In order to create an effective competition compliance culture, the initiative needs to be taken by CCI. Unless CCI emphasises the importance of soft measures such as compliance programmes and also communicates effectively with enterprises as to the manner of their implementation and uses, the enterprises will be ill-equipped or uninterested in using such...
In order to create an effective competition compliance culture, the initiative needs to be taken by CCI. Unless CCI emphasises the importance of soft measures such as compliance programmes and also communicates effectively with enterprises as to the manner of their implementation and uses, the enterprises will be ill-equipped or uninterested in using such measures.
Competition authorities/regulators have two main tools, namely enforcement and advocacy, to seek compliance with competition laws and thus, protect, preserve and improve the markets by ensuring sanctity of the competitive process.
Competition Commission of India ("CCI"), the Indian competition authority, has been statutorily mandated, by the Competition Act, 2002 ("Competition Act"), to eliminate practices having adverse effect on competition in India1. In order to enable CCI to achieve this objective, provisions dealing with anti-competitive agreements2 and abuse of dominance3 were brought into force in 2009. CCI's enforcement of these provisions involves an ex-post examination of the conduct and possible penalties and cease and desist directions for proven contraventions4. Provisions dealing with combinations5 were brought into force in 2011 and CCI's enforcement of these involves an ex-ante examination of transactions which may have an impact on competition; a failure/delay to notify a transaction required to be notified may be met with penalties6. As regards competition advocacy7, CCI has been empowered to provide non-binding inputs to the government regarding policy formulation and to "take suitable measures for the promotion of competition advocacy, creating awareness and imparting training about competition issues".
CCI: Enforcement and Advocacy
Enforcement and Advocacy: In Practice
As of March 2014, CCI had dealt with 461 cases concerning alleged violations of Sections 3 and 4 of the Competition Act.8 On the combinations side, in the period from 2011- 14, CCI had dealt with close to 165 combinations9, most of which were approved within the stipulated time limit.
As of 27 February, 2015, CCI has imposed a total penalty of '12, 474 Crores, out of which penalty of '92.84 Crores has been realised, penalty of '12, 292.57 Crores has been stayed and penalty of '61.10 Crores has been dismissed by Competition Appellate Tribunal ("COMPAT")/courts10. The above figures provide a fair idea regarding the enforcement pattern by CCI.
On the advocacy front, a perusal of the advocacy measures and annual returns published by the CCI for the years 2012-13 and 2013-14 reveals that most of the CCI's efforts in this regard have been aimed at engaging with various stakeholders (government officials, members of judiciary, companies, trade associations etc.) through lectures, workshops, panel discussions etc. regarding certain aspect of competition laws.
Analysis + Way Ahead
The statistics indicate that most of CCI's efforts have been employed towards creating an effective and deterrent enforcement regime. CCI has intervened in a variety of sectors and industries in order to examine and penalise any anti-competitive conduct. On the other hand, advocacy measures have largely been limited to lectures, workshops and discussion by CCI officials with various stakeholders.
Though the importance of creating an effective enforcement regime cannot be overstated, the same needs to be balanced with an appropriate ex-ante advocacy framework which adequately prepares the enterprises to conduct themselves in a competition compliant manner. Deterrence, though important to create fear and awareness among the stakeholders, cannot overshadow the importance of preparing/enabling the enterprises to voluntarily act in a competition-compliant way to the best of their means. It may be noted that CCI has utilised a major portion of its resources (financial and human) in creating a suitably deterrent enforcement regime yet its penalty recovery rate remains a paltry 0.7%.
The present approach involving major focus on enforcement, creates a disproportionately adversarial and confrontational system where a more advocacy-focussed approach could be more efficient and harmonious. It may also be noted that enforcement measures will inevitably be enforced after the alleged anti-competitive conduct has been inflicted, while effective advocacy measures, which go beyond mere awareness, will create enterprises which are compliant in the first place, which would require less time and resources to be spent on a long and arduous ex-post inquiry.
The experience of various other jurisdictions that have employed more elaborate advocacy measures to create compliance may be illustrative.
Australia
The Australia Consumer and Competition Commission ("ACCC") has made advocacy measures a big part of its compliance procedure. The ACCC Compliance and Enforcement Policy11 released in 2015 states that "ACCC encourages and assists genuine voluntary compliance initiatives by individual businesses and industry sectors.". It further states that "ACCC takes the firm view that prevention of a breach of the Act is always preferable to taking action after a breach has occurred." The ACCC lays great emphasis on effective communication of its policies and its commitment to its advocacy initiatives is best illustrated by the fact that it has created 4 different templates (depending on size, from micro-business to large corporate entities) for compliance programmes to be adopted by enterprises which may be tailored to individual needs12.
Japan
The importance given to advocacy by Japan Federal Trade Commission ("JFTC") is best illustrated by the various guidelines issued by it which lay down comprehensively the JFTC's position regarding anti-competitive conduct with respect to various sectors and aspects thereof13. For instance, Guidelines Concerning the Activities of Trade Associations under the Antimonopoly Act, Guidelines Concerning Abuse of Superior Bargaining Position under the Antimonopoly Act, Guidelines on Standardization and Patent Pool Arrangements. These guidelines thoroughly describe the details of anti-competitiveness with respect to a particular conduct or sector. Additionally, JFTC also has guidelines for Prior Consultation System for Activities of Business which allows enterprises to consult with JFTC with respect to the legality of a particular conduct prior to its implementation.
United Kingdom
In the United Kingdom ("UK"), the former competition regulator, namely the Office of Fair Trading ("OFT") conducted detailed research into drivers of compliance and non-compliance with competition law14 and issued a guideline15 called "How your business can achieve compliance with competition law"16. These guidelines recognise that "majority of businesses want to comply with competition law" and state that "whilst we take enforcement action where necessary, we also wish to support businesses seeking to achieve a competition law compliance culture, so that breaches of competition law are avoided in the first place". It further lays down a four-point process meant to provide guidance for a competition law compliant culture. It also laid down how the compliance programme would inter-play with the penalty imposition in case of an enforcement proceeding.
Canada
The Canadian Competition Bureau has adopted a Bulletin on Competition and Compliance Framework17. The said Bulletin reveals a refreshing approach to competition law compliance by recognising the concept of "shared compliance" whereby it recognises that the Competition Bureau, the business community and the legal community share the duty of compliance since collectively, these stakeholders can promote compliance far more effectively and efficiently than in their individual capacities. The Bulletin also provides for Bureau giving an opportunity for Voluntary Compliance "by providing guidance to the business or individual on relevant aspects of the law and, where appropriate, to seek alternative case resolutions ("ACRs"). ACRs refer to certain processes and remedies through which, in appropriate circumstances, the Bureau resolves concerns of non compliance without the need for litigation or consensual resolutions". These ACRs can take various forms such as Information Letters, Warning Letters, Information meetings, Corporate Compliance Programmes etc.
According to a study conducted by International Chamber of Commerce ("ICC")18, various other jurisdictions such as Brazil, France, Korea, Netherlands etc. also employ elaborate compliance programmes to minimise reliance on ex-post enforcement-oriented methods of seeking compliance.
The practices adopted by the above jurisdictions are within the domain of CCI and can be resorted to in the interest of greater efficiency in competition enforcement. It is important to note that CCI has, as part of its enforcement activities, started recognising the importance of compliance programmes- in a recent case, the contravening party was directed to prepare and file a "Competition Compliance Manual"19, and in another case the contravening party was directed to organise "five competition awareness and compliance programmes for its members"20.
CCI's increased adoption of such measures (as well as those adopted in some other jurisdictions) is more likely to encourage/influence the present day businesses to usher in a culture where compliance becomes an acknowledged and appreciated business practice consequently minimising the regulator's role as a policy enforcer.
In India (in the year 1997) the tax authorities had significant success driving up revenue by using voluntary disclosure mechanism called the "Voluntary Disclosure of Income Scheme" which netted tax revenues of INR 78 Billion. Accordingly, sector-wise compliance programmes for competition law may neither act like a silver bullet solution nor can they be a like-for-like replacement for traditional regulation/enforcement but, like in other jurisdictions, they offer possibilities of desirable results.
The real challenge before CCI would not be to formulate compliance programmes and other related measures (for each sector) but the real challenge (as always) would be to implement and execute such programmes resulting in enterprises competing more effectively.
The compliance programmes sought to be implemented ought to inspire confidence among businesses that compliance with competition law by all alike would protect each one from any anti-competitive behaviour of their competitors, apart from ensuring a level playing field to nurture their businesses. Shaping a constructive, effective and responsible competition compliance regime, therefore, necessitates commitment and contribution from all stakeholders.
In order to create an effective competition compliance culture, the initiative needs to be taken by CCI. Unless CCI emphasises the importance of soft measures such as compliance programmes and also communicates effectively with the enterprises as to the manner of their implementation and uses, the enterprises will be ill-equipped or uninterested in using such measures. Though CCI has been taking some measures in this regard21, a more elaborate and targeted approach may be desirable. The most effective manner in which enterprises can create an internal competition compliance programme is, however, the subject of another debate.
Competition authorities/regulators have two main tools, namely enforcement and advocacy, to seek compliance with competition laws and thus, protect, preserve and improve the markets by ensuring sanctity of the competitive process.
Competition Commission of India ("CCI"), the Indian competition authority, has been statutorily mandated, by the Competition Act, 2002 ("Competition Act"), to eliminate practices having adverse effect on competition in India1. In order to enable CCI to achieve this objective, provisions dealing with anti-competitive agreements2 and abuse of dominance3 were brought into force in 2009. CCI's enforcement of these provisions involves an ex-post examination of the conduct and possible penalties and cease and desist directions for proven contraventions4. Provisions dealing with combinations5 were brought into force in 2011 and CCI's enforcement of these involves an ex-ante examination of transactions which may have an impact on competition; a failure/delay to notify a transaction required to be notified may be met with penalties6. As regards competition advocacy7, CCI has been empowered to provide non-binding inputs to the government regarding policy formulation and to "take suitable measures for the promotion of competition advocacy, creating awareness and imparting training about competition issues".
CCI: Enforcement and Advocacy
Enforcement and Advocacy: In Practice
As of March 2014, CCI had dealt with 461 cases concerning alleged violations of Sections 3 and 4 of the Competition Act.8 On the combinations side, in the period from 2011- 14, CCI had dealt with close to 165 combinations9, most of which were approved within the stipulated time limit.
As of 27 February, 2015, CCI has imposed a total penalty of '12, 474 Crores, out of which penalty of '92.84 Crores has been realised, penalty of '12, 292.57 Crores has been stayed and penalty of '61.10 Crores has been dismissed by Competition Appellate Tribunal ("COMPAT")/courts10. The above figures provide a fair idea regarding the enforcement pattern by CCI.
On the advocacy front, a perusal of the advocacy measures and annual returns published by the CCI for the years 2012-13 and 2013-14 reveals that most of the CCI's efforts in this regard have been aimed at engaging with various stakeholders (government officials, members of judiciary, companies, trade associations etc.) through lectures, workshops, panel discussions etc. regarding certain aspect of competition laws.
Analysis + Way Ahead
The statistics indicate that most of CCI's efforts have been employed towards creating an effective and deterrent enforcement regime. CCI has intervened in a variety of sectors and industries in order to examine and penalise any anti-competitive conduct. On the other hand, advocacy measures have largely been limited to lectures, workshops and discussion by CCI officials with various stakeholders.
Though the importance of creating an effective enforcement regime cannot be overstated, the same needs to be balanced with an appropriate ex-ante advocacy framework which adequately prepares the enterprises to conduct themselves in a competition compliant manner. Deterrence, though important to create fear and awareness among the stakeholders, cannot overshadow the importance of preparing/enabling the enterprises to voluntarily act in a competition-compliant way to the best of their means. It may be noted that CCI has utilised a major portion of its resources (financial and human) in creating a suitably deterrent enforcement regime yet its penalty recovery rate remains a paltry 0.7%.
The present approach involving major focus on enforcement, creates a disproportionately adversarial and confrontational system where a more advocacy-focussed approach could be more efficient and harmonious. It may also be noted that enforcement measures will inevitably be enforced after the alleged anti-competitive conduct has been inflicted, while effective advocacy measures, which go beyond mere awareness, will create enterprises which are compliant in the first place, which would require less time and resources to be spent on a long and arduous ex-post inquiry.
The experience of various other jurisdictions that have employed more elaborate advocacy measures to create compliance may be illustrative.
Australia
The Australia Consumer and Competition Commission ("ACCC") has made advocacy measures a big part of its compliance procedure. The ACCC Compliance and Enforcement Policy11 released in 2015 states that "ACCC encourages and assists genuine voluntary compliance initiatives by individual businesses and industry sectors.". It further states that "ACCC takes the firm view that prevention of a breach of the Act is always preferable to taking action after a breach has occurred." The ACCC lays great emphasis on effective communication of its policies and its commitment to its advocacy initiatives is best illustrated by the fact that it has created 4 different templates (depending on size, from micro-business to large corporate entities) for compliance programmes to be adopted by enterprises which may be tailored to individual needs12.
Japan
The importance given to advocacy by Japan Federal Trade Commission ("JFTC") is best illustrated by the various guidelines issued by it which lay down comprehensively the JFTC's position regarding anti-competitive conduct with respect to various sectors and aspects thereof13. For instance, Guidelines Concerning the Activities of Trade Associations under the Antimonopoly Act, Guidelines Concerning Abuse of Superior Bargaining Position under the Antimonopoly Act, Guidelines on Standardization and Patent Pool Arrangements. These guidelines thoroughly describe the details of anti-competitiveness with respect to a particular conduct or sector. Additionally, JFTC also has guidelines for Prior Consultation System for Activities of Business which allows enterprises to consult with JFTC with respect to the legality of a particular conduct prior to its implementation.
United Kingdom
In the United Kingdom ("UK"), the former competition regulator, namely the Office of Fair Trading ("OFT") conducted detailed research into drivers of compliance and non-compliance with competition law14 and issued a guideline15 called "How your business can achieve compliance with competition law"16. These guidelines recognise that "majority of businesses want to comply with competition law" and state that "whilst we take enforcement action where necessary, we also wish to support businesses seeking to achieve a competition law compliance culture, so that breaches of competition law are avoided in the first place". It further lays down a four-point process meant to provide guidance for a competition law compliant culture. It also laid down how the compliance programme would inter-play with the penalty imposition in case of an enforcement proceeding.
Canada
The Canadian Competition Bureau has adopted a Bulletin on Competition and Compliance Framework17. The said Bulletin reveals a refreshing approach to competition law compliance by recognising the concept of "shared compliance" whereby it recognises that the Competition Bureau, the business community and the legal community share the duty of compliance since collectively, these stakeholders can promote compliance far more effectively and efficiently than in their individual capacities. The Bulletin also provides for Bureau giving an opportunity for Voluntary Compliance "by providing guidance to the business or individual on relevant aspects of the law and, where appropriate, to seek alternative case resolutions ("ACRs"). ACRs refer to certain processes and remedies through which, in appropriate circumstances, the Bureau resolves concerns of non compliance without the need for litigation or consensual resolutions". These ACRs can take various forms such as Information Letters, Warning Letters, Information meetings, Corporate Compliance Programmes etc.
According to a study conducted by International Chamber of Commerce ("ICC")18, various other jurisdictions such as Brazil, France, Korea, Netherlands etc. also employ elaborate compliance programmes to minimise reliance on ex-post enforcement-oriented methods of seeking compliance.
The practices adopted by the above jurisdictions are within the domain of CCI and can be resorted to in the interest of greater efficiency in competition enforcement. It is important to note that CCI has, as part of its enforcement activities, started recognising the importance of compliance programmes- in a recent case, the contravening party was directed to prepare and file a "Competition Compliance Manual"19, and in another case the contravening party was directed to organise "five competition awareness and compliance programmes for its members"20.
CCI's increased adoption of such measures (as well as those adopted in some other jurisdictions) is more likely to encourage/influence the present day businesses to usher in a culture where compliance becomes an acknowledged and appreciated business practice consequently minimising the regulator's role as a policy enforcer.
In India (in the year 1997) the tax authorities had significant success driving up revenue by using voluntary disclosure mechanism called the "Voluntary Disclosure of Income Scheme" which netted tax revenues of INR 78 Billion. Accordingly, sector-wise compliance programmes for competition law may neither act like a silver bullet solution nor can they be a like-for-like replacement for traditional regulation/enforcement but, like in other jurisdictions, they offer possibilities of desirable results.
The real challenge before CCI would not be to formulate compliance programmes and other related measures (for each sector) but the real challenge (as always) would be to implement and execute such programmes resulting in enterprises competing more effectively.
The compliance programmes sought to be implemented ought to inspire confidence among businesses that compliance with competition law by all alike would protect each one from any anti-competitive behaviour of their competitors, apart from ensuring a level playing field to nurture their businesses. Shaping a constructive, effective and responsible competition compliance regime, therefore, necessitates commitment and contribution from all stakeholders.
In order to create an effective competition compliance culture, the initiative needs to be taken by CCI. Unless CCI emphasises the importance of soft measures such as compliance programmes and also communicates effectively with the enterprises as to the manner of their implementation and uses, the enterprises will be ill-equipped or uninterested in using such measures. Though CCI has been taking some measures in this regard21, a more elaborate and targeted approach may be desirable. The most effective manner in which enterprises can create an internal competition compliance programme is, however, the subject of another debate.
1. Section 18, Competition Act, 2002.
2. Section 3, Competition Act, 2002.
3. Section 4, Competition Act, 2002.
4. Section 27, Competition Act, 2002.
5. Section 5 and Section 6, Competition Act, 2002.
6. Section 43A, Competition Act, 2002.
7. Section 49, Competition Act, 2002.
8. Fair Play: Quarterly Newsletter of CCI (Volume 8, January-March 2014)
9. CCI Annual Reports for the years 2011-12, 2012-13 and 2013-14.
10. Answer by Ministry of Corporate Affairs to Unstarred Question no.755 in LokSabha (27 February 2015).
11. https://www.accc.gov.au/about-us/australian-competition-consumercommission/ compliance-enforcement-policy#accc-compliance-and-enforcement-strategy.
12. https://www.accc.gov.au/business/business-rights-protections/implementing-acompliance- program.
13. http://www.jftc.go.jp/en/legislation_gls/imonopoly_guidelines.html.
14. https://www.gov.uk/government/uploads/system/uploads/attachment_data/ file/284405/oft1227.pdf.
15. Subsequently adopted by the Competition and Markets Authority ("CMA").
16. https://www.gov.uk/government/publications/how-your-business-canachieve- compliance-with-competition-law.
17. http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03982.html.
18. http://ec.europa.eu/competition/antitrust/compliance/ icc_comparative_study_en.pdf.
19. Kannada GrahakaraKootaShri Ganesh Chetanvs Karnataka Film Chamber of Commerce (KFCC) & Others; [Case No. 58/2012], decided on 27 July 2015.
20. In Re:M/s. Crown Theatre vs Kerala Film Exhibitors Federation (KFEF); [Case No. 16/2014] decided on 8 September 2015.
21. http://cci.gov.in/sites/default/files/advocacy_ booklet_document/CCP.pdf
Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.