Presentation. G.R. Bhatia, Partner Luthra & Luthra Law Offices 13 th June, 2008

Transcription

1 National Workshop on Competition Law- Jointly organised by the ICSI with CCI Presentation Competition Law Compliance & Due Diligence G.R. Bhatia, Partner Luthra & Luthra Law Offices 13 th June,

2 New Competition Regime Seeks to Prohibit Anti competitive Agreements ; Prohibit Abuse of dominant position by enterprise or group ; Regulate Certain combinations ; Mandate Competition Advocacy ; and Provide for Advisory opinion. 2

3 Unique features of New Competition Regime Enterprise includes Government Department engaged in commerce, Consumer includes commercial buyer, Law applicable to goods, services and IPs, Explicit jurisdiction in respect of overseas acts having effect on competition in India, Provision to enter into MoU with foreign agency Incorporation of punitive provisions 3

4 What necessitates to have Competition Compliance Programme (CCP) The Act brings with it bouquet of opportunities and bunch of challenges, Ensures freedom of trade of other participants in the market Leans heavily on rule of reason Prescribe factors to determine competition concepts Effect on competition in the relevant market. Adequate mechanism to have redress of anti competitive practices of others Adequate provision to maintain confidentiality Provision to tame anti competitive public action Friendly-if you are on the right side of the law 4

5 What necessitates to have CCP (contd).. Deterrent penalty-linked with profits or turnover Detection possibilities heightened-dg vested with power of Civil Court, MoUs with overseas authorities Growing vigilance by NGOs, whistle blowers, media, etc. Introduction of leniency programmes, growing cases of breach/cheating by members of cartels Aggrieved person s right to claim compensation after findings of infringements. 5

6 What necessitates to have CCP (contd.) No indemnification of fines imposed on individuals in case violation of the law is found to be intentional and deliberate Investigation/inquiry are disruptive, costly and seriously damage the reputation and goodwill of the enterprise Ever increasing emphasis on convergence and harmonization of competition laws and principles Competition regimes are being increasingly modernized 6

7 Benefits of having CCP Reduces the risk of contraventions and its consequences CCP are generally inexpensive vis-à-vis penalties which can be imposed Helps in early detection of contraventions Early detection reduces quantum of penalties as well as compensation to third parties Ensure compliance with the orders passed by the Commission Action can be taken against delinquent employees who have contravened or have been party to contravention Contd.. 7

8 (contd.) Suggest appropriate action in case being a victim of anti-competitive practice of others Combinations are strategic decisions-disapproval causes loss to reputation-ccp can draw up planned action In case, the enterprise belong to a regulated sector, CCP can suggest strategy on competition issue Facilitate in eliminating/taming anti-competitive practice emanating from public action Ensure compliance with overseas competition law in case export business/overseas acquisition 8

9 CCP A Mitigating Factor In US a penalty can be reduced by more than 80% In Australia a relevant factor in assessing pecuniary penalty In Netherlands a relevant factor provided no senior executive is involved in the violation In Canada a mitigating conduct for sentencing purposes provided contravention has been terminated soon after it became known CCI is expected to follow global trend. 9

10 Tailoring the Programme Difficult to suggest a tailor-made programme However, broad principles evolved globally need to be incorporated in the CCP framed for the enterprise Programme has to be comprehensive, well documented and effective Training programme Understandable and Usable 10

11 Training Programme What, where, whom and how you sell Teach comprehensively the competition law Anti-Trust History of the Industry Identify anti-competitive conducts of Competitors/suppliers Need to attend and comply - a part of employment contract. Mock dawn raids to prepare for the unexpected, Internal Amnesty programme whereby employees are encouraged to report infringements but with special care 11

12 Relevant Market (RM) RM = Relevant Product (RPM) + Relevant Geographic Market (RGM) RPM: - Uses of product, - price of product, - consumer preference RGM: - trade barriers, - national procurement policy, - transport cost, - language, - need for regular supplies or after sale service. 12

13 Due Diligence Trade Agreements Agreement includes understanding, arrangementformal or informal-enforceable or otherwise Review agreements relating to production, supply, distribution, of goods or services Examine agreement if any with competitor relating to price, production, marketing or bidding Examine agreements with distributors, customers and consumers Review purchase agreement 13

14 Review Joint Venture Agreement-nature, duration, non-compete covenant Competition concerns- Concession Agreements Review Technology Transfer, Know-how, IP Licensing Agreements Examine Agreements relating to exports in terms of law of export destination 14

15 Due Diligence Abuse of dominance Are you dominant ( individually or by way of group) in the Relevant Market- Host of factors to be looked into; Existence of dominance not bad but its exercise Dominance is a condition precedent to its abuse Abuses are : unfair or discriminatory price or conditions including predatory pricing (exception is to meet competition). Compelling tie-in. denial of market access, limiting production or development, to protect or enter into any other market In case of abuse, AAEC need not be proved 15

16 Due Diligence - Combination Nature of Combination-acquisition of share, voting rights, assets or control or merger/amalgamation Examine total value of Assets or Turnover of combining parties Threshold linked with area of operation and its structure Issues relating to valuation of assets or turnover Examine Domestic Nexus thresholds Is it that combination is covered in exempted categories? Is it that Notification is to be filed with CCI 16

17 Combination to be consummated only after approval. Law provides maximum waiting period of 210 days Regulations do provide forming of prima facie opinion within 30/60 days Time limit and other requirements of filing of notice Liability for non filing of notice 17

18 Contd.. Creation of documents: - market share of main products - Level of concentration - entry/exit in industry during the last 5 years - competitors - efficiency - price( past, present and expected in future) - size and countervailing power of buyers - details of filings in other jurisdictions - details of orders passed in respect of combining parties by any anti trust authority/court - benefits outweighs disadvantages 18

19 Don ts with Trade Association A decision by Asscn. may be construed as agreement amongst competitors, Issues which you can t discuss with competitors should not be discussed at Asscn. Meeting, Leave immediately if any such topic is discussed, Ensure the Asscn. Is following rules of meeting, Don t exchange information which give impression that price or terms are not determined independently 19

20 Due Diligence of laws etc List out all laws, rules, regulations, policies and procedure which are distinctly applicable, Review them from competition lens Prepare detailed report as to how public action is affecting competition Take up with the concerned Ministry of Central/State Government for reference for opinion from the CCI Generate favourable public opinion 20

21 The price of antitrust liability continues to increase cookie cutter policies are not likely to meet the threshold of effectiveness hence, prudence suggests launching of effective and comprehensive CCP. You can maximise the chances of your company staying on the right side of the law without having to rely on advice from Specialist Anti-Trust Lawyers. 21

22 Thank you 22