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NATIONAL UNIVERSITY OF STUDY AND RESEARCH IN LAW,

RANCHI

COMPETITION LAW: TAKE HOME ASSINGMENT

TOPIC:
TOOLS TO UNDERTAKE CARTEL INVESTIGATION

SUBMITTED TO:
Mr. ALOKE PRABHU

SUBMITTED BY:
DHARMESH SINGH CHAUHAN

Assistant Professor

Roll No. 268

Competition Law

Question- Mention the tools to undertake cartel investigation.


Due to the inherently secretive nature of cartels, the evidence that can be collected to prove a
cartel agreement is largely circumstantial. It may include evidence of parallelism plus factors
i.e. plus evidence of meetings or communications between competitors, but it is difficult to
detect direct evidence of an agreement to form a cartel. Generally, many cartel investigations
have been started once the competition authorities received a private notification or
information about the existence of such alliances.
There are mainly two tools which are employed in cartel investigation1. Dawn Raids
For most countries there is one most effective tool available to the cartel prosecutor i.e. the
dawn raid, or unannounced visit to the offices of suspected cartel operators for the purpose
of seizing documentary or electronic evidence of a cartel agreement. Dawn raids are not too
difficult to undertake, and can generally bring good results, especially in cases in which the
alleged companies refuse to cooperate. More and more competition authorities across the
world are employing the dawn raid tool to good effect. The suspected members of a cartel
must have no prior knowledge that they are under investigation. This is a tricky point, since
the procedures in most countries require that the competition authorities seek authorisation
from courts in order to conduct dawn raids, once they think they have sufficient conclusive
evidence of the violation. The longer and more complicated the process, the more players it
involves, and there is a higher possibility that information might leak, which could be
customised by competition agencies as per their own customs and requirements.
In the US, the tool closest to this is the use of search warrants in antitrust investigations.
Unlike a subpoena (a command to a witness to produce documents issued by the grand jury) a
search warrant typically does not provide the recipient with advance notice. It gives the law
enforcement officers the benefit of surprise and consequently creates a much more volatile
situation. In addition to search warrants issued by a court, several administrative agencies
have the power to inspect the records of government contractors or participants in
government programmes. The authorities can make use of informants, consensual
monitoring/wiretap authority, and hidden microphones and video cameras.
In India, the tool closest to dawn raids is visible in the MRTP Act under section 12 (5). If the
Commission has grounds to believe that any books or papers are relevant to an inquiry and
need to be produced, the section empowers the Commission to authorise any of its officer to

undertake entry, search and seizure to recover such documents. In the Competition Act, as
compared to the MRTP Act, the Director General would need to invoke Sections 240 and 240
A of the Companies Act, 1956 to undertake search and seizure, as he is given the powers of
an inspector under the said sections.
2. Leniency & Whistleblower Protection
In the increasingly sophisticated world of global competition law enforcement, it is becoming
the norm for competition authorities to have an effective leniency policy. One of the
remarkable developments in competition law over the past decade has been the surge in
national and international anti cartel enforcement in prosecuting national and global
conspiracies. The proliferation of leniency or amnesty programmes has significantly
contributed to this development by providing enforcement authorities a highly effective tool
for bursting cartel activity and by giving cartel members a strong incentive to inform about
their co-conspirators.
Leniency programmes are widely used as instruments to detect and burst cartels. They are
supposed to serve two purposes: in the short-run to facilitate the detection of cartels and
thereby to reduce cost of legal enforcement, and in the long-run to deter firms from antitrust
abuse.
The objective of all leniency programmes is, through increased detection of cartels, to
increase the level of compliance with antitrust or competition laws, which then benefits the
community through increased competition.
The hallmarks of a successful leniency programme are predictability, transparency, and
consistent application of the process. The key objectives of leniency programmes are- First
and foremost is to be more proactive in prosecution, making conviction more likely by
encouraging violators to confess and implicate their co-conspirators with first-hand, direct
insider evidence that provides proof of conduct, which the parties want to conceal. Second
goal is that Leniency programme are also aimed at enhancing the likelihood of detection,
promoting the discovery of conspiracies that would otherwise go undetected. The third goal
of such programmes is desistance, i.e destabilizing existing cartels. The final rationale for
adopting such programmes lies in its deterrence effect, which is to make cartels less
profitable and hence prematurely stop the formation of cartel arrangements. There are two
main dimensions to any leniency programme. First is the criteria for being awarded amnesty,
including the stage of the investigative process at which leniency is possible, the maximum

number of firms that can apply for leniency, and the eligibility criteria for leniency. Second is
the extent of penalties that are waived when amnesty is awarded to any firm.
In terms of section 27 of the Competition Act, 2002, any agreement which is prohibited by
Section 3 has been entered into by any cartel, the Competition Commission of India (CCI)
may impose upon each producer, seller, distributor, trader or service provider participating in
that cartel, a penalty of up to three times of its profits for each year of the continuance of such
agreement or a penalty up to ten percent of its turnover for each year of the continuance of
such agreement, whichever is higher. In the case of company, its directors/officials who are
guilty are liable to be proceeded against and punished.
Competition Act, 2002 incorporates lesser penalty (leniency) provisions under section 46 for
cartel infringement. For this purpose, CCI has been given power to impose lesser penalty in
cartel cases if the requirements of the law as provided under Section 46 are met. In terms of
Section 46, if any producer, seller, distributor, trader or service provider included in any
cartel, which is alleged to have violated Section 3, has made a full and true disclosure in
respect of alleged violations and such a disclosure is vital, the Commission may impose upon
him a lesser penalty than as prescribed under the Act or rules or regulations. However, the
lesser penalty shall not be levied where before making such disclosure, the report of
investigation directed under section 26 has been received before making such disclosure.
Further, the lesser penalty shall be imposed only in respect of the producer, seller, distributor,
trader or service provider included in the cartel, who has made a full, true and vital
disclosures.
The Commission shall not impose lesser penalty under Section 46 of the Act if the person
making the disclosure does not continue to cooperate with the Commission till the
completion of proceedings before the Commission.

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