Competition Commission of India

• Competition Commission of India (CCI) is a statutory body of the Government

of India which was established in the year 2003 under the Competition Act, 2002
but it came into enforced fully in March 2009. Its objective is to provide a
competitive environment in the Indian economy. The commission attempt to promote
and maintain competition in the markets, preventing practices that are hurting
competition, the commission ensures freedom of trade and also protects the interests
of consumers.
Powers and Functions of CCI:
• CCI eliminates practices that are hurting competition.
• It sustains and promotes competition in the Indian economy.
• Protect the interest and ensure the welfare of customers and ensure freedom of trade.
• For small establishments, CCI is an antitrust ombudsman.
• Through the execution of the competition policies, it ensures the efficient and
effective utilization of resources.
• CCI accelerates the economic growth of the country by maintaining fair and healthy
competition in the economy.
• This body also acts as a business facilitator as it makes sure that the new firm enters
into the market does not create dominance and that there is a mutual or a peaceful
existence of the small and large enterprise.
• CCI scrutinizes all the foreign companies which entered through mergers and
acquisitions into the Indian markets only for ensuring that it abides by the laws of the
Indian Competition Act, 2002.
• Section 36 of Competition Act, 2002 provides the power of CCI for regulating its
procedure.
• Whereas Section 38 of the act provides the power of imposing a pecuniary penalty.
• Under section 33 of the act, the commission has the power to issue interim orders in
regards to anti-competitive contracts and misuse of dominant position.
• As per section 49 of the act CCI also commences competition advocacy.
Penalties under the Competition Act
• The Competition Act, unlike any of the formal regulations of the country, is cascaded
with a set of obligations. These new-found obligations, which must be complied with
by businesses of all kinds, are intended to ensure fairness in the Indian competitive
market. Non-compliance with such provisions would force the defaulting businesses
to face penal consequences.
• Designated Personnel
• The powers pertaining to the administration and implementation of competition laws
in India are vested with the Competition Commission of India (CCI), which came into
existence with the introduction of the Act.
• According to the Act, if the CCI discovers the existence of an anti-competitive
agreement which may potentially cause an appreciable adverse effect on competition
within India or finds out any instance abuse of dominant position, it may discreet to:
• Cease and desist the order of agreement or abuse, thereby directing the parties of such
agreement or abuse to discontinue the perusal of such agreement with the assurance of
not re-entering into it, or to discontinue the abuse of dominant position, as the case
may be.
• Impose a monetary penalty which doesn’t exceed 10% of the average turnover for the
previous three financial years. On the same page, if the agreement has been entered
into by a cartel, the CCI may choose to impose a penalty that is three times the profit
of the concerned business or 10% of its turnover for each year of the continuance of
the agreement; whichever is higher. The penalty is imposed on the producer, seller,
distributor, trader or service provider of the cartel.
• Issue an order conveying that the agreement must be modified in a manner which is
specified in the order.
• Issue an order demanding the division of an enterprise that is abusing its dominant
position so as to disable it from indulging in acts of dominance.
• Issue any other order as determined by the CCI.
• Norms of Recovery
• The CCI has come up with a set of directives for recovering the monetary penalties
imposed under the Act, the likes of which includes a reference to the Income Tax
Authority for the recovery of penalty as tax due under the income-tax law.
• Consequences of Contravention of CCI Orders
• The CCI is vested with the powers of ensuring compliance with its powers and
directions, including the ones connected with modifications and combinations. The
first non-compliance provision comprises of punishment and a fine of up to Rs.
1,00,000 for each instance of non-compliance. The fine can go up to Rs. 100 million.
• Defaults in the remittance of penalties will be dealt with by the chief metropolitan
magistrate of Delhi based on complaints filed by the CCI. The trial may result in
imprisonment of up three years and/or a fine of up to Rs. 250 million.
• Penalty for Non-Compliance with CCI Directions
• Non-compliance of CCI directions issued under Section 36(2)/(4) or non-adherence to
the directions issued by a Director General (without sufficient cause for the same) is
 punishable with a fine of Rs. 1,00,000 for each day of default, subject to a maximum
of Rs. 10 million. On the other hand, if any person or enterprise fails to provide notice
to the CCI under Section 6(2), the regulatory body would impose a penalty which
may extend to 1% of the combination’s total turnover or assets, whichever is higher.
• Section 36(2) of the Competition Act
• Section 36(2) of the Competition Act, 2002, entitles the CCI to:
• Summon and enforce the attendance of a person and examine him/her on oath.
• Demand the discovery and production of documents.
• Receive evidence on the affidavit.
• Issue commissions for examining the witnesses or documents.
• Requisitioning any public record, document or copy of such record or document from
any office.
• Section 6(2) of the Competition Act
• We felt it essential to have a preview of Section 6(1) before going ahead with the
provisions of the latter. Section 6(1) of the Competition Act specifies that people or
enterprises are prohibited from entering into a combination which may potentially
cause an appreciable adverse effect on competition within the relevant market in
India.
• Sub-section 2 conveys that any person or enterprise entering into a combination as
specified above is required to issue a notice to the commission in the stipulated
manner with particulars of the details of the proposed combination. This must be
done within seven days of the endorsement of the merger or amalgamation or
execution of any agreement or other documents for acquisition purposes.
• Penalty for Issuing False Statements or Non-Furnishing of Material Information
• If any party to a combination makes an incorrect statement or fails to furnish any
material, the parties in question will be imposed with a penalty which is not less than
Rs.5 million (can be as high as Rs. 100 million), as determined by the CCI.
• Scheme of Leniency
• The CCI is empowered to extend leniency towards the producers, sellers, distributors,
traders, service providers or individuals involved in a cartel in the event of alleged
violations of section 3. The leniency may be accorded if the concerned party has made
a full and true disclosure of the alleged violations and if the disclosure is vital. Such a
provision shouldn’t be provided in a scenario where the investigation report has
already been received from the director general and where the member of the cartel
doesn’t co-operate with the CCI until the completion of proceedings.
 • Also, a complete waiver of penalties is accorded for the members of cartels for
making such disclosures, which will be rendered on a first come, first served basis.

GUN JUMPING
Introduction

In the world of mergers and acquisitions (M&A), there are various legal aspects that
companies must adhere to in order to ensure fair competition and protect the interests of
shareholders and consumers at large and one such aspect is 'gun jumping'.

The term 'gun jumping' originated in sports to refer to an athlete beginning the race before the
starting gun is fired whereby the violator gains an advantage over its co-athletes. On the same
analogy, gun jumping in competition law parlance refers to enterprises "jumping the gun",
that is acting too soon or before the proper time in giving effect to a combination.

Under Section 43A of the Competition Act, 2002 ("Act"), gun jumping occurs when an
enterprise either fails to notify the transaction to the Competition Commission of India
("CCI") prior to its consummation (procedural gun jumping), or when an enterprise violates
the standstill obligations by prematurely giving effect to the transaction before CCI's
approval (substantive gun jumping).

In the event of violation, the CCI may impose a penalty on the enterprise which may extend
to one percent of the total turnover or assets of the combination, whichever is higher. Apart
from monetary penalty, initiation of proceedings for gun jumping also raises significant
reputational implications for the parties to the combination.

Two Types of Gun-Jumping:

Procedural: Failing to notify the CCI about a combination that requires notification.

Substantive: Giving effect to a combination before CCI's approval, even if it's been notified.

The merger control regime under the Act is ex-ante and mandatorily requires all
combinations breaching the jurisdictional thresholds to be notified to the CCI, unless
otherwise exempted. It is also suspensory in nature and requires the parties to "stand still" and
not give effect to the combination prior to the CCI approval or until 210 days have elapsed
from the filing of the notice. 2 The Competition (Amendment) Act, 2023 envisages a shorter
timeline of 150 days as a relief to enterprises waiting to give effect to the combination.
However, this provision is yet to be enforced.

Recently, gun jumping has caught the limelight since the CCI passed a slew of orders
penalising enterprises for gun jumping and the CCI also released the draft of the new
Combination Regulations for public consultation which can have far-reaching implications,
inter alia, for gun jumping inquiries.

Engaging in gun jumping is considered a violation of merger control regulations, and it can
lead to legal consequences for the parties involved. Such consequences may include fines, the
unwinding of the transaction (reverting to the pre-merger status), and reputational damage.

To avoid gun jumping, companies typically work closely with legal counsel, follow best
practices in merger planning, and maintain transparent communication with regulatory
authorities throughout the process. Understanding and adhering to the specific requirements
of antitrust laws in different jurisdictions is crucial to navigating mergers and acquisitions
successfully without running afoul of regulatory authorities

CCI is empowered under Section 43A to impose a penalty of up to 1% of the turnover of the
enterprise that either fails to seek the CCI's approval for a transaction that breaches applicable
thresholds or gives effect to the transaction prior to the CCI's approval.

Penalties on individuals: Under Section 48 of the Act, relevant individuals within a non-
compliant enterprise may also be penalised up to 10% of their average 'turnover' for the
preceding three years, for either giving effect to or failing to prevent a contravention of
Sections 3(3), 3(4), or 4. Further, in case of contravention of Section 3(3) of the Act, the CCI
is empowered to impose a penalty of up to 10% of the individual's aggregate 'turnover' during
the period of the computation.

A large number of gun-jumping cases before CCI were Suo-Motu inquiries, primarily based
on information gathered through media and market intelligence. Several procedural gun-
jumpings were unearthed on the basis of voluntary belated filings by the parties or
information provided in combination notices regarding other transactions pursued by the
parties. Some of the important cases are mentioned below:

Amazon-Future Group Deal case: In 2021, CCI, while exercising its extraordinary
jurisdiction, suspended the 2019 approval order granted in favour of Amazon NV Investment
Holdings LLC (Amazon) for the acquisition of Future Coupons Private Limited (FCPL) and
fined Rs. 202 crores on Amazon on the ground that Amazon was found jumping the gun by
giving false information to CCI about the reason for the combination, which in reality was to
by-pass FDI restrictions, which violates Section 6(2) read with Section 43A of the
Competition Act of 2002 (the Ast) and Regulation 9(4) of the Combination Regulation.
Further, the order was upheld by NCLAT.

Chhatwal Group Trust/Shrem Roadways Private Limited: In 2018, CCI imposed a

penalty of Rs.10 lakh on Chhatwal Group Trust for violation of Section 6 read with Section
43A of the Act, on the ground that pre-payment of consideration by the acquirers in the form
of 'token money' in advance of signing definitive transaction documents amounts to
consummating a part of the combination before filing notice of the combination with the
Commission and resulted in gun-jumping.

Significance of gun jumping in merger control

There are a number of reasons why merger control authorities have strict rules against gun
Jumping, some of which can be:

First, by implementing the merger before it has been approved, the merging parties can lock
in customers, suppliers, and other strategic assets. This can make it more difficult for
authorities to assess the impact of mergers and for other companies to compete, and can
ultimately lead to higher prices and less choice for consumers.

Second, glye the merging entities an unfair advantage over their competitors by gaining
access to confidential information about their competitors or locking in customers of merging
entities.

Finally, gun jumping can undermine public confidence in the merger control process. When
companies are seen to be flouting the rules, it can erode public trust in the system and make it
more difficult for competition authorities to do their job.