India’s Competition Act, 2002 (“Act”) is comparable to those of other jurisdictions with effective laws in this area, and embodies a modern economics-based approach. It has also been credited as being “close to state of the art” by the OECD.
The Competition Commission of India (“CCI”), apart from encouraging the provisions of the Act, also has the mandate to undertake competition advocacy, public awareness and training. One such advocacy propagated by the CCI to assist and encourage the compliance of the Act by enterprises in India is the competition compliance programme (“CCP”).
The need for an effective CCP is underlined by the fact that penalties prescribed under the Act are very high and may result in draining the resource of an enterprise in defending competition law infringement cases. For instance, theCCI may, if it finds an agreement to be anti-competitive or constituting abuse of dominance, impose a penalty not exceeding 10% of the average turnover for the last three preceding financial years upon each violating enterprise. In case of a violation by a cartel, the CCI may impose a penalty up to three times the profits for each year of the life of such agreement or 10% of the turnover for each year of the life of the agreement, whichever is higher. Recently, the CCI imposed a penalty in excess of INR 6000 Crore on 11 cement manufactures for forming cartels. It therefore, becomes pertinent for all enterprises to have an effective CCP in place in order to be better guarded against any alleged competition law infringement enquiry or suit.
The objective of CCP is to circumvent the legal, economic and reputational risk of non-compliance of the Act. The ultimate goal of such a programme is to raise awareness of potential conflicts with thecompetition law and to disseminate adequate knowledge of how to avoid them at all levels, i.e. from grass root to the top management.
In case of scrutiny, the CCI will consider if such enterprise had taken necessary and concrete steps to ensure that knowingly or unknowingly, it or its employees do not infringe the provisions of the Act. The existence of a well documented CCP proves the bona fide of the enterprise and accordingly, CCI may tone down the severity of penalty, if any.
An enterprise may, upon enquiry, attempt to impress the existence of an effective CCP upon the CCI, by demonstrating effective policies implemented for (i) educating its employees and representatives about the Act and what may be constituted as a violation; (ii) promoting a culture of competition compliance in the organization; and (iii) encouraging good corporate citizenship and accordingly, attempting facilitation of early detection of violations within the organization.
In case of absence of a comprehensive CCP, it may be practically very difficult for an enterprise to demonstrate such efforts. Hence, CCI has recommended that a comprehensive CCP should be made a part of the human resource and organizational guidelines structure of an enterprise.
CCP cannot be a standard document applicable to all enterprises and is required to be developed specifically in accordance with the business and commercial strategy of an enterprise with substantial focus on activities prohibited under the Act, including anti-competitive agreements, abuse of dominant position5 and regulation of combinations.
An effective CCP should inter alia contain a general description, purpose, enforcement and potential costs of non-compliance of the Act and also educate on the guidelines to mitigate all such competition related risks. It should additionally create a culture of compliance, through explicit and clear senior management support and assigned personnel acting as a single point of contact for all competition related queries. It is advisable to provide regular training to such employees who are most likely to be confronted with situations that could lead to infringements under the Act.
With the gradual evolution of competition law jurisprudence, it has become imperative for all enterprises irrespective of their size and business to have an exhaustive CCP in place. This will not only result in effective compliance of the Act but will also enable enterprises in assisting CCI in facilitating enquiries and taking remedial actions against anti competitive behavior of its competitors affecting such enterprise.
It may be noted that though any effort by an enterprise to ensure compliance with the Act is commendable, but what matters is the actual compliance. It is therefore, advisable that an enterprise should devote sufficient resources to develop a tailored CCP, appropriate to its size and risks, which can accomplish the object of creating systems to continuously monitor compliance of the Act, inter alia, by outlining the enterprises’ approach towards compliance, setting out practical challenges and measures to deal with them and defining guidelines for reviewing contracts/ agreements and combinations.
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