Three conferences, two lodges, one metropolis. These have been essential to an eight-month-long investigation by the Competitors Fee of India (CCI) in 2010 and 2011 to reveal a cartel in India’s cement trade, which resulted in a penalty of Rs 6,317 crore, the regulator’s highest in a single case thus far.

The CCI has since carried out many probes into alleged anti-competitive agreements and corporations’ abuse of their dominant place, however it’s nonetheless greatest identified for the cement cartel case primarily due to the eye-popping high quality. It’s almost half of the Rs 13,523 crore the CCI levied in 135 circumstances until March 2018, in line with the newest knowledge out there with the regulator. Of its complete fines, the CCI has collected a mere Rs 55 crore, or zero.four%.

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Evaluate this to the US Division of Justice (DoJ), which collected $172 million in prison penalties in fiscal yr 2018 (October-September), with the best ever being $three.6 billion in fiscal yr 2015. It has additionally despatched a number of executives to jail.

Whereas the CCI can’t boast figures like DoJ, the actual fact that it has the authority to severely penalise violators might be working to its benefit. In the meantime, a few of the suggestions made by the Competitors Regulation Evaluation Committee (CLRC), which submitted its report lately, may make CCI extra nimble within the decision of circumstances and take it a bit nearer to its counterparts within the EU, the UK and the US.

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It was in 2010, virtually a decade in the past, that the CCI, which had solely grow to be operational in Could 2009, determined to probe its most high-profile case — to search out out if 10 cement firms colluded by means of the Cement Producers Affiliation (CMA) to restrict provides and lift costs. The CCI mentioned that after two of three CMA conferences at Mumbai’s Grand Hyatt and Lodge Orchid in early 2011, the businesses hiked cement costs, which, the CCI mentioned, “establishes that they co-ordinated their choices and stuck costs after due consultations”. There have been additionally questions over whether or not Ambuja Cement and ACC, that are a part of the Swiss firm LafargeHolcim, had attended two of those conferences regardless of not being members of the CMA.

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The businesses and the CMA disputed the CCI’s findings and appealed the penalty. The case has made its approach by means of the Competitors Appellate Tribunal, the Nationwide Firm Regulation Appellate Tribunal (NCLAT), which changed the previous in 2017, and is now pending earlier than the Supreme Courtroom, which requested the events to deposit 10% of the penalty final yr. Aparna Dutt Sharma, secretary basic, CMA, didn’t reply to a request from
ET Journal for remark. Questions despatched to Lafarge-Holcim, UltraTech Cement and Jaiprakash Associates, which have been handed the best penalties, additionally went unanswered.

The delay within the conclusion of this case — and others the place fines have been levied — has meant that firms haven’t coughed up what the CCI requested them to. Ought to that be a trigger for concern? Kaushal Kumar Sharma, the primary director-general of the CCI, says it could be mistaken to equate deterrence to realisation of penalties. Vaibhav Choukse, accomplice, competitors regulation, J Sagar Associates, concurs. “Firms don’t need to be on the mistaken facet of the competitors regulation as there’s a big reputational loss from a penalty.” A listed firm must make disclosures to the inventory exchanges in case it’s fined by the CCI, which may drive its shares down.

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“It’s not that the CCI needs to earn a living. The CCI’s concept within the early days was to make a splash and say, ‘Now we have arrived,’” says a contest lawyer, requesting anonymity. Nisha Kaur Uberoi, nationwide head of competitors regulation at Trilegal, a regulation agency, says the CCI has created deterrents by means of a mix of things: “its capability to levy India’s highest financial penalties on firms, imposition of particular person legal responsibility in addition to advocacy to foster a tradition of competitors compliance”. By particular person legal responsibility, she is referring to the CCI’s powers to penalise the administrators of an errant firm.

Ashok Kumar Gupta, chairman, CCI, lately instructed ET that penalties should not an finish in themselves in any enforcement course of. “In quite a few circumstances, events rectify their anti-competitive behaviour in the course of the enquiry course of itself so the market correction as such has taken place.”

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As of March 2018, the CCI had famous 940 competitors circumstances, ordered probes into 400 and accomplished investigations in 288. Even earlier than the cement cartel case, a CCI order in 2011 gave India Inc an inkling of the regulator’s powers. It investigated the realtor DLF’s conduct in relation to considered one of its residence buildings in Gurgaon and located that the corporate had set phrases unfavourable to patrons of their settlement, like their incapability to boost objections to adjustments within the construction by the builder. The CCI report added: “Regardless of realizing that mandatory approvals have been pending on the time of assortment of deposits, DLF Ltd inserted clauses that made exit subsequent to unattainable for the patrons.”

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The CCI fined DLF Rs 630 crore, which the realtor appealed; the matter is now within the apex court docket. Additionally earlier than the Supreme Courtroom is an enchantment associated to a Rs 591 crore penalty on Coal India for discriminatory phrases in fuel-supply agreements. DLF and Coal India didn’t reply to questions despatched by
ET Journal. Apart from anti-competitive agreements like cartels and abuse of dominance, the CCI additionally has to greenlight mergers and acquisitions past a sure measurement. The CCI, arrange below the Competitors Act, 2002 (amended in 2007), changed the Monopolies and Restrictive Commerce Practices Fee.

Change is within the Air

The CLRC, which the federal government arrange final yr, has advisable a collection of adjustments to the CCI. These embrace a devoted NCLAT bench for competitors circumstances, provided that NCLAT is overburdened with circumstances below the Insolvency and Chapter Code (IBC), 2016. Although there isn’t any NCLAT-specific knowledge, as of September 30, there have been almost 1,500 IBC circumstances pending earlier than the NCLAT or the Supreme Courtroom, in line with the Insolvency and Chapter Board of India.

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Among the report’s solutions may make the CCI eliminate circumstances shortly. The introduction of settlement and dedication procedures, as an illustration, may assist keep away from pendency of circumstances. Within the EU, which has had settlements since 2008, half the cartel circumstances are resolved utilizing settlements, during which the events admit to their guilt in alternate for a 10% discount in penalties. Since 2004 the EU has additionally had commitments, during which the events agree to alter their behaviour. The US DoJ has consent decrees, which should be court-approved.

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One other advice made by the CLRC is that the CCI must be clear in the way it arrives at penalties, like within the EU and the UK. “It’s as if the CCI is pulling figures out of a hat,” says Aditya Bhattacharjea, professor on the Delhi College of Economics and a member of the CLRC.

The CCI, in line with CLRC suggestions, can levy a penalty of as much as 10% of the typical turnover of the previous three years in issues associated to abuse of dominance. In case of cartels, it could possibly impose a high quality of as much as 10% of their turnover or as much as 3 times their revenue in every year of the interval throughout which the cartel existed, whichever is larger. “Having penalty pointers might be good for the CCI when it has to defend its orders in courts,” says the competitors lawyer quoted earlier.

Come Clear

No matter when these suggestions are integrated into the regulation, consultants say firms may make use of an present provision to minimise a crippling penalty. An organization engaged in an anti-competitive settlement with its rivals can alert the CCI to the existence of the cartel and cooperate within the investigation within the hopes of being waived an element, or the entire, of its high quality.

Panasonic Vitality utilised the lesser penalty possibility and went to the CCI in 2016 and admitted that it was a part of a cartel with Eveready Industries and Indo Nationwide (which sells below the Nippo model), aided by their trade affiliation, to manage the distribution and costs of zinc-carbon dry cell batteries, since 2008. Eveready and Indo Nationwide additionally availed of the lesser penalty provision. In consequence, the CCI waived 100% of Panasonic’s Rs 75 crore penalty, and lowered Eveready’s and Indo Nationwide’s fines by 30% and 20%, respectively, to Rs 172 crore and Rs 42 crore.

Tech Problem

Cracking down on cartels with out one of many taking part firms coming ahead shouldn’t be straightforward, particularly since in some circumstances the CCI could not have greater than circumstantial proof to base its conclusions on. An excellent larger problem is coping with violations within the fast-evolving world of know-how.

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Performing on data filed by Jaipur-based Shopper Unity & Belief Society and Matrimony.com, the CCI in 2018 fined Google Rs 136 crore for selling its personal specialised search — say, for flights — to the detriment of different web sites. The order was stayed by NCLAT. Google can also be being probed by the CCI for tying a few of its apps to Android and limiting handset makers’ capability to promote gadgets with alternate variations. “Android has enabled thousands and thousands of Indians to connect with the web by making cellular gadgets extra inexpensive. We stay up for working with the CCI to reveal how Android has led to extra competitors and innovation, not much less,” says a Google India spokesperson.

Google’s dominance has been below scrutiny within the EU and the US as properly. Since 2017, it has been fined a complete of $9.three billion by the EU in three completely different circumstances associated to its abuse of dominance by favouring its promoting and procuring providers over its rivals’ and for bundling a few of its functions with Android. (Google has appealed all three orders.) It is usually being investigated within the US and so are Fb and, reportedly, Amazon. “Aside from within the EU, competitors regulators are exercising warning (with tech firms) as a result of shoppers are benefiting from these firms,” says Bhattacharjea.

Whereas India could have gotten a contest authority later than a number of different international locations, new applied sciences are coming to India quickly after they’re launched elsewhere. This is the reason Sharma, former CCI director basic, believes that dealing with tech issues will not be too laborious for the CCI. One of many rising areas of concern for competitors regulators worldwide is synthetic intelligence-powered pricing algorithms of rivals colluding to repair costs. Who’s to be held accountable right here within the absence of executives of rival firms performing in tandem?

Along with cases of cartelisation and abuse of dominance within the old-economy sectors, the CCI must more and more take care of competitors circumstances in companies like ecommerce, ridehailing, meals supply and on-line journey aggregation (the CCI is at present investigating MakeMyTrip and Goibibo, which merged in 2017, and Oyo Rooms over allegations of predatory pricing, amongst others). The CCI has additionally made clear its intent to pursue circumstances by itself with no formal criticism. However what’s unlikely to alter, until the CLRC suggestions are applied, is the time it takes for a case to achieve its conclusion.