In these raids, companies were often found to be unaware of not only the procedural necessities and requirements that the DG investigation is supposed to follow, but also the rights a company has when such an unforeseen event takes place.
By L Charanya & Puneeth Ganapathy
Dawn raids are CCI’s tool to curb anticompetitive practices
Over the last few months, officers from the investigative wing of the Competition Commission of India (CCI) have been undertaking dawn raids to pursue allegations of anticompetitive practices. The CCI recently conducted its fifth raid (third in the last nine months) on the Indian arm of the French company Mersen, possibly to investigate allegations of bid rigging relating to a railway contract. This sudden increase in dawn raids by the CCI is also the result of a recent Supreme Court judgment (CCI vs JCB), where it was held that the documents seized by the director general (DG) during a search can be used as evidence during the inquiry.
In these raids, companies were often found to be unaware of not only the procedural necessities and requirements that the DG investigation is supposed to follow, but also the rights a company has when such an unforeseen event takes place. Here is a quick guide to prepare for a dawn raid.
When can a dawn raid take place?
*The CCI may direct the DG to investigate anticompetitive practices prohibited by the Competition Act, 2002. Such direction can be made by the CCI without seeking any comments or representation from those being investigated.
*An unexpected raid may be conducted by the DG when there is reasonable ground to believe that books/papers are likely to be destroyed, mutilated, altered, falsified or secreted.
*The provisions require authorisation from the chief metropolitan magistrate, New Delhi, before such a raid.
*What are the most common issues investigated?
Collusive bidding/pricing of goods and services, exclusivity arrangements, price determination agreements and refusal to supply have been the common practices targeted.
*Bundling or tying-in arrangements and use of dominance in one market to enter into another will remain perennial issues for growing businesses.
* Persons, companies, firms routinely engaged in bidding for tenders by government entities and public sector undertakings must tread with 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 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?
*Cooperate 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 (1) that the warrant is correctly addressed to your company, (2) whether the warrant specifies any premises or officers of the company, and (3) that the officers of the raid team visiting your company are properly named and authorised in the warrant.
*Insist on presence of independent witness/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.
*Answer details on the location and storage of information correctly. Keep copies of all answers. Record details of persons, documents, hard drives, email, electronic devices, storage, etc, to which access was given to the officials.
*Obtain a detailed record of any seizures made. Do not provide false information or obstruct the investigation.
* Follow a preprepared dawn raid checklist creating a central point of contact to calmly handle the investigation.
It is advisable bespoke recommendations are obtained suitable to the needs of a company/business/group structure, after a detailed analysis of likely anticompetitive issues, size of staff and logistics, data repositories and management policies and cross-regulatory and cross-jurisdictional issues.
Charanya is partner and Ganapathy is principal associate, Lakshmikumaran & Sridharan