80% Indian enterprises unaware of Competition Law: EY report

Mumbai, 22 December, 2014

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  • Penalties levied could cost the company a 10% fine on the company’s average turnover
  • EY’s survey reveals 80% of Indian enterprises are unaware about Competition Law

A survey conducted by the EY’s Fraud Investigation & Dispute Services practice indicates that more than 80% of Indian enterprises are unaware about Competition Law and the likely consequences of contravening it. On the other hand, most multi-national corporations (MNCs) in India have a high degree of awareness and have adopted mechanisms to comply with it. Incidentally, 70% of the respondents are convinced that Indian enterprises do not have control mechanisms in place, and their documents (vendor contracts, supply and distribution agreements, etc.) are not verified at the grass-root level for compliance with Competition Law. The findings therefore induce the need for organizational awareness and highlight the importance of complying with the mandates of the Law.

The report titled ‘Calibrating the pulse of Competition Law in India’ has been launched today, and captures insights from revered regulatory and law professionals. It also reveals the industry’s perception towards the role of trade organizations in facilitating anti-competitive conduct. Furthermore, it highlights misgivings in the industry sentiment towards the about issues relating to confidentiality and the discretionary power of the CCI. 

Arpinder Singh, Partner and National Leader, Fraud Investigation & Dispute Services commented, “Competition law related regulatory decisions have been making waves across corporate India, given the huge penalties levied on organizations who were found flouting regulations. Although it would seem as though there has been sufficient drivers to warrant organizational attention to this subject, it’s quite the paradox; as our report on Competition Law uncovers. A serious overhaul of the Corporate India’s mind-set is necessary at this point. Apart from the industry incognizance, there are a series of external factors which stand to impact the smooth transition to a better regulatory framework on this front. These range from data which lacks quality and is largely unstructured and widespread, to trade associations who may facilitate anti-competitive conduct. Given the magnitude of what’s at stake, it’s necessary to promptly mitigate these setbacks and organizations need to take the onus of ensuring they’re aware.”

Key developments and trends in Competition Law in India revealed in the report:

Lack of awareness about Competition Law in India

  • More than 80% of Indian enterprises are unaware about Competition Law
  • 70% of the respondents believed that Indian enterprises do not have in place control mechanisms and their documents (vendor contracts, supply and distribution agreements, etc.) are not verified at the grass-root level for compliance with Competition Law
  • On the other hand – Most multi-national corporations (MNC’s) in India are aware of the country’s Competition Law and have adopted mechanisms to comply with it.
  • According to 75% of the respondents, dawn raids will increase the level of compliance to a great extent.

Unstructured and widespread data hindering economic market analyses

  • More than 75% of the respondents believe that there is no clear data available for conducting clear and viable economic analyses in anti-trust situations.
  • 25% of the respondents indicated that the problem is not due to lack of data (quantitative data), but to the dearth of qualitative data available for reasoned economic analysis.
  • According to 90% of the respondents, use of e-discovery tools will be useful in Competition-related cases and disputes.

Trade associations

  • Trade associations constitute the collective voice of the industry and need to be educated on Competition laws.
  • Market perception - trade associations often play an important role in various possible anti-competitive activities
  • Cartel cases - All of them (100%) felt that there is no doubt that trade associations add value to the industries/sectors in which they operate, but they may also facilitate anti-competitive conduct — inadvertently or deliberately.

Leniency applications

  • According to 70% of the respondents, there is a problem with the manner in which penalty provisions are drafted under the Competition Act, and there is a lack of clear guidelines/ procedures for parties approaching the CCI for leniency.
  • 80% of the respondents stated that the CCI needs to instil more confidence in corporate organizations to elicit more leniency applications.
  • According to 90% of the respondents, industry is concerned about issues relating to confidentiality and the discretionary power of the CCI.
  • Only two leniency applications have been filed before the CCI

Safeguards: be Competition Law Compliant

  • The creation of a compliance system will enable organizations to detect violations early, help them take the requisite preventive steps, avoid fines or mitigate their severity, pre-empt the possibility of their concluding potentially void agreements, and reduce the costs and negative effects of litigation and regulatory intervention.

ends

Notes to Editors

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This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.