Regulating Cartels in India

322 Pages·2022·2.284 MB·English

by  Sudhanshu Kumar

Regulating Cartels in India
This book presents a comprehensive assessment of anti-cartel enforcement
and investigative procedures in India. It makes a case for enhanced sanctions
for cartel conduct in India. Cartels are considered the most pernicious
violation of competition law, referred to as “cancer to the free-market
economy”. While competition laws in most jurisdictions prescribe strict
sanctions against cartels, Indian Competition Law provides only civil
penalties, with an upper ceiling for proven cartel conduct.
This volume assesses the effectiveness of anti-cartel enforcement of the
Competition Commission of India (CCI). It explores investigative procedures
of the CCI through multiple qualitative and quantitative indicators and the
extent to which enforcement of anti-cartel laws in India has led to cartel
deterrence. Further, it also examines the priorities and processes of the CCI
in terms of anti-cartel enforcement, their sanctioning mechanism and their
dependency of computation of penalty on varied factors.
Featuring detailed case law studies and engaging data, this book will
be an essential read for students and researchers of law and legal studies,
competition law, corporate law, intellectual property law and business law.
Sudhanshu Kumar is an experienced academic and is currently working as an
assistant professor of law at NALSAR University of Law, Hyderabad, India.
He is also the coordinator for the Centre for Corporate and Competition
Laws at NALSAR. He offers papers on corporate and competition law for
both undergraduate and postgraduate students. Some of his publications
include books on competition law, consumer protection law and capital
market. He has worked on multiple government-sponsored projects and
has been engaged in training professionals and administrative officers on
corporate and commercial laws. Dr Kumar is also a member of the Network
of Indian Competition Experts (NICE) of the Competition Commission
of India.

Regulating Cartels in India
Effectiveness of Competition Law
Dr. Sudhanshu Kumar
First published 2023
by Routledge
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and by Routledge
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Routledge is an imprint of the Taylor & Francis Group, an informa
business
© 2023 Sudhanshu Kumar
The right of Sudhanshu Kumar to be identified as author of this
work has been asserted in accordance with sections 77 and 78 of the
Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or
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Trademark notice: Product or corporate names may be trademarks
or registered trademarks, and are used only for identification and
explanation without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
ISBN: 978-1-032-18731-0 (hbk)
ISBN: 978-1-032-38950-9 (pbk)
ISBN: 978-1-003-34765-1 (ebk)
DOI: 10.4324/9781003347651
Typeset in Sabon
by Apex CoVantage, LLC
Contents
List of Figures vi
List of Tables vii
Preface viii
List of Cases xi
List of Abbreviations xxxi
1 Introduction 1
2 Conceptualizing cartels 9
3 Characterizing Indian cartels 65
4 Investigation of investigative procedures of the CCI 113
5 Sanctioning cartels 175
6 Organizational design and anti-cartel enforcement 239
7 Conclusion and planning ahead 279
Index 288
Figures
3.1 Relative figures of types of cartels on a yearly basis for
Section 27 orders. 66
3.2 Relative figures of types of cartels on a yearly basis for
Section 26 (6) orders. 66
3.3 Year-wise distribution of cartels on the basis of sectors. 75
3.4 Type and number of cartels in a specific sector (Section 27). 76
3.5 Yearly trend of participation of trade associations in all
concluded cases of cartels. 93
3.6 Yearly trends with respect to the total number of involved
trade associations and market participants in all concluded
cases of cartels. 94
3.7 Average duration of cartels per year. 101
4.1 Year-wise trend of all the orders passed by the CCI related
to cartels. 120
4.2 Section-wise source of information in cartel cases. 122
4.3 Average duration of disposal of cases; average duration of
investigation and duration of decision from the submission
of the investigation report (in months by year of decision
under Section 27). 125
4.4 Average duration of disposal of cases; average duration of
investigation and duration of decision from the submission
of the investigation report (in months by year of decision
under Section 26 (6). 128
4.5 Types of evidence – pictorial representation. 135
4.6 The total number of appeals related to cartels when
compared to the total number of appeals. 152
5.1 Year-wise usage of aggravating and mitigating factors for
the imposition of penalty. 204
5.2 The total number of cartel decisions vis-à-vis the number of
cartel decisions with fines. 218
6.1 Posts of professionals and staff filled up in the CCI (in %). 248
6.2 Posts of professionals and staff filled up in the DG office (in %). 248
6.3 Posts of legal and economic professionals filled up in the
commission (in %). 249
Tables
3.1 Types of cartels and their frequency in terms of the number
of cases 69
4.1 Number of CCI orders related to cartels during the
observation period (2009–2021) 118
4.2 Detailing year-wise usage of types of evidence by the CCI 136
4.3 A tabular representation of the outcome of the CCI’s order
at the appellate stage 155
5.1 Comparative study of parameters to determine fine in the
EU and the USA 191
5.2 Quantum of penalty over the observation period 220
6.1 Comparative figures of the penalty imposed and realized by
the CCI over the years 262
Preface
Protection of a free-market economy is the bedrock of competition law
across jurisdictions. The free market ensures that the allocation of resources
is on the basis of demand and supply. Competition in such a market acts as
an invisible hand to push market participants to work for their self-interest
and, in turn, provide the consumers with the best possible options.
Market competition has been explained as having similar normative
underpinnings as that of democracy in terms of “freedom of choice, decen-
tralized decision making and adherence to rule of law”1 and also having
similar objectives of maximization of welfare. Competition law may be
regarded as an effort by the state to “protect the process of competition”2
and punish anti-competitive practices. Most of the countries of the world,
irrespective of the nature of their economies, have realized the importance
of a statutory safeguard in the form of competition law to protect the inter-
ests of consumers and increase the efficiency of the market.
India replaced its age-old law in the form of the Monopolies and Restric-
tive Trade Practices Act, 1969, with the Competition Act, 2002 (the Act),
to respond to the changing economic environment of the country. However,
due to the constitutional challenge, it took another nine years for the Act to
become fully operational.3 In the last 12 years, the Indian competition law
has grown by leaps and bounds and has had a major impact on how the
business entities operate in the market. The Competition Commission of
India (CCI) has imposed previously unheard-of penalties to the tune of bil-
lions of rupees on corporations proved to be indulging in anti-competitive
behaviour. Under the scheme of the Act, the CCI is vested with inquisitorial,
investigative, regulatory, adjudicatory and to a limited extent, even advisory
jurisdiction. The CCI is structured as an expert regulatory body acting as a
watchdog for the economy.4
Competition law has to be applied rigorously and effectively and competi-
tion matters need to be dealt with expeditiously in order to prevent damage
to any open market economy. The issue of cartelization in markets has been
one of the major areas of concern for all competition regulators. Considered
as “supreme evil” or “cancer to the market”, cartels are supposed to be
dealt with iron hands. Criminal sanctions and high monetary penalties in
Preface ix
many competition jurisdictions are grounded in the theory of “deterrence”
and are justified on the basis of their proven ill effects on the market and
economy. Indian competition law, although inspired by antitrust legislations
in countries like the US and the UK/EU, is not quite in pari materia with
these legislations. Therefore, the Act in India does not envisage criminal
sanctions for indulgence in cartel activities and is limited to civil penalties.
In a time when we are rethinking the tenets of competition law, it is impor-
tant to evaluate and assess the experience of the CCI in dealing with cartel
cases in India. Reforms, if any, have to be in light of previous experiences
and challenges to the effective enforcement of anti-cartel laws.
The main objective of the present work is to examine and assess the pub-
lic enforcement of anti-cartel laws in India. Optimal enforcement leading to
optimal deterrence forms the crux of the enquiry.
The present book, apart from Chapter 1, which provides a brief introduc-
tion to the underlying theme of the book, is divided into five core chapters.
Chapter 2 lays down the theoretical underpinnings of competition law and,
more specifically, anti-cartel laws in a larger market context. To understand
cartels as a phenomenon, it is important to understand the determinants of
cartels in the form of cartel conducive environment; the reasons for the for-
mation of cartels; the establishment of, participation in and decision-making
of cartels; and the mode and sector of operation of cartels and see how these
factors have shaped the formulation of anti-cartel laws. It is imperative that
the theories around cartels, which have led to the modern-day competition
laws, are tested on Indian conditions. The theoretical understandings devel-
oped through wide-ranging literature are therefore juxtaposed with the inci-
dences of cartels in India in order to assess whether theoretical assumptions
apply to Indian markets as well. In order to provide scientific backing to the
assumption of variance of both the nature of cartels and their treatment by
the CCI, an investigation of the underlying determinants of cartels in India
during the observation period has been undertaken to check for consistency
in the empirical validation of theoretical assumptions.
A descriptive account of Indian cartels based on parameters like type,
duration, number of involved entities (including trade associations), affected
sectors, duration and involvement of executives is provided in Chapter 3.
A similar investigation is done in Chapters 4 and 5 to examine the investiga-
tive procedures of the CCI to assess factors of anti-cartel enforcement, like
duration of investigation and disposal, nature of detection, yield ratio, use
of evidence, standards of proof and cartel sanctions. These acceptable and
implementable parameters are based on information available in the public
domain.
Finally, Chapter 6 examines the institutional design of the CCI in dealing
with the issue of cartelization in Indian markets. The present work, in light
of the existing evidence, tries to explore whether the CCI has been able to
achieve optimal anti-cartel enforcement through detection, design and sanc-
tion parameters.