India: Competition law fact sheet

The main source of competition law in India is the Competition Act, originally enacted in 2002 (the Act), which is enforced by the Competition Commission of India (the CCI) and the National Company Law Appellate Tribunal (the NCLAT).

The Act was last amended in 2023 - however, several key changes will only come into force once the CCI issues implementing regulations.

Substantive provisions

Main rules

The Act prohibits restrictions on competition in India through the following three broad sets of rules:

• The prohibition on anticompetitive agreements;
• The prohibition on the abuse of a dominant position; and
• The regulation of combinations.

Prohibition on anticompetitive agreements

The Act contains a broad prohibition on enterprises from entering into agreements which cause or are likely to cause an appreciable adverse effect on competition within India. Consistent with international practice, the prohibition is stricter when applied to “horizontal” agreements between competitors than when applied to “vertical” agreements between suppliers and their customers:

• “Horizontal” agreements between competitors, including cartel arrangements, are presumed under the Act to have an adverse effect on competition when they relate to price fixing, limitations of supply, market sharing or bid-rigging, except in the context of efficiency-enhancing joint ventures.
• “Vertical” agreements between enterprises at different stages of the supply chain, such as exclusive supply or distribution, tie-ins or resale price maintenance, are prohibited when they cause or are likely to cause an appreciable adverse effect on competition.

The Act applies to formal agreements as well as informal arrangements, understandings and actions in concert. The sharing of competitively sensitive information (such as future pricing intentions) between competitors may constitute evidence of such arrangements or understandings. Consistent with international practice, intragroup agreements are excluded, so long as parties can prove that they are part of a “single economic entity”. Restraints considered reasonable and necessary to protect intellectual property rights can serve as a valid justification against allegations of anticompetitive agreements.

The 2023 amendments expand cartel liability to any enterprise that “participates or intends to participate in the furtherance” of a cartel - a likely indication that the CCI will scrutinise so-called “hub-and-spoke” cartels more carefully going forward.

Prohibition on the abuse of a dominant position

The Act prohibits conduct involving an enterprise or a group of enterprises which both (i) is dominant on the relevant market and (ii) abuses its position of dominance. Simply having a dominant market position, or market power, will not by itself amount to an infringement under the Act.

The Act defines a dominant position as “a position of strength, enjoyed by an enterprise, in the relevant market in India, which enables it to operate independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favour”. Neither the Act nor its implementing regulations provide guidance on market share levels above which market dominance can be presumed. A particular feature of the Act is that the abuse of dominance regime also applies where several enterprises form a “group”, a notion that includes not only situations where a party can appoint the majority of Board members or otherwise controls management, but also where a party holds 26 per cent or more of voting rights, irrespective of whether this provides the power to control another enterprise.

Examples of abuses provided in the Act include unfair or discriminatory prices or trading conditions, the restriction of production or technical development, conduct leading to a denial or market access, tying, and the leveraging of a dominant position in one market to enter or protect a position in another market.

Although not expressly mentioned in the Act, the CCI’s practice varies with respect to exploitative conduct (such as for example excessive pricing or the imposition of unfair terms on customers) and exclusionary conduct (such as for example exclusivities foreclosing other competitors from the market). The CCI is more likely to adopt an “effects” based approach in respect of exclusionary conduct, whereas exploitative conduct is analysed using a per se approach.

Regulation of combinations and merger control

The Act prohibits any combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India. The notion of “combination” is very broad, encompassing mergers, amalgamations and acquisitions of control, as well as the acquisition of any number of shares, voting rights or assets. However, under the Act the definition of “combination” currently incorporates a size-of-parties test, with global and India components, where the participating enterprises must meet certain size thresholds, measured by reference to the value of their turnover or of their assets.

The Act provides for a mandatory notification regime whereby parties that propose to enter into a combination must notify and obtain clearance from the CCI prior to their implementation of the combination. The scope of this notification regime is extensive on account of the broad notion of “combination”, although the Act and implementing regulations provide for several exemptions and relaxations from the prior notification requirement:

• Acquisitions by specified categories of financial institutions as part of loan or financing agreements are exempt from the mandatory prior notification requirement. These require notification in a shorter and simpler format, post-closing.
• Further, the accompanying regulations list several categories of transactions for which clearance may not ordinarily be required. These include many forms of intragroup transactions, acquisitions of assets in the ordinary course of business, or some acquisitions of minority equity stakes not conferring control. In the CCI’s interpretation, “control” for this purpose can be found as soon as “material influence” is conferred, which can include even a single board seat or any rights beyond those available to an ordinary shareholder.
• Other exemptions apply to transactions in select sectors, including banking companies. These exemptions are regularly reviewed and amended.

In terms of procedure, the CCI grants approval immediately upon notification of very simple transactions (under the so-called “green channel” procedure), where parties can show that their respective activities do not present any horizontal (i.e. they do not compete), or vertical overlaps (i.e. they are not present at different stages of the supply chain) and are not complementary (i.e. they are not active on neighbouring markets).

For other transactions, the CCI will adopt a prima facie decision usually within 30 calendar days of receiving a complete notification, subject to “clock stops”, where the CCI may request parties to provide further information. The CCI’s prima facie orders usually approve the transaction unconditionally, and in some cases upon parties offering commitments if it considers that the transaction is not likely to cause any appreciable adverse effect on competition in India.

Where the CCI finds that the transaction may cause an appreciable adverse effect on competition in India, it first issues a show cause notice to the transacting parties seeking their views on why an in-depth review should not be conducted. If it is satisfied with the parties’ response, the CCI may approve the transaction (with or without modifications). If it is not satisfied, the CCI directs an in-depth investigation, which can last up to 210 calendar days from receipt of the notification. Note that these periods can be suspended (i.e. “clock stops”) where the CCI raises questions or where parties negotiate remedies with the CCI to obtain its clearance.

A combination that has or is likely to have an appreciable adverse effect on competition in India shall be prohibited. When a combination raises competition issues, remedies may be proposed to reduce its harmful effects and to obtain clearance.

The 2023 amendments introduce a few key changes to the merger control regime, which are yet to come into force.

• First, a “transaction value” threshold of Rs.20bn (approx. US$244m), where the target enterprise has substantial business operations in India. The transaction value threshold will be applicable once the CCI issues implementing regulations.
• Second, a provision whereby a combination is “deemed” approved if the CCI does not pass a prima facie order within 30 days.
• Third, the amendments considerably shorten the CCI’s review timelines, to an overall 150 days from the date of notification, and streamline the process for Phase II reviews, including the negotiation of remedies.

Sanctions

Where an enterprise enters into a prohibited anticompetitive agreement, the CCI may order it to cease and desist, order amendments to relevant agreements and impose a fine of up to ten per cent of the average of the enterprise’s turnover for the last three preceding financial years. The maximum amount of fines is higher where parties have engaged in cartel arrangements, as the CCI may in that case impose a penalty of up to three times the parties’ profit for each year of the cartel’s duration, or ten per cent of their turnover for each year of the cartel’s duration, whichever is higher.

Where an enterprise is found to abuse its dominant position, the CCI may order it to cease and desist, order amendments to relevant agreements and impose a fine of up to ten per cent of the average of the enterprise’s turnover for the last three preceding financial years. In addition, the CCI has the power to order the breakup of an enterprise enjoying a dominant position to ensure that it does not abuse its dominant position.

As regards merger control, a breach of the notification obligations under the Act can lead to the imposition of fines of up to one per cent of the value of sales or of assets of the enterprises participating in the combination. Further, combinations that have or are likely to have an appreciable adverse effect on competition can be declared void.

All of the above sanctions can be imposed on natural persons and companies. In addition, where the infringement was committed by a company, sanctions can also be imposed in some circumstances on those individuals who were in charge of the company at the time the contravention was committed, as well as on the company’s directors, managers, secretaries or other officers.

Finally, the Act also provides for sanctions on parties that refuse to cooperate or provide false information.

The CCI’s practice thus far, following from a decision of the Supreme Court of India (the “Supreme Court”), has been to consider the turnover of the products or services that were affected. However, the 2023 amendments incorporate a provision that expands the scope of the CCI’s penalty computation powers to consider global turnover. The CCI is expected to issue guidelines for the computation of penalties, but has not yet done so.

Extraterritorial effect

The Act has extraterritorial reach in that it applies to agreements, abuses of dominant position and combinations outside the territory of India where they have or are likely to have an appreciable adverse effect on competition in the relevant market in India. The Act’s merger control provisions are also applicable to foreign mergers where the parties meet specified thresholds in India, which will include the transaction size threshold as well, in due course.

Enforcement regime

Public enforcement

Administrative enforcement authority under the Act rests with the CCI, which has sole jurisdiction to investigate and adjudicate. The CCI is vested with significant powers to investigate, adjudicate and dispose of a case, and sanction infringements of the Act. Investigative powers are delegated to the CCI’s Director General. Certain CCI orders, including those finding infringements, imposing penalties, closing inquiries as well as those relating to merger approvals, can be appealed first, before the NCLAT, and then on to the Supreme Court.

The 2023 amendments introduce mechanisms for settlements and commitments at various stages of a CCI inquiry.

• Commitments: an enterprise under investigation may offer commitments in respect of the alleged contraventions being investigated by the CCI, at any time after an investigation has commenced, but before it is complete.
• Settlements: on the other hand, an enterprise may choose to use the settlements mechanism, after an investigation is complete, but prior to the CCI issuing its final order.
• Neither settlements nor commitments orders can be appealed, although third-party claims for compensation can be filed on the basis of a settlement order.

The Act expressly excludes the jurisdiction of civil courts in respect of any matter falling within the powers of the CCI, such that no stand-alone private rights of action arise under the Act. However, parties who suffer loss or damage as a result of another party’s infringement of the prohibition on anticompetitive agreements, abuses of dominance or merger control rules may bring an action in the NCLAT against that party for compensation. These actions must be brought as a “follow-on” claim, meaning that the claim must rely on the findings of the CCI or of the NCLAT. The party bringing the claim must accordingly wait for such findings before bringing a claim, and cannot gather and present its own evidence to establish liability.

Contracts which violate the prohibition on anticompetitive agreements are considered void to the extent that they infringe the Act. As a result, such anticompetitive agreements cannot be enforced.

Where a party takes the initiative to report to the CCI on its involvement in a cartel agreement by making “full, true and vital” disclosures in respect of the alleged violations, the CCI may in its discretion offer to such party a reduction in or an exemption from the penalty. Leniency applications can be made any time before the CCI opens an investigation but not after the CCI has completed its investigation. The leniency applicant is required to offer continuous cooperation.

The 2023 amendments introduce a so-called “leniency plus” regime, although it is not yet in effect. This allows leniency applicants to support their claim for lesser penalty in an ongoing cartel proceeding, if they offer information relating to a separate cartel that allows the CCI to initiate an investigation into the second cartel.

The CCI has wide-ranging investigation powers, including the power to conduct on-site inspections of business premises (so-called “dawn raids”) during which it can search and seize evidence, upon obtaining a warrant from the Chief Metropolitan Magistrate in New Delhi. It has the same powers as those vested in civil courts and can hear witnesses under oath, require the discovery and production of documents, receive evidence on affidavit, and requisition public records and documents. Investigations are led by the CCI’s Director General, who has the same investigation powers as the CCI.

These have been clarified and expanded by the 2023 amendments, to include the power to retain documents, seek information and take statements on oath from past employees, in-house legal advisors or auditors employed by an enterprise. The Director General’s expanded investigation powers were brought into effect on 18 May 2023.

Recent enforcement trends

Public and private enforcement

Focus on cartels and bid-rigging

Consistent with international practice, the CCI has so far prioritised enforcement against the more severe forms of anticompetitive arrangements, i.e. cartels and bid-rigging practices between competitors. Since the entry into force of the prohibition on anticompetitive arrangements under the Act, the CCI has imposed fines in excess of Rs200 billion (approx. US$2.4 billion) on participants in cartel and bid-rigging conduct, including a fine of Rs63 billion (approx. US$770 million) in a single case involving cartel arrangements in the cement industry. Most of the cases where the CCI made use of its power to sanction a company’s management for their involvement in the conduct involve price-fixing cartels. The CCI’s cartel enforcement has been greatly improved through the use of the leniency regime.

Vertical restraints

Very few cases before the CCI have dealt with vertical restraints alone; typically allegations of vertical restraints and abuse of dominance are combined. The CCI has found an infringement involving vertical restraints in only five cases since 2009, three of which also involved an allegation of abuse of dominance.

Three of these cases have related to the automotive sector, and deal with automobile manufacturers’ relationships with distributors, including issues such as exclusivity, resale price maintenance and refusal to deal. As in other jurisdictions, market power is an essential precursor to the CCI’s vertical restraints analysis; in these cases, the CCI overcame this hurdle by finding that each automobile manufacturer was dominant in the market for its own spare parts and after-sales services. The CCI ultimately penalised fourteen car manufacturers for several practices, including restricting the supply of spare parts and after-sales services through authorised dealer networks. This decision is under appeal before the Supreme Court. Subsequently, the CCI also penalised two car manufacturers for “discount control mechanisms”, which, in the CCI’s view, amounted to resale price maintenance and reduced intrabrand competition between car dealers. These decisions have also been challenged in appeal.

Abuses of dominance

The CCI’s enforcement practice in abuse of dominance cases has covered a wide range of sectors, including real estate, automobiles, medical equipment and more recently, technology platforms.

The key focus of CCI decisions in abuse of dominance is to establish a finding of dominance. Although market share is not the sole determining factor for a finding of dominance, low market shares and the presence of credible competitors are typically sufficient for the CCI to find a lack of dominance. Factors such as high entry barriers (including regulatory barriers), economic and technological capabilities, ease of switching and countervailing buyer power are given significant weightage by the CCI in its analysis.

The Act does not include a statutory mandate to consider “effects” when evaluating abusive conduct, unlike with vertical restraints. Interestingly, the NCLAT recently mandated that the CCI must consider effects when evaluating abuse of dominance allegations. As such, CCI case trends indicate some incongruity.

• Overall, the CCI is more likely to adopt an effects-based approach in analysing exclusionary conduct, rather than exploitative conduct. In the latter, the CCI considers that the existence of unilateral impositions by dominant market players is an unlawful exercise of market power, and therefore, sufficient to prove a contravention of the Act.
• When evaluating exclusionary abusive conduct, the CCI considers it necessary to prove that competitors have been actively hampered or excluded from the relevant market to establish an infringement.

The above approach has also found its way into the CCI’s evolving assessment of competition concerns in Indian technology markets. Since 2017, the CCI has considered over 30 cases involving digital markets, over half of which were dismissed as non-problematic, without a detailed investigation. Of the remaining, the CCI has issued four infringement orders (relating to online search, mobile operating systems, app stores and online travel intermediation) and two non-infringement decisions, with investigations ongoing in seven. Some of the key principles that emerge from the CCI’s practice are:

• First, the CCI has increasingly moved away from considering online and offline sales as being part of the same relevant market. On several occasions, it has noted the distinct characteristics of online platforms (network effects, ease of use, scale, etc.) as supporting its position that offline trade is distinct from trade on online platforms.
• Second, in line with global jurisprudence, the CCI considers whether a platform is an “indispensable trading partner” or a “must-have” to reach end consumers. In this regard, it considers aspects such as the number of monthly average users, direct and indirect network effects, technological restrictions, data aggregation, etc.
• Thirdly, all the CCI’s infringement decisions consider the impact of eco-systems built up by tech platforms to find violations involving impositions and anticompetitive effects not only on the platform itself but in adjacent markets as well.
• Finally, based on a recommendation by the Parliamentary Standing Committee for Finance in December 2022, the CCI and government ministries are working on a proposal to create a stand-alone framework of ex-ante rules for digital platforms in India, that would apply alongside the existing disciplines under the Act.

Sanctions

Since the entry into force of the Act, the CCI has imposed significant pecuniary sanctions on companies and individuals for breaches of the prohibition on anticompetitive agreements and of the prohibition on the abuse of dominance.

Source: CCI annual reports. Note that a significant number of the decisions imposing fines were appealed, with the courts on occasion annulling or reducing the above amounts.

However, the CCI has only been able to recover a very small percentage of fines imposed thus far, on account of judicial review both by the NCLAT and before constitutional courts in India for due process violations. Judicial review in India is generally time-consuming, and several of the CCI’s orders are in abeyance owing to pending appeals.

Mergers and acquisitions

The CCI reviews around 90 combinations on average each year. Consistent with international practice, a vast majority of the transactions are approved unconditionally, with only a handful being approved subject to remedies. The procedure is efficient, with clearance usually granted within less than 20 working days on average. Parties can also engage in informal pre-filing consultations with the CCI. The introduction of the so-called “green channel” procedure in 2019 has significantly improved the review of simple transactions presenting no competition law issues, with around one-fifth of all combinations benefitting from immediate approval under the procedure.

Source: CCI annual reports.

Over the years the CCI has been attentive to parties’ compliance with their merger filing obligations, and has regularly imposed sanctions on parties that had failed to seek clearance or that had consummated their transaction prior to seeking clearance. While fines remained modest in most cases, the CCI imposed a fine of Rs2 billion (approx. US$24 million) on a company that allegedly failed to disclose relevant information on the basis of which it received merger approval. The CCI also suspended its approval decision in that case.

Source: CCI annual reports.

Future enforcement focus and developments

As indicated above, Indian competition law is likely to undergo significant changes, both on account of the 2023 amendments (as they are brought into force) and the proposed ex-ante rules for digital markets. Overall, the amendments are likely to streamline and increase the CCI’s efficiency and effectiveness in its enforcement of the Act. Should the ex-ante rules become law, the CCI will also gain a tool to scrutinise digital markets more closely.

The CCI also continues to conduct market studies into various issues, with a focus on online platforms. These studies have been useful indicators of the CCI’s areas of interest as well as theories of harm with respect to specific kinds of conduct. Over the last five years, the CCI has issued market studies on e-commerce, telecom and cab aggregators, which have been useful to better understand and apply competition law to new-age sectors.

Key information

Relevant legislation

The Competition Act, 2002 (No. 12 of 2003), as amended by the Competition (Amendment) Act, 2023.

Competition authority

Competition Commission of India

9th Floor, Office Block – 1,
Kidwai Nagar (East),
Opposite Ring Road,
New Delhi 110023, India

Relevant officials

Members of the Commission

• Mrs. Ravneet Kaur (Chairperson)
• Ms Sangeeta Verma
• Mr Bhagwant Singh Bishnoi

Commission’s Acting Secretary

• Ms Jyoti Jindgar Bhanot