COMPETITION COMPLIANCE PROGRAMME AND ITS STAGES

Competition Compliance Programme or audit is important in order to ensure the compliance of the enterprises with the provisions of the Competition Act, 2002. The blog discusses the importance of the audit, benefits of conducting an audit, consequences of non-compliance and the stages of conducting an audit.

Competition law is that branch of Economic law which deals with markets, behaviour of market players, market strategies adopted by them as well as regulate the competition. The Competition Act, 2002 (‘the Act’) intends to regulate the market and maintain a healthy competition among the market players ultimately targeting the consumer benefit. The Competition Commission of India (‘CCI’) established under the Act is a regulatory and adjudicatory body and ever since its enforcement, it has become one of the most active regulatory bodies in India.

The Competition Compliance Programme (‘CCP’) is an initiative taken by the CCI inculcating the competition compliance culture in the economy at large. It is nothing but a process where the operations of the enterprise, both internal and external are checked in accordance with the Act. The compliance programme is often referred to as a competition compliance audit. It is a mode through which an enterprise verifies whether its actions are in compliance with the law.

The reason why the enterprises shall undertake the compliance audit is primarily to check if there is any violation of the provisions of the Act. Another reason for the audit is to save the enterprises from paying huge penalties against the violation. It is also done to analyse the position of the enterprise in accordance with the Act. The main objectives of the CCP are preventing the violation of competition laws, promoting the culture of auditing and compliance, encouraging good corporate citizenship.^[1] The CCI has given certain guidelines for CCP through a manual.^[2] However the manual is not exhaustive and comprehensive.

If any enterprise violates the provisions of the Act, then the cost of non-compliance under the provisions is high.^[3] It may result in initiation of inquiry, cease and desist along with imposition of monetary penalty on the enterprise, individual liability, adverse reputational effect, etc. However, it is always beneficial for an enterprise to conduct an audit to check the compliance with the law in force. Some of the key benefits of conducting a compliance audit are that it helps in mitigating the level of the fine or penalty (leniency programme), the agreement which has a potential of being void under the Act can be avoided, compensation against the actions which are barred under the Act can be avoided, etc.

The manual of the compliance program published by the CCI has five chapters consisting of guidelines and principles which direct towards compliance with section 3 (Anti-competitive agreements), section 4 (Abuse of dominance), section 5 and section 6 (combinations). Lastly, in chapter five, the manual enumerates the benefits and attributes of an effective compliance programme.


After analysing all the chapters of the compliance manual by CCI, it is observed that the stages and the details of the competition law audit are not prescribed comprehensively in the manual. Therefore, to understand the international practice with regard to the procedure and the stages of the audit, an international approach needs to be considered. The general practice of the compliance audit involves following stages:

1. General Preparation and planning: In this stage goals, scope, steps, timing and the person who is going to conduct an audit shall be specified. There shall be a competent authority to take charge of the entire procedure of audit. This includes the external counsels, or any other person with such qualification and knowledge about the competition law.
   
2. Scrutinization of documents: This is perhaps the most important stage where the documents are first identified. An enterprise may have loads of documents. However, it is the duty of the person conducting the audit to first identify the relevant documents and then make a detailed review. The documents can be the major agreements, other agreements with the competitors, sales reports, non-compete covenants, major competition policies, paperwork of any potential transaction, documents of bids if any, documents related to trade associations, documents relating to pricing decisions, etc.^[5]
   
3. Information gathering: The information which is not available through the documents, is gathered by interviewing selected employees. Information related to any transaction which is not on papers but may affect the competition is gathered.
   
4. Outcome of the audit: After going through the above mentioned stages, the person or the authority conducting an audit finds out whether there is any violation of the provisions of the Act. There can either be no violation of the provisions of the Act or the violation of the provisions of the Act or potential of violation of the provisions of the Act.
   

Ergo, it is very important for an enterprise to have a compliance check to ensure that there is no violation of the provisions of the Act. This can be done through a sound CCP or compliance audit. If an enterprise fails to make an audit and if knowingly and unknowingly violates the law, then it may have to suffer huge penalties. However, an awareness of the audit is important among the Indian economy. The CCI needs to be more specific in order to have a sound compliance mechanism.

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Submitted by
Gargi Kulkarni
5th Year, BBA LLB

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