If the government accepts the recommendations made by the parliamentary committee and incorporates the proposal in the Competition Amendment Bill, businesses accused of cartel practice may be able to settle their case with the Competition Commission of India (CCI) by paying a settlement fee. Huh. through Parliament.
This would basically be an extension of the ‘Settlement and Commitment Scheme’ proposed in the Competition Amendment Bill, which only covered offenses such as entering into anti-competitive agreements and abuse of dominance.
Cartelization was originally excluded from the plan for negotiated settlement as it was seen as a more serious crime. However, the Standing Committee on Finance, headed by the Bharatiya Janata Party’s Jayant Sinha, recommended that any case—cartel or otherwise—that reaches the settlement stage would be an anti-competitive one. “The committee will recommend that the CCI should consider expanding the scope of settlements to include cartels as well, as a practical measure of the entire process,” said the report tabled in Parliament on Tuesday. A request for a settlement or commitment requires an admission of guilt. “Prima facie, admission of guilt should not be mandatory,” the committee recommended.
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Sectors such as cement, shipping, beer production and tire manufacturing have seen cartel investigations in the past.
As per the Settlement and Commitment Scheme, parties facing allegations of anti-competitive conduct can offer commitments to correct their behavior after the order of investigation by the CCI, but before the Director General associated with the regulator submits its investigation report. Give In contrast, an application for negotiated settlement can be made only after the submission of the investigation report, but before the CCI passes its final order. Negotiable remedies are available to businesses in the European Union, Japan and the US as they help resolve matters quickly 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 going to court in several cases where the CCI has imposed heavy fines.
A person with knowledge of conversations between the corporate affairs ministry, the CCI and the standing committee, who spoke on condition of anonymity, explained why the cartel was originally left out of the plan. “Cartelization is harmful behavior similar to insider trading in terms of the seriousness of the offense.”
Neelambar Sandeepan, a partner at law firm Lakshmikumaran & Sreedharan Attorneys, said the inclusion of cartels in the scheme of settlements and commitments provides another avenue for cartel participants to mitigate the risk of monetary penalties, the first being the leniency framework of the CCI.
Presently, the CCI is empowered to show leniency and complete immunity from punishment to a co-operating cartel member who discloses the existence of the cartel. If cartelization is included in the plan, it will be a second chance to settle the matter.
Sandipan said the challenge would be to bring all the parties involved to collectively settle the matter or offer commitments. “In the absence of such collective action, the alternative would not provide a viable solution. From the CCI’s point of view, voluntary closure of investigations would free up resources and finalize the matters. Such proposals by the parties, he said .
The panel also recommended that in case of offshore mergers and acquisitions between parties having Indian business presence, what defines their local nexus or their India presence requires CCI approval. The panel also said that the existing merger approval timeline of the CCI should be retained and there is no need to further reduce it as suggested in the original bill. The panel struck down a provision in the bill allowing the Director General of Investigation to examine on oath stakeholders such as legal advisors of parties, saying it would be violative of attorney-client privilege and the Indian Evidence Act.
Emails sent to the Ministry of Corporate Affairs spokesperson late on Sunday and to the CCI in the early hours of Monday seeking comment on the issue of cartel permissions in commitments and settlements remained unanswered at the time of publication.
The Securities and Exchange Board of India (SEBI) and the Income Tax Department have offered settlement under various schemes.
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