’). The Informant is engaged in purchasing lifestyle products such as belts, wallets, sunglasses etc. and selling them on several e-commerce platforms such as Flipkart, Paytm Mall and Amazon (under the trade name ‘BUYMORE’).
The Informant alleged that Timex stopped doing business with it after it chose not to comply with Timex’s RPM ‘diktat’ – which was in contravention of Section 3(4)(e) of the Act. It was also alleged that by engaging with other online distributors that offered similar discounts, Timex discriminated against the Informant under Section 4 of the Act. It was also alleged that Timex had abused its dominant position by initiating sham litigation and allegedly failing to provide after-sale services to customers who purchased Timex wrist watches from the Informant in contravention of Sections 3 and 4 of the Act.
For the purpose of delineating the relevant market to examine allegations under Section 4 of the Act, CCI opined that consumers who were interested in durability, quality, established network for sales, after-sales and warranty services tended to prefer branded wrist watches over unbranded ones. CCI therefore believed this distinction separated the organized (where Timex was present) from the unorganized market for watches. On this basis, CCI defined the relevant market as the “market for manufacture and sale of wrist watches in the organized watch industry in India.” While CCI acknowledged that wrist watches may be further categorized into three segments based on price i.e., (a) mass-price segment for primarily unorganized manufacturers; (b) mid-segment (that included Titan, Citizen and Timex); and (c) premium segment which included international players like Rolex, Tagheuer, Rado etc.. However, CCI observed that as Timex (along with its competitors) existed in all three categories, competitive assessment would not undergo any material change, even if the market was not segregated under each of these segments.
On dominance, CCI observed that Titan admittedly held the largest market share at 60% and Timex could not thus be ‘dominant.’ Whilst CCI held that absent dominance, no case of abuse may be sustained against Timex, it nevertheless examined the allegations of abuse of dominance against Timex.
Against allegations of Timex having initiated sham litigation against the Informant by instituting (and obtaining an ex parte injunction in) a suit for trademark infringement, CCI observed that Timex had initiated similar suits against several others, including around the same time, and was able to seize thousands of counterfeit goods. As holders of intellectual property have the right to take reasonable actions to protect their right, such action cannot be said to violate the provisions of the Act.
In relation to allegations of RPM, CCI observed that an isolated email to the Informant by Timex asking to control discounts without any evidence of follow on adverse action (from the record CCI observed that Timex continued to supply to the Informant even after the said email) cannot qualify as an RPM. CCI also observed that for RPM to be effective, it has to be imposed on all online retailers. Admittedly, Timex supplied to other online platforms that offered greater discounts. CCI additionally noted that in order for RPM to be anti-competitive, it needed to result in an AAEC. To the extent that Timex did not have sufficient market, was just one of several watch manufacturers and did not enforce RPM across the distribution channel, it could not be said to have caused an AAEC. Accordingly, the allegation of RPM could not be sustained.
Placing reliance on Ashish Ahuja v. Snapdeal.com, CCI observed that market players have a right to deny after sale or warranty services to discourage counterfeit good- that cannot be termed anti competitive. CCI equally dismissed the charge that Timex’s refusal to deal with the Informant was an anti-competitive refusal to deal under Section 3(4) of the Act. CCI held that as (i) sales by Timex to the Informant was insignificant compared to Timex’s total sales and (ii) revenue derived by the Informant from selling Timex watches was not significant, any refusal to deal could not be said to result in an AAEC, particularly when, as in this case, there existed reasonable apprehension of brand dilution by the Informant.
 Case No. 55 of 2017
Competition Commission of India Orders Probe Against Star India, Sony Pictures and Indian Broadcasting Foundation
On July 27, 2018, CCI directed the DG to investigate allegations against Star India Pvt. Ltd. (‘Star India’), Sony Pictures Network India Pvt. Ltd. (‘Sony Pictures’) and Indian Broadcasting Foundation (‘IBF’) (collectively, ‘Broadcasters ’) for engaging in unfair business practices with regard to pricing of television channels.
Information was filed by Noida Software Technology Park Ltd. (‘NSTP’), a public limited company, which is a ‘distributor’ of television channels, has been issued a license to establish, install, operate and maintain Head-End In The Sky (‘HITS’) project for digital cable services in India. NSTP alleged collusion between the Broadcasters in determining prices and supply to distributors in contravention of Section 3(3) of the Act. It also alleged (i) price discrimination by Broadcasters in the supply of television content to it in comparison to similarly placed Multi System Operators (‘MSOs’)/distributors/ operators under Section 4 of the Act; and (ii) anti-competitive vertical agreements under Section 3(4) of the Act in the form of ‘refusal to deal.’
CCI rejected allegations under Section 4 of the Act against the Broadcasters, holding that the Act does not envisage the concept of ‘collective dominance.’ Absent credible evidence, CCI found allegations of collusion as being conjecture. CCI specifically held that forming an association or taking a favourable stand by such association before a regulatory authority cannot, in and of itself, be deemed anti-competitive. CCI also noted the lack of evidence re exchange of business sensitive information amongst Broadcasters. On this basis, CCI dismissed allegations of a cartel under Section 3(3) of the Act.
To examine whether the alleged conduct may be scrutinized as a potential vertical anti-competitive arrangement under Section 3(4) of the Act, CCI clarified that the Broadcasters market power would need to be considered in a relevant market. While acknowledging that narrower markets on the basis of genres and regional preferences may exist, CCI identified the relevant market as the “market for broadcasting of television channels in India”.
While noting that the Broadcasters did not hold significant market shares in the identified relevant market, particularly as there existed over 500 channels, CCI nevertheless found that the Broadcasters enjoyed ‘significant market power’ in the relevant market of ‘sports’ and ‘entertainment’ genre in India. Relying on (i) the size and importance of the Broadcasters as compared to their competitors; (ii) commercial advantage over competitors; and (iii) consumer dependence as a result of their extensive channel portfolio in the sports and entertainment genre, CCI was of the preliminary opinion that the Broadcasters had sufficient market power.
Having determined that Broadcasters enjoyed sufficient market power, CCI turned to examining allegations of price discrimination. It was alleged that Broadcasters made disparate payments in the form of ‘carriage fees’ (to carry channels) and ‘placement fee’ (to place channels at prominent positions) to their ‘favoured’ distributors. Allegedly, these fees were often greater than the license fee ordinarily charged to distributors that significantly reduce costs for such ‘favoured’ distributors’ vis-à-vis others. While Broadcasters made channels available on an a-la-carte basis, the terms at which they were offered, including pricing, made the choice between a bouquet of channels and a-la-carte illusory.
Relying on the decision of the Telecom Disputes Settlement and Appellate Tribunal (‘TDSAT’), CCI opined that despite regulatory oversight, Broadcasters had the ability to discriminate amongst distributors. CCI rejected the Broadcasters’ contention that the very offer of channels at rates mentioned in the Reference Interconnect Offer (‘RIO’) (in Interconnect Agreements filed with the Telecom and Regulatory Authority (‘TRAI’)) negates allegations of ‘refusal to deal’. However, referring to observations of the TDSAT and TRAI’s issuance of new regulations to ensure non-discrimination, CCI was of the prima facie opinion that the RIO terms by Broadcasters may well qualify as a mechanism for refusal to deal in contravention of Section 3(4)(d) of the Act.
Finally, responding to the Broadcasters’ challenge of CCI’s jurisdiction to take cognizance of information, CCI held that its powers are in addition to, and not in derogation of, TRAI’s mandate to regulate Broadcasters. CCI also noted that as TDSAT and TRAI have decided the matter fully and recognized that Broadcasters had engaged in the practice of price discrimination/ refusal to deal, nothing precluded it from taking cognizance of this matter.
 M/s Noida Software Technology Private Limited v. M/s Media Pro Prvt. Ltd. & Ors. (Petition No. 295 (C)/ 2014 decided on 07 December 2015
CCI Expands the Scope of Investigation to Consider the Pricing Practices in the Aftermarkets Healthcare Products and Services Provided by Super Specialty Hospitals in Delhi
On August 31, 2018, CCI published an order in Vivek Sharma v. Becton Dickinson India (P) Ltd. directing the DG to carry out further investigation and furnish a detailed supplementary investigation report, including on the issues specifically identified by CCI in its order.
By way of background, in 2015, Vivek Sharma (‘Informant’) had filed information against Becton Dickinson India (P) Ltd.(‘BDIL’) and Max Super Specialty Hospital (‘Max’) alleging that Max, in collusion with BDIL, was selling disposable syringes at a price well above the maximum retail price (‘MRP’) and the open market price. This was alleged to be in contravention of Sections 3(1) and 4 of the Act. Having found a prima facie case of contravention of 4 of the Act, CCI directed the DG to carry out a detailed investigation.
Pursuant to reviewing the findings of the DG and submissions of Max and BDIL, CCI disagreed with the DG’s identification of the relevant market as the “provision of healthcare services/ facilities by private super-specialty hospitals within a distance of about 12 kms from Max Super Specialty Hospital, Patparganj”. Instead, CCI directed the DG to consider the concept of ‘aftermarket abuse’ to define the relevant market and directed the DG to identify the relevant market as the “market for healthcare services/ facilities in the after-market for in-patients in super-specialty hospital”. CCI appears to be concerned that, once admitted for treatment, a patient is effectively ‘locked-in’ to the services and products as made available by the hospital. This ‘locked-in’ effect, in turn, increases the ability of hospitals to ‘exercise its dominance over its in patients” by requiring its patients “to purchase aftermarket products from its in-house pharmacy only.” CCI observed that “such conduct may be considered as an aftermarket abuse even if [Max] is found to be not dominant in the primary market for provision of healthcare services in Delhi.” CCI also disagreed with the DG’s identification of the relevant geographical market and directed the DG to consider ‘Delhi’ as the relevant geographic market – as CCI had done at the time of issuing its prima facie order.
CCI further opined that the DG report did not adequately make a case of excessive pricing and directed the DG to carry out further investigation. CCI noted that although the DG had recorded high profit margins in the sale of syringes to conclude an abuse of dominance, it failed to look at the absolute profits from the sale of syringes “and other products in the after markets.” Referring to concerns of “locked-in effects” CCI directed the DG to further investigate other products such as medicines, surgical tools etc. to “establish that the higher profit margins from sale of syringes or any other products cause consumer harm due to lack of competition.” Moreover, it specifically directed the DG to focus on those after-market products that are not required urgently to “examine whether [Max] abuses its dominant position by forcing in-patients to purchase those at higher/unfair prices from its in-house pharmacy though the same are available at discounted rates in the open market.”
Case No. 77 of 2015
CCI Dismisses Information Alleging Abuse of Dominance Against Social Welfare and Nutritious Meal Program Department and Cooperation, Food and Consumer Protection Department
On August 6, 2018, CCI dismissed information against the Principal Secretary, Social Welfare and Nutritious Meal Program Department (‘SWNMPD’) and Principal Secretary, Cooperation, Food and Consumer Protection Department (‘FCPD’) (collectively, ‘Respondents’). It was alleged that by modifying the pre-qualification criteria in the tender process for procuring tur dal/Canadian yellow lentil, palmolein oil and eggs (‘Products’), the Respondents had restricted several stakeholders from participating in the tender process allegedly resulting in a contravention of Section 4 of the Act. CCI duly noted that the Government of Tamil Nadu had appointed Tamil Nadu Civil Supplies Corporation (‘TNCSC’) to procure tur dal/Canadian yellow lentil and palmolein oil to distribute the Products to family cardholders under the Special Public Distribution Scheme (‘SPDS’), by way of a tender process
For the purpose of defining the relevant market, CCI noted that the demand and supply of each of the Products were distinct. CCI noted that while the Products were not fungible, they were complementary. It was also noted that the producers/ distributors of each of the Products were separate. CCI accordingly delineated three distinct relevant markets, namely, the market for (a) procurement of tur dal in India; (b) procurement of palmolein oil in India; and (c) market for procurement of eggs for noon meal scheme in India.
1. Market for Procurement of Tur Dal in India: Relying on its decision in Maheshwari Agro Products v. Tamil Nadu Civil Supplies Corporation, CCI found that there existed several State and Central agencies engaged in procuring tur dal, similar to TNCSC, that were equally supported by various corporations. As the TNCSC faced competitive constraints from such central and state agencies, CCI held that it could not be held dominant in the market for procurement of tur dal in India. CCI also noted that the relevant market appeared fragmented and no evidence was furnished to conclude otherwise. CCI also rejected the contention that the introduction of certain pre requisites that resulted in the elimination of certain bidders, was in and of itself as abuse of dominance. CCI was of the opinion that TNCSC has the right to determine necessary pre requisites to ensure that bidders have requisite capacity and resources to meet high demand to avoid subsequent concerns relating to scarcity, once the tender has been allotted.
2. Market for Procurement of Palmolein Oil: For palmolein oil, CCI noted that the pre requisites were to be decided by TNCSC, and TNCSC in order to ensure seamless supply of palmolein oil, ensured that the potential bidders had the capacity and resources to provide the said product by adding such pre requisites. TNCSC faced competitive constraints from various other State agencies and did not have the capability to operate independently of its competitors. For these reasons, TNCSC could not have said to be dominant. CCI also noted that asking bidders to abide with statutory compliances, that may have the potential effect of eliminating certain bidders, could not be construed as anti competitive.
3. Market for Procurement of Eggs for noon meal scheme: In addition to the aforementioned factors, CCI noted that the bidder pre-requisites introduced in this market had been issued under the Integrated Child Development Services scheme (‘ICDS’) for children. Several States had issued similar tenders under the Public Distribution Scheme (‘PDS’) and at least 13 States had issued tenders under the ICDS – each of which had similar pre-requisites. CCI also noted the presence of several procurement agencies in the market, because of which it held that the Respondents could not be held dominant. It was also noted that SWNMPD was procuring eggs for the benefit of weaker sections of society because of which certain conditions were necessary to ensure capacity for the tendered product. Additionally, the seamless delivery of eggs also ensures efficient use of funds by the State Government as suggested by the Accountant General since a bidder with sufficient resources and capacity would only be able to bid and the State Government will not have to employ other suppliers at the last minute.
CCI accordingly concluded there was no prima facie case of contravention and dismissed the information.
 Case No. 2 of 2018
CCI Grants Interim Relief to Confederation of Real Estate Developers Association of India – NCR Against HUDA’s Conduct
In its order dated August 1, 2018, CCI issued an order under Section 33 of the Act, granting interim relief to the Confederation of Real Estate Developers Association of India – NCR (‘Developers’) against the conduct of Department of Town and Country Planning (‘DTCP’) and Haryana Urban Development Authority (‘HUDA’) (collectively, ‘Respondents’).
The primary allegation was with respect to compelling Developers to pay External Development Charges (‘EDC’) and Infrastructure Development Charges (‘IDC’). The Developers requested CCI to restrain the Respondents from invoking the bank guarantee against them and sought a cease and desist order against the Respondents from taking any coercive actions including compelling the Developers to pay EDC or IDC or any increase or any penalty payment until the disposal of the case.
While considering the application for interim relief, CCI relied on the factors laid down in M. Gurudas and Others v. Rasaranjan and Others i.e. (i) existence of prima facie case; (ii) balance of convenience and (iii) irreparable injury.
To determine the existence of the first element of prima facie case, CCI referred to its prima facie order issued under Section 26(1) of the Act, directing the DG to conduct an investigation. However, citing the SC decision in Competition Commission of India v. Steel Authority of India Limited (‘SAIL Case’) that required CCI to apply a higher standard for establishing a prima facie case than the one required under Section 26(1) of the Act, CCI considered the Respondents’ conduct beyond its prima facie order under Section 26(1) of the Act. In doing so, CCI noted that despite collecting EDC from Developers, the Respondents had failed to undertake external development services (‘EDS’) or infrastructure work. While the Respondents contended that other government agencies had indeed undertaken some infrastructure works, CCI noted that they did not cover basic facilities like water supply, sewerage, drains, roads, electrical works, etc. without which the flats would be uninhabitable.
CCI also noted that a policy was issued in 2010 that allowed relaxations with respect to collecting EDC up until the time the rates for medium and low potential zones were finalized and also, the Developers were exempted from payment of any EDC when it wasn’t charged to the allottees. However, no such benefit or a similar policy was in place for high potential zone. Additionally, 60% of the collected IDC was already transferred and utilized for refund purposes for other projects by HUDA. In view of the above fact, the CCI noted that the alleged anticompetitive conduct has been continued by the Respondents and there was a prima facie case to intervene.
On the following two elements of balance of convenience and irreparable injury, CCI noted that to obtain a license to set up a colony in Sohna, a Letter of Intent (‘LOI’) and LC-IV (Agreement by owner of land intending to set up a colony) (‘Agreement’) between the Developers and DTCP had to be executed. The LOI and the Agreement required Developers to pay the EDC either within 30 days of grant of license or in 8 to 10 six monthly installments. The Agreement additionally, contemplated annual interest in case of delayed EDC payment by Developers. CCI also noted that licenses were to be renewed every five years and renewal fee deposited each time, even if the reason for non completion of the project was limited to EDS.
Citing Dalpat Kumar and Anr. v. Prahlad Singh and Ors., CCI held that in order for the third element of ‘irreparable injury’ to be satisfied, it needed to be reasonably satisfied that absent its interference, Developers and consumers would suffer irreparable loss. To this extent, CCI noted that without interim relief, Developers, and consequently consumers, would suffer significant damages for which they were unlikely to be appropriately compensated. CCI also noted that if interim relief is not granted, Developers may lose their licenses and be forced to pay penal interest even when the Respondents are at fault. Such actions will cause irretrievable harm to Developers.
On this basis, CCI noted that the balance of convenience lay in favour of the Developers and absent intervention, irreparable harm would be caused to Developers and consumers alike. In order to preserve status quo, CCI noted that it was important to intervene and restrain the Respondents from taking coercive steps with respect to EDC installment payments. CCI, in its order, also took cognizance of the fact that EDC was imperative in order carry out EDS, but as Respondents had failed to take requisite action, CCI granted interim relief to Developers. Specifically, CCI directed that, where Developers had already paid 10% of EDC and deposited 25% of EDC in the form of bank guarantee, DTCP will not coerce the Developers for remaining installments or take coercive measures with respect to licenses granted to the Developers. Expressly CCI has directed that the status quo be maintained until final disposal of the matter.
 AIR 2006 SC 3275
 (1992)1 SCC 719