1. Describe the principal competition rules governing information exchange in your jurisdiction.
Section 3(3) of the Competition Act, 2002 (the Act) governs information exchange between enterprises/ persons/ association of enterprises or persons (enterprises). It prohibits horizontal agreements (ie, agreements between competing enterprises engaged in identical or similar trade of goods or provision of services, including cartel agreements), which cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India, including:
- agreements to directly or indirectly determine purchase or sale prices;
- agreements to limit or control production, supply, markets, technical development, investment or provision of services;
- agreements to share the market or source of production or provision of services by way of allocation of geographical area of market, type of goods or services, number of customers in the market, or any other similar way; and
- agreements to directly or indirectly result in bid rigging or collusive bidding.
2. Which bodies are responsible for enforcing competition rules on information exchange in your jurisdiction?
The Competition Commission of India (CCI), established under the provisions of the Act, is the nodal regulator responsible for adjudicating matters under the Act, including on matters pertaining to information exchange between competitors. In conducting an investigation, the Office of the Director General (DG), the investigative arm of the CCI, has primary responsibility. Appeals to the CCI’s decisions, which previously lay before the Competition Appellate Tribunal (COMPAT), now lie before the National Company Law Appellate Tribunal (NCLAT). The final appellate authority for decisions on competition law is the Supreme Court of India.
3. Describe the types of information exchanges that may be caught under the competition rules in your jurisdiction.
The Act does not set out the details of what constitutes information exchange. As such, the CCI’s position in relation to the nature of information exchange that is anticompetitive, is found in its decisional practice. The most recent decision that sets out the current position of the CCI in this regard is In Re: Alleged Cartelisation in Flashlights Market in India (Suo Motu Case No. 01 of 2017, order dated 6 November 2018) (Flashlights case) where the CCI held that while the exchange of ‘commercially sensitive information’ (ie, information capable of removing uncertainties concerning the intended conduct of the participating undertakings) may be considered as a plus factor indicating the possibility of collusion, it would not constitute adequate evidence of anti-competitive behaviour unless the information exchanged was acted upon by the enterprises, resulting in conduct violating section 3(3) of the Act. The CCI also held that mere information exchange would not constitute enough evidence to conclude that there was coordinated behaviour between parties and would have to be considered in conjunction with other evidence to establish contravention of the provisions of the Act.
This decision of the CCI marked a notable departure from its previous position captured in Builders Association of India v Cement Manufacturers’ Association and Ors (Case No. 29 of 2010, order dated 31 August 2016) wherein the CCI had held that mere exchange of ‘commercially sensitive information’ among competing enterprises would constitute adequate evidence for arriving at a finding of an anticompetitive agreement under section 3 of the Act. In the appeal preferred by the cement companies (Ambuja Cements Limited & Ors v CCI, TA(AT)(Compt) No. 22 of 2017, order dated 25 July 2018), the NCLAT observed that information exchange could constitute a concerted practice if it reduced strategic uncertainty in the market thereby facilitating collusion. The matter is presently sub judice before the Supreme Court of India.
Further, in relation to the CCI’s merger control regime, under section 43A of the Act, the CCI has the power to penalise parties that consummate any step of a proposed merger or amalgamation before receiving approval from the CCI. Substantive gun-jumping may occur when the parties involved coordinate or integrate their conduct prior to the actual closing of the transaction, including the sharing of commercially sensitive information between the parties. Such an instance of information sharing would be impermissible both, under merger control provisions as well as section 3(3) of the Act.
4. Are some information exchanges regarded as more serious breaches of the competition rules than others?
As detailed in the response to question 3, information exchange between competitors which is strategic (ie, it is likely to reduce certainty regarding the operation of the market or players therein), is likely to be perceived as evidence of collusive conduct by the CCI. However, based on the current decisional practice of the CCI, such information would have to be supplemented by further evidence of implementation of the information gathered by way of such exchange.
5. In what circumstance, do information exchanges fall within the scope of cartel leniency programmes in your jurisdiction?
The leniency regime in India is governed by section 46 of the Act read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (as amended).
The treatment of exchange of information under the Indian leniency regime is the same as detailed in question 4, ie, information exchange between competitors that is strategic is likely to be perceived as evidence of collusive conduct by the CCI. However, as discussed in question 3, the CCI in the Flashlights case (which arose from a leniency application) held that the exchange of information by itself would not suffice to establish the existence of a cartel and violation of section 3(3) of the Act; and would have to be supplemented by further evidence of implementation of the information gathered through such exchange.
The CCI in In Re: Cartelisation by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters (Suo Moto Case No. 2 of 2013, order dated 11 July 2018) (Sports Broadcasting case), considered exchange of commercially sensitive and confidential price information as crucial evidence for establishing the contravention of section 3(3) of the Act. Further, corroborative evidence furnished by one of the leniency applicants (which disclosed the background of the information exchange) was also considered to have added value to the investigation so as to warrant a 30 per cent reduction in the penalty imposed on such leniency applicant.
6. To what extent is it necessary for an information exchange to have a negative effect on competition to prove a competition infringement in your jurisdiction?
Section 3(3) of the Act creates a presumption of a negative effect, that is, an AAEC once the existence of an ‘agreement’ between competitors has been proved by the CCI, possibly based on, inter alia, evidence of information exchange. However, such a presumption can be rebutted by the defending enterprises, after which the burden of proof would shift to the CCI to demonstrate that the alleged collusive conduct did cause AAEC in the relevant market in India.
7. What types of information exchanges are not caught by the competition laws in your jurisdiction? For example, are certain types of information exchanges viewed as pro-competitive?
Section 19(3) of the Act lays down the factors that must be considered by the CCI while arriving at a finding of AAEC, and lists factors which would be considered as ‘anticompetitive’ and ‘pro-competitive’. The following factors under section 19(3)(d)–(f) of the Act would be considered as being pro-competitive:
- the accrual of benefits to consumers, if any;
- improvements in production or distribution of goods or provision of services; or
- promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.
Whether an agreement restricts the competitive process is an analysis of a balance between these positive and negative factors listed in section 19(3) of the Act. Thus, information exchange between competitors that is shown to produce such positive effects on competition would not be caught as a contravention under section 3(3) of the Act. However, the onus to rebut the presumption of an AAEC is on the defending enterprises.
8. To what extent can public information be caught under the competition rules governing information exchange in your jurisdiction?
Publicly available information would not be considered as ‘commercially sensitive’ and will not have the ability to reduce the strategic uncertainty in the market. Therefore, exchange of such information is unlikely to be caught under the provisions of the Act.
9. Are there any specific competition rules in place for certain types of information exchange or certain sectors?
Under section 2(h) of the Act, any activity of the government relating to its sovereign functions, including all activities carried out by the departments of the central government of India dealing with atomic energy, currency, defence and space are not ‘enterprises’ for the purposes of the Act, and therefore, are exempt from the regime governing information exchange. Further, all vessel sharing agreements in the liner shipping industry are exempted for a limited duration from scrutiny under section 3 of the Act as long as such agreements do not include collusive practices such as fixing of prices, limitation of capacity or sales and the allocation of markets or customers (Notification dated 4 July 2018 released by the Ministry of Corporate Affairs, Government of India).
Section 3(3) of the Act also provides for a joint venture defence, provided such joint ventures result in an increase of efficiency in production, supply, distribution, storage, acquisition or control of goods or provisions of services. Section 3(5) also exempts any reasonable restrictions or conditions imposed for protecting intellectual property rights and the right of a person to export goods to the extent the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.
Additionally, the government is vested with the power to create further exemptions in accordance with any obligation assumed under any treaty, agreement or convention between India and any other country, or to exempt any enterprise that performs a sovereign function on behalf of the government or any class of enterprise in the interest of security of the nation or public interest.
10. Have public bodies in your jurisdiction published any guidance on the competition rules governing information exchange?
No guidance has been published by the CCI or any other public body regarding the applicability of competition rules governing information exchange.
11. What defences are available for information exchanges caught by the competition laws in your jurisdiction.
Based on the above discussion regarding the CCI’s position on information exchange, the following defences may be adopted against allegations of contravention of section 3(3) of the Act arising out of any information exchange:
- Applicability of any of the exemptions available under the Act (for joint ventures or in relation to IPR) or the exemption for vessel sharing agreements as discussed in response to question 8.
- Demonstrating the pro-competitive benefits arising from the alleged contravention of section 3(3) of the Act, as discussed in the response to question 6 a, which shows that there was no AAEC in the relevant market. This would need to be further supported by evidence by the defending enterprises to demonstrate that the information exchange and/ or any collusive conduct arising thereof did not cause or is unlikely to cause AAEC in the relevant market in India.
- In light of the CCI’s current decisional practice (as discussed in the response to question 3), evidence demonstrating that the information so exchanged was never acted upon by the parties and did not lead to any collusive/coordinated conduct would constitute a valid defence to any alleged contravention of section 3(3) of the Act.
12. What is the standard of proof and on whom does the burden of proof fall in information exchange cases? Are there any scenarios in which the burden of proof is or could be reversed?
Contravention of the Act is a civil liability offence. Accordingly, the evidentiary standard of proof required to show the existence of a cartel, as derived from the consensus that has evolved through the CCI’s decisional practice (and also been affirmed by the Supreme Court of India in its judgment in Rajasthan Cylinders and Containers Ltd and Ors v Union of India & Anr (2018 SCC OnLine SC 1718)) is one of “preponderance of probabilities”, and not of a standard of proof beyond reasonable doubt. As such, circumstantial evidence indicating the existence of a cartel would be enough for the CCI to find a contravention under section 3 of the Act.
Further, under section 3(3), the burden of proof to demonstrate the existence of an agreement between competitors lies with the CCI, following which an automatic presumption would arise regarding the existence of AAEC, which would be rebuttable by the defending parties.
13. What are the sanctions for anticompetitive information exchanges in your jurisdiction?
The sanctions for anticompetitive information exchange that falls foul of section 3 of the Act are prescribed under section 27 of the Act, and include the following:
- penalty of up to 10 per cent of the average of the turnover for the last three preceding financial years, upon each enterprise found guilty by the CCI. In case of cartels specifically, the penalty may go up a maximum of three times the profit or up to 10 per cent of the turnover of each of concerned enterprise for each year of the continuance of such contravention, whichever is higher;
- cease-and-desist orders;
- direct the parties to modify the agreement in question in the manner specified by the CCI; and
- any other orders the CCI deems fit.
Further, under section 48 of the Act, there is individual liability. Any person found to be in charge of the business of the company during the period of contravention and any person involved in the impugned anticompetitive conduct of the company by way of his or her consent, connivance or neglect, can be penalised by way of a monetary penalty up to 10 per cent of the average of their income for the preceding three financial years.
No criminal sanctions are provided under the Act for anticompetitive conduct.
14. Describe any recent cases in the area of information exchange of note in your jurisdiction, how they were decided and which sections they concerned.
The current position of the CCI in relation to information exchange is largely captured in the Flashlights case discussed in question 3. In addition to the same, the Supreme Court of India, in its judgment in Rajasthan Cylinders and Containers Ltd and Ors v Union of India & Anr (2018 SCC OnLine SC 1718) has affirmed that the evidentiary standard applicable for assessing alleged contraventions under section 3(3) of the Act is one of preponderance of probabilities, and that in the absence of direct evidence, the CCI may rely on circumstantial evidence for establishing the existence of a cartel.
15. Describe any recent changes to legislation in your jurisdiction that may have an impact on information exchanges.
There have been no recent changes to legislation that would impact the aforementioned position on information exchange under the Indian competition regime. However, in July 2018, the government of India constituted a competition law review committee (CLRC) to review the Act and bring it in line with international best practices. The CLRC submitted its report in August 2019. Based on the report, in February 2020, the draft Competition (Amendment) Bill, 2020 intended to amend the Act was released for stakeholder consultation by the Ministry of Corporate Affairs. The Competition (Amendment) Bill, 2020 is expected to be introduced in the Indian Parliament in 2020.
16. Are there any proposals to reform the rules governing information exchange in your jurisdiction?
As mentioned in the response to question 15, the Competition (Amendment) Bill, 2020 seeks to amend the Act in line with international best practices, and is expected to be introduced in the Indian Parliament in 2020.
17. Are there any other noteworthy characteristics or practical examples specific to your jurisdiction?