Cartels may get to settle cases without admitting offence

This would be an expansion of the ‘settlement and commitment scheme’ originally proposed in the Competition Amendment Bill, which covered only offences like entering into anti-competitive agreements and abuse of dominance.

Cartelization was originally out of the scheme for negotiated settlements as it was seen as a more serious offence. However, the standing committee on finance led by the Bharatiya Janata Party’s Jayant Sinha recommended that any matter—cartels or otherwise, that reaches the settlement stage would have been an anti-competitive one. “The committee would therefore recommend that the CCI should consider expanding the scope of settlements to include cartels also as a pragmatic recourse to the whole process,” said the report tabled in Parliament on Tuesday. The committee also said the bill is silent on whether a request for settlement or commitment requires admission of guilt. “Prima facie, admission of guilt should not be mandated,” the committee recommended.

Sectors such as cement, shipping, beer production and tyre manufacturing have seen cartel investigations in the past.

According to the settlement and commitment scheme, parties facing charges of anti-competitive conduct can offer a commitment to correct their behaviour after CCI orders an inquiry but before the Director General attached to the regulator gives his investigation report. In contrast, an application for negotiated settlement can be made only after the investigation report is submitted but before CCI passes its final order. Negotiated remedies are available to businesses in the EU, Japan and the US as they help to quickly resolve cases through financial or non-monetary provisions and reduce lengthy investigations and litigation.

The move to include cartels within the scheme comes in the context of companies moving court in many cases where CCI has imposed hefty penalties.

A person privy to the talks between the ministry of corporate affairs, CCI and the standing committee, who also spoke on condition of anonymity, explained why cartels were originally excluded from the scheme. “Cartelization is pernicious behaviour, similar to insider trading in terms of the gravity of the offence.”

Inclusion of cartels in the settlements and commitments scheme allows cartel participants another avenue to reduce their exposure to monetary fines, the first being CCI’s leniency framework, said Neelambera Sandeepan, a partner at law firm Lakshmikumaran and Sridharan Attorneys.

Currently, CCI is empowered to show leniency and give full exemption from penalty to a cartel member who discloses the existence of the cartel and cooperates. If cartelization is included in the scheme, it would be a second opportunity to resolve the case.

Sandeepan said the challenge would be to bring all parties involved to collectively settle the case or offer commitments. “In the absence of such collective action, the option will not offer a viable solution. From the CCI’s perspective, voluntary closure of investigations would free up resources and bring finality to cases,” he said. Detailed rules would be needed to implement the scheme, and it would have to be seen what subjectivity remains with the CCI to allow or disallow such proposals by parties, he said.

The panel also recommended that in the case of offshore mergers and acquisitions between parties with Indian business presence, their local nexus or what constitutes their India presence that necessitates CCI’s clearance needs to be defined. The panel also said CCI’s existing merger approval timelines should be retained and need not be further curtailed as suggested in the original bill. The panel shot down a provision in the bill allowing the director general of investigation to examine on oath stakeholders like legal advisers to parties, saying it would breach the attorney-client privilege and the Indian Evidence Act.

Emails sent to the spokesperson for the corporate affairs ministry late on Sunday and to CCI early on Monday seeking comments on the issue of cartels being allowed in commitments and settlements remained unanswered at the time of publishing.

The Securities and Exchange Board of India (Sebi) and the income tax department have offered settlements under different schemes.