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Quick guide to CCI Dawn Raids


By  Charanya Lakshmikumaran and Puneeth Ganapathy

Officers from the investigative wing of the Competition Commission of India (‘CCI’), have been increasingly undertaking dawn raid investigations to pursue allegations of anti-competitive practices. Recently, CCI conducted its fifth raid (3rd in the last 9 months) on the Indian arm of the French company possibly to investigate allegations of bid rigging relating to a Railways contract. This sudden increase in dawn raids by the CCI is also the result of a recent judgment of the Supreme Court in CCI v. JCB [Order dtd. 15.01.2019 in Cr. App. Nos. 76-77/2019] where the Supreme Court has held that documents seized by DG during a search can be used as evidence during the inquiry.

In these recent dawn raids companies were often caught unaware of not only the procedural necessities and requirements that the DG investigation is supposed to follow but also the rights that a company has when such an unforeseen event does take place.

General procedural preparedness will go a long way in ensuring that the company is in a position to deal with such a raid in a knowledgeable manner. At the same time, it is important to take early initiatives to become aware of, and to address possible anti-competitive issues that could possibly be unknowingly existing in some business models.  

This quick guide aims to answer some of the most common queries.

When can a dawn raid take place?
  • The CCI may direct the Director General (‘DG’) to investigate anti-competitive practices prohibited by the Competition Act 2002 (‘the Act’).  Such direction can be made by the CCI without seeking any comments or representation from the persons being investigated.
  • An unexpected raid may be conducted by the DG when there are reasonable grounds to believe that books and papers are likely to be destroyed, mutilated, altered, falsified or secreted.
  • The provisions require authorization from the Chief Metropolitan Magistrate, New Delhi before such a raid.
 
How often does the CCI engage in this procedure?
  • The latest dawn-raid marks the 5th in the CCI’s history, and 3rd raid in the last 9 months alone.
 
What are the most common issues being investigated by the CCI?
  • Collusive bidding or pricing of goods and services, exclusivity arrangements, price determination agreements and refusal to supply, have been some of the most common anti-competitive practices targeted by the CCI.
  • Bundling or tying-in arrangements and use of dominance in one market to enter into another market will remain perennial issues for growing businesses.
  • Competition jurisprudence is continually evolving and targeting innovative anti-competitive constructs such as market dominating structures and use of bad faith litigation to suppress a competitor.
  • Persons, companies, firms routinely engaged in bidding for tenders by government entities and public sector undertakings must tread with exceptional caution.
 
What are the powers of the DG?
  • The DG has the power to require the production of records and documents from officials and employees of the company being investigated and may seize them as prescribed under provisions of the erstwhile Companies Act 1956, as reformulated in the Companies Act, 2013.
  • The DG is also empowered with the powers of a Civil Court, and may record statements on oath and require the presence of any person. The DG can consequently also receive evidence, issue commissions for examination of evidence and requisition public documents from any office.
 
What you need to do in the event of a raid or investigation
  • Co-operate and seek time to call an in-house or external counsel.
  • Seek identity of the officials and the search warrant from a magistrate.
  • Ensure and check (a) that the warrant is correctly addressed to your company, (b) whether the warrant specifies any premises or officers of the company and (c) that the officers of the raid team visiting your company are properly named and authorized in the warrant.
  • It is advisable to insist on the presence of an independent witness or external counsel when being questioned or when a statement is taken.
  • Do not share any communications, opinions, documents relating to legal advice taken from counsel, as these are protected by privilege. You are entitled to withhold the same from the DG/CCI after politely explaining legal privilege or asking your in-house or external counsel to do so. If pressure to do so – clearly record that information covered by privilege has been given “under protest and assertion of legal privilege.”
  • Answer details as to the location and storage of information correctly.
  • Keep copies of all answers given in questionnaires.
  • Record details of all persons, documents, hard drives, email inboxes, electronic devices, storage, etc. to which access was given to the officials.
  • Obtain a detailed record of any seizures made.
  • Do not provide any false information or obstruct the investigation in any manner.
  • Follow a pre-prepared dawn raid checklist creating a central point of contact to harmoniously and calmly handle the investigation.
It is advisable that bespoke recommendations are obtained suitable to the specific needs of a company/business/group structure, after a detailed analysis of the likely anti-competitive issues, size of staff and logistics, data repositories and management policies and cross-regulatory and cross-jurisdictional issues.

 
Charanya Lakshmikumaran
Partner, Competition, Regulatory & Litigation
E – Charanya.l@lakshmisri.com
      
Puneeth Ganapathy
Principal Associate, Competition, Regulatory & Litigation
E – Puneeth.ganapathy@lakshmisri.com

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