Staying Ahead of the Game: The Role of Proactive Compliance in Fostering Healthy Competition
April 26, 2023DownloadsDownload Article
Competition is a key driver of innovation, productivity, and economic growth. However, businesses must operate within the bounds of antitrust laws that prohibit anti-competitive behavior, such as predatory pricing, bid-rigging, and market-sharing agreements.
The Competition Commission of India (CCI) is the primary regulator responsible for ensuring competitive markets and enforcing competition laws in India. The CCI has the power to investigate mergers and penalize anti-competitive behavior. In recent years, the CCI has investigated anti-competitive conduct in multiple sectors, including pharmaceuticals, cement, and automobiles.
Violations of antitrust laws can result in significant fines, legal costs, reputational damage, and even criminal sanctions. Therefore, it is critical for businesses to have a proactive compliance program that mitigates the risks of antitrust violations and demonstrates their commitment to fair competition.
To this end, CCI has kept pace with the latest tools, technologies, and resources, deploying them for investigative purposes.1 It has the power to summon employees, conduct raids, confiscate IT equipment as per Section 41 of Companies Act, 20022 and Section 220 of the Companies Act, 2013.3
As a result, there has been a rise in the penalties imposed for breach of competition law in India. As per the annual report of CCI for 2021-22, INR 13,357 Mn (USD 163 Mn) was imposed as penalty for the financial year which is approximately 205% higher than the penalty imposed in 2017-18.4
The quantum of penalties are likely to remain high as the Competition Amendment Bill, 2023, has enabled penalties based on global turnover of the entities under investigation (as opposed to ‘relevant turnover’ earlier).5
Organizations need to ensure that their employees are not partaking in anti-competitive behavior such as pricefixing, group boycotts, and exclusionary exclusive dealing contracts or trade association rules.
The CCI is known to take a considerate view of the efforts made by a company to curb violation of Competition Act, in case of an enforcement action.6 To avoid penalties and reputational damage, businesses must have a robust compliance program that is tailored to their specific risks and operations.
The following outlines key elements of a compliance program that will help organizations avoid the many adverse potential consequences of competition law infringement.
By implementing a comprehensive and hands-on compliance program, organizations can demonstrate their commitment to compliance and avoid costly penalties and reputational damage. While there is no one-size-fitsall approach to implementation, solutions do not have to be burdensome. Companies do not need to overspend on advanced tools, instead, with the right amount of planning, a business can seamlessly incorporate an antitrust compliance program to ensure healthy competition.
1: Press Trust of India, 5 December 2022, CCI chief calls for devising new tools to check anti-competitive practices.
2: The Competition Act, 2002 n.d Competition Commission of India.
3: The Companies Act, 2013 n.d Ministry of Corporate Affairs, Government of India.
4: Annual Report 2021-22 n.d Competition Commission of India.
5: The Indian Express, 31 March 2023, Competition (Amendment) Bill pass in Lok Sabha: How it affects Big Tech.
6: Competition Act 2002 – Leniency Programme n.d Competition Commission of India.