A Critique of CCI’s Revised Confidentiality Regime
Second-year law student at Rajiv Gandhi National University of Law, Punjab
In April 2022, the Competition Commission of India (CCI) through a notification introduced its revised confidentiality regime. This notification revised Regulation 35 of the Competition Commission of India (General) Regulations, 2009 (CCI Regulations), completely overhauling the confidentiality mechanism of antitrust cases in India. Regulation 35 deals with the procedure of maintaining confidentiality over sensitive information of parties in matters before the CCI.
This article first discusses the drawbacks in the then-existing system and then analyses the revised Regulation and points out its limitations while suggesting solutions.
II. The Old System and its Drawbacks
In competition law proceedings, it is necessary for the adjudicating or investigative body to preserve parties’ confidential information. At the same time, it is important for the aggrieved party to have access to certain documents of the opposite party in order to fulfil its burden of proof. These two conflicting interests had always made confidentiality a delicate issue for the CCI to handle.
Before introducing this new confidentiality regime, the commission handled confidentiality issues on a case-to-case basis. Previously, Regulation 35 stated that the party requesting confidentiality had to submit one confidential and the other non-confidential reports to the CCI or the Director General (DG). This arrangement caused delays for various reasons. Firstly, as mentioned above, the parties had to prepare two forms of submissions. Secondly, in cases where the DG does not accept a party’s request for confidentiality, it may knock the doors of the CCI appealing the DG’s denial of confidentiality.
Hence, the Regulation caused considerable delays in the disposal of matters before the CCI. To simplify this process and prevent inordinate delays, the CCI made changes and notified its revised confidentiality regime.
III. The New Confidentiality Regime
Under the new system, the CCI has taken a back seat and has transferred responsibility to the parties themselves. Under Sub-Regulation 2 of the amended Regulation 35, instead of the CCI deciding over confidentiality, now, the respective parties can themselves certify what information they consider confidential and then make their submissions accordingly. The parties themselves need to certify if the particular information is made public, it will result in (a) disclosure of trade secrets; or (b) destruction or appreciable diminution of the commercial value of any information; or (c) can be reasonably expected to cause any other serious injury to the party’s business and commercial interests. This has been called the self-certification system.
Along with the self-certification, the party is also required to submit an undertaking stating why it was necessary to certify the information as confidential as per conditions specified in Sub-Regulation 2. These conditions include that the particular information should not be available in the public domain, and the party has taken adequate measures to guard the secrecy of the information. Also, if a party furnishes a false undertaking under Regulation 35, then it shall be held liable under the Competition Act 2002.
Sub-Regulation 5 incorporates Confidentiality Rings (CR) into the Indian competition law framework. A confidentiality ring is a disclosure measure whereby the disclosing party makes specified categories of information. This includes confidential information which is available only to defined categories of individuals. Sub-Regulation 5 states that if the CCI considers it necessary, then it may constitute a CR which will allow authorized representatives from both parties to have access to the unredacted confidential information. In addition, the CCI may, as it sees fit, determine the degree of information to be supplied and the entities and individuals that will be part of the CR.
To protect the interests of the requesting party, the members of the ring will have to file an undertaking stating that they shall not share or disclose the information provided to them as part of the ring. In case of a breach of the undertaking, the aggrieved party shall avail suitable remedies under law. Further, Sub-Regulation 8 specifies that the informant shall not be a part of the CR unless the commission deems it necessary or expedient for an effective inquiry.
IV. Fault Lines in the New Regime and their Remedies
Although the CCI’s introduction of this new system is commendable, the new regime is not faultless either. There are two key issues with this new confidentiality regime.
Firstly, the CCI has taken a back seat in adjudicating confidentiality claims. The commission shall provide confidentiality to the requesting party based only on self-certified confidentiality claims and an assurance that such claims comply with the conditions specified in Sub-Regulation 2. Secondly, the setting up of the CR is not mandatory, but rather at the discretion of the commission. Sub-Regulation 6 reads as, “The Commission may if considered necessary or expedient, set up Confidentiality Ring(s) comprising of such authorised representatives of the parties…..”. (Emphasis supplied).
This might be an obstacle for two reasons. In the first place, confidentiality is being granted merely on self-certified claims by the requesting party and the CCI is not actively participating in the process of granting confidentiality. Secondly, the setting up of CR is not mandatory. These developments have the potential to put the aggrieved party in an unfair position as it may not be able to obtain the information which it claims it requires to carry its burden of proof.
The self-certifying of information could be misused by the party under investigation. It could be done by blocking access to potentially incriminating documents that would have not been kept confidential in the ordinary course of business. Although the proviso to Sub-Regulation 2 provides that if a party gives a false undertaking then it shall be liable to be proceeded against as per the provisions of the Act, there is a caveat involved. It is not mentioned which provision of the Competition Act does the proviso refer to. The only provision which can be inferred here is the S. 45 of the Competition Act which deals with “Penalty for offences in relation to furnishing of information”.
However, the provision is not stringent enough to prevent a party from not giving access to certain required documents under the guise of confidentiality. When compared to the fine imposed by the commission on a party guilty of disclosing confidential documentsThe penalty under S. 45 can be minuscule when compared to the fine that the Commission may impose if a party is found guilty upon disclosure of the documents which the party unwarrantedly kept confidential. That is because the maximum penalty that can be imposed in such a case is only Rs. 1 crore and as per S. 27 of the Competition Act, upon finding guilty of abuse of dominance or of entering into prohibited agreements, the commission can impose penalties of up to 10% of the annual turnover of the parties.
In the past, penalties have been generally imposed to the tune of hundreds of crores by the CCI, with the most recent example being the Rs. 2274 crore penalty imposed on Google. Furthermore, the setting up of the CR is not mandatory in every case. Situations may arise where CR has not been set up and a party wants to challenge the inclusion of certain information as confidential information. The aggrieved party will not have any options in that case. Moreover, a party may specifically seek the establishment of a CR, and if the commission denies its request, it might result in additional litigation delays, thereby altogether contradicting the aim of the new rules.
Hence, to solve this two-fold problem, two things need to be done. Firstly, the CCI should play more of an active role while deciding confidentiality claims, rather than granting confidentiality completely on the basis of self-certification and an undertaking. Secondly, the setting up of CR should be mandatory in every case, rather than keeping it at the discretion of the CCI. This will ensure that the aggrieved party can make use of the confidential information in an attempt to prove the allegations against the party under investigation. This will also keep litigation delays to a minimum.
The second problem lies in Sub-Regulation 8 which states that the informant shall normally not be a part of the CR unless the commission thinks that it is necessary and expedient for the informant to be included in the ring for an effective enquiry. The reasoning behind this is to avoid the filing of frivolous complaints by parties merely for the purpose of getting access to a party’s confidential data. However, this provision is more in the favor of big and powerful companies against whom information is generally provided as compared to the informants which are generally associations working for smaller businesses, advocating their interests against the big corporations.
It is necessary to acknowledge that the informant is an essential part of an antitrust investigation or proceeding. If the informant is permitted to become a member of the CR and is granted access to the sensitive materials, it can undoubtedly play a far more active role in the investigation and proceedings.
As mentioned, the concern with the inclusion of informants in the CR is that it might lead to filing of frivolous complaints just to get access to a party’s confidential data. This is a realistic threat but CCI can address this concern in the preliminary stages to see if the informant’s intentions are genuine or not, before moving to investigation and further stages. Hence, the informant should be made a part of the CR in every case.
The CCI has done a great job by incorporating the CR regime in India, taking cues from a developed competition regime such as the EU. The intention behind the introduction of the revised Regulation is to reduce the delays that were occurring under the old rules. However, the new rules might not lead to the desired result owing to certain faults that have been discussed above. Further, the non-inclusion of the informant in the CRs is also a cause for concern. I believe the informant should necessarily be made a part of the CR.
Even though it is still very early to comment upon the newly notified regulation, however, if the above-mentioned drawbacks can be resolved, it will surely lead to a better and more efficient working of the new system.
Note: This article has been reviewed and edited by Mr. Steven Levitsky at Stage-II.