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India – Competition Regulator Conducts First Raid.

25 September, 2014

 


First Search and Seizure Operations by the Office of the Director General

 
It is reported that the Office of the Director General (‘DG’), which is the investigative arm of the Competition Commission of India (‘CCI’), has for the first time enforced its search and seizure powers under the Competition Act, 2002 (‘Competition Act’) to assist in collecting evidence in its investigation against JCB India Limited (‘JCB’), a manufacturer of construction and earth-moving equipment.

 
The investigation against JCB by the CCI began at the behest of a complaint by its competitor, M/s Bull Machines Pvt. Ltd. (‘Informant’) on the grounds that that JCB abused its dominant position in the market for back-hoe loaders in India (a particular type of earth-moving equipment). According to the Informant, JCB committed such abuse by alleging the infringement of its intellectual property rights before the Delhi High Court, and obtaining an interim injunction against the Informant, preventing the latter from manufacturing its own back-hoe loader.

 
The CCI’s order dated 11 March 2014, which initiated the investigation by the DG, stated that it was of the prima facie view that JCB abused its dominant position by denying market access, and foreclosing the Informant from entering the relevant market. The CCI went so far as to state that ‘predation through abuse of judicial processes presents an increasingly (sic) threat to competition, particularly due to its relatively low anti-trust visibility.’ As part of this investigation, it is reported that the DG has conducted unannounced raids at JCB’s Delhi and Faridabad offices, uncovering certain documents that could prove useful for its inquiry.

 
Section 41 of the Competition Act empowers the DG to undertake unannounced search and seizure operations, for the purpose of collecting evidence and documents during the course of its investigation. However, the statute requires the DG to obtain a warrant from the Chief Metropolitan Magistrate, New Delhi (“CMM”) authorizing it to conduct such search and seizure. The scope of the DG’s powers is wide enough to cover seizure of physical and electronic documents (including email, mobile message records, etc.), hard disk drives, etc., and includes not only official premises, but could also potentially cover private homes and vehicles of senior management personnel and employees.

 
Unannounced searches or ‘dawn raids’ as they are referred to globally, are a very common and effective means employed by competition law agencies worldwide to collect evidence of anti-competitive conduct. Typically, dawn raids are conducted to uncover cartels, which by their very nature, operate in secret, and hence, evidence of their existence is difficult to come by.

 
The DG however, has never used this power previously, despite the Indian competition regime being in force for five years. This could possibly be on account of the procedural hurdles built into the Indian framework, prompting the DG to follow the more traditional route of evidence collection through depositions and written submissions from the parties and other stakeholders. It is notable that the DG saw fit to first use its search and seizurepowers in an abuse of dominance investigation.

 
It should be noted that the proposed amendments to the Competition Act that are currently pending before (the Indian) Parliament do away with the requirement to obtain a warrant from the CMM, and instead, empower the Chairperson, CCI to authorize dawn raids. This will no doubt bolster the speed and efficacy of this procedure and reduce the risk of destruction or concealment of evidence by enterprises being investigated.

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com

Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com

Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

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