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India/US Competition Laws – Cartel Enforcement A Comparative Primer Competition Commission of India Cartel Training at U.S. Chamber of Commerce Washington, DC – October 25-29, 2010 Charles H. Critchlow Baker & McKenzie LLP Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. NYC 1166626 Key Statutes, Enforcement Authority, Hearing/Trade The Competition Act, 2002 (12 of 20033) as amended by The Sherman Act (1890) (15 USC The Competition (Amendment) Act, 2007 (39 of 2007) The Clayton Act (1914) PREDECESSOR STATUTE Foreign Trade Antitrust Improvement Act (1981) Antitrust Division, U.S. Department of Justice Monopolies & Restrictive Trade Practices Act, 1973 Competition Commission of India Dhanedra Kumar, Chairperson A. K. Chauhan, Director General Hearings before the Commission Competition Appellate Tribunal Supreme Court of India (15 U.S.C. Christine Varney, Assistant Attorney General Trials in U.S. District Court Appeals to Circuit Courts U.S. Supreme Court Statutory Prohibitions Agreement in respect of production, supply, Contract, combination or conspiracy “in restraint distribution…which causes or is likely to cause of trade” an appreciable adverse effect on competition in Sherman Act 15 U.S.C. § 1 Direct, substantial, reasonably forseeable effect India on US commerce Competition Act §3 (1) Foreign Trade Antitrust Improvements Act, 15 U.S.C.§6a Any agreement directly/indirectly: (a) determing prices; (b) limiting or controlling production, supply, markets…or services; (c) sharing market through allocation; (d) resulting in bid rigging or collusive bidding presumed to have an appreciable adverse effect Illegal “per se”: price fixing, geographic, product market or customer allocation agreement on terms/conditions of sale when among horizontal competitors Competition Act §3(3) Case Law Interpretation Does not apply to joint venture agreements if Joint Ventures analyzed under a “rule of reason” they increase efficiency in production, supply, weighing impact of restraints against distribution, storage, acquisition or control of efficiencies and net competitive benefits Case Law Interpretation goods or provisions of services Competition Act §3(3) Penalties/Exposure 10% of average turnover for 3 preceeding years or for a cartel[1]: Fines up to $100 million on each count 15 U.S.C. §2. (Under U.S. sentencing guidelines a base fine 20 of volume of commerce, adjusted by culpability score considering various factors) 3 times profit or 10% of turnover for each year of or continuation, whichever is higher twice the gain realized or the loss suffered by Competition Act §27 victims 18 U.SD.C.§3571(d) Fines on individuals by the Commission: rupees one lakh/day for each day of non-compliance, up Individuals fined up to $1 million to maximum of rupees ten crore Up to 10 years imprisonment on each count Penalties by New Delhi Magistrate: up to 3 years 15 USC. § 2 in prison, fines up to reupees 25 crore, or both, for failure to comply with orders, upon complaint by the Commission Competition Act §42 [1] Section 2 (c) defines Cartel to include an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or , trade in goods or provisions of services. Investigation Procedure Commission can initiate inquiry on its own Antitrust Division generally empowered to motion, upon receipt of a complaint,or enforce both criminal and civil penalties upon a referral from central government Competition Act §19 Antitrust Division can issue “civil investigative demands” to collect If Commission is of the view that there evidence and/or can petition a US Court exists a prima facie case, it shall direct to convene a grand jury the Director General to investigate and issue a report Competition Act §26 FBI assistance, court-appoved search warrants and wiretaps available Director General for the purpose of inquiries is vested with the powers of Grand jury issues document subpoenas civil court (including interviews, executed by Justice Department, and can examinations) besides powers to conduct hear testimony; a variety of interview and ‘search and seizure’ immunity techniques are available Competition Act §§ 41, 36 Leniency Programs Commission may impose a “lesser penalty” Full leniency for first to come forward, and on someone who makes disclosure before its employees if an investigation has not DG issues his report yet begun (unless corporation coerced Competition Act §46 others or was originator), or if Division Cooperation must be complete, information does not at the time have evidence likely to result in sustainable conviction and not must be “vital,” with consideration to be unfair to others given to “stage” at which person comes forward, quality of information, and facts and report is a corporate act, is with candor and complete, unlawful acts were and circumstances promptly terminated when First applicant reduction up to 100%; discovered,cooperation is complete, second and third applicants providing restitution is made [remain exposed to “significant added value” may get single damages, no trebling] reductions of up to 50% and 30% Reg. No. 4 of 2009 No leniency for later applicants