Confidentiality Rings Under the Competition Law: Taking a Cue From the EU
[Rohan and Yagya are students at Institute of Law, Nirma University.]
The dispute resolution procedure under the competition law of India is such that the Competition Commission of India (CCI) has access to the documents of any enterprise under investigation which might contain confidential information. Under the Indian competition regime, preservation of confidential information is a right of enterprises under Section 57 of the Competition Act 2002 (Act). On the other hand, in order to meet its burden of proof, the aggrieved party is required to prove a violation which can be done only if it has sufficient access to documents which are under the control of the opposite party. Additionally, providing access to confidential information falls under the ambit of the principle of natural justice which the CCI is required to adhere to under Section 36 of the Act. Consequently, the CCI is required to maintain a balance between preserving confidential information and providing access to confidential information. Moreover, another rationale for preserving confidential information is that if not preserved, approaching the CCI will become a medium to access an enterprise’s information that otherwise would not have been available.
Further, in order to frame a robust confidentiality regime, the CCI sought public comments on the proposed review of the extant confidentiality regime as provided in Regulation 35 of the CCI (General) Regulations 2009 (Regulation). The review proposes to set up a mechanism of confidentiality ring (CR) which would constitute representatives of the involved firms who are not part of commercial operations, and who would have access to any unredacted information requested by parties in an antitrust case.
This article aims to explore the need for the mechanism of CR in the Indian competition regime and compares it with the legal positions of CR in the EU.
The Need for CR in the Indian Framework
At present, the Regulation provides a detailed mechanism including procedure and parameters for seeking confidentiality claims. In the review, the CCI intends to expand the Regulation by incorporating the concept of CR.
The Regulation provides that any party can submit a request to the CCI or the DG seeking confidentiality of the documents submitted. A request is sanctioned by the concerned authority based on certain parameters such as, inter alia, the extent to which such information is known to the public. The fulfilment of these parameters is assessed on a clause-by-clause basis which slows down the inquiry. Further, if the DG repudiates the request, such a decision is appealable to the CCI who will again ascertain the realization of the parameters by each clause individually; this further lengthens the already gradual process. This was witnessed in the recent case of Meru Travel Solutions Private Limited v. Uber India Systems Private Limited, wherein Uber filed applications seeking confidential treatment of several submissions filed with the DG. After the DG rejected the aforesaid request for confidential treatment, Uber challenged the confidentiality order passed by the DG before the CCI. The CCI allowed the requests made and directed the DG to revise the non-confidential version of the investigation report. Such a mechanism results in a prolonged investigation, hampering the timely disposal of the case.
Moreover, as noted in the amendment, it so happens that the party dissatisfied with the extent of information provided by the DG or the CCI seeks access to confidential information citing the principle of natural justice which the CCI is mandated to observe. Collectively, due to clause-by-clause ascertainment of confidential information and dissatisfaction of the receiving party, the whole process becomes time-consuming and hinders the purpose of correcting markets promptly.
With the introduction of the mechanism of CR, the CCI intends to do away with the above-mentioned hindrances: First, there would be no need to ascertain fulfilment of parameters on a clause-by-clause basis by the DG or the CCI as the representatives having unrestricted access to documents will themselves decide whether the information is to be recognized as confidential or not. In that, the representatives would ascertain whether the clauses for which confidentiality is sought fulfil the parameters enumerated in the amendment. Notably, such representatives will be made to sign an undertaking certifying that they shall not disclose information to any other person. Consequently, there would not be an appealable decision by the DG as decisions determining confidentiality status will come from the CR. Second, as opposed to the current regime, the CCI would no longer be receiving a request for disclosure of confidential information from a dissatisfied party. The rationale behind this is that the representatives of both parties would have participated in the CR and deliberately decided on the confidential status of respective clauses.
On multiple occasions, the Indian courts have accepted an application for the setting up of a CR. For instance, the Delhi High Court, in cases involving Telefonaktiebolaget v. Xiaomi Technology ordered the creation of CR comprising of a specified number of lawyers. Similarly, in order to devise a procedure to ensure the confidentiality of the information, documents, and database, the Delhi High Court in Mvf Aps and Others v. M Sivasamy and Others limited the number of people who can have access to confidential information.
These cases demonstrate the need for the mechanism of CR in India and in order to formally introduce this concept, the CCI has decided to review the extant mechanism and institutionalize a dispensation that can address the claims without compromising the sanctity of any information furnished by the parties or the rights of the parties to defend themselves effectively.
It is important to gauge the efficiency that the upcoming confidential regime will carry in India, for which, reference can be made to the confidential regime of the EU which is more matured.
Comparison with the CRs in EU Competition Law Regime
In this comparative analysis, authors have made a reference to EU’s competition law regime and its relevant documents i.e., the General Guidance and the Guidelines. These documents were introduced to guide the lawmakers of the EU Member States in formulating provisions related to the disclosure of confidential information. Through these documents, the EU members have been granted the liberty to pick and choose what measures to adopt. Further, as opposed to any other law on CR, these documents are suggestive which makes them highly comprehensive.
A procedure of CR can be characterized in three parts: manner of requesting the formation of a CR, the appointment of representatives, and penalization in case of disclosure.
As for the formation, in the EU, either party can propose setting up a confidentiality ring to the DG who may allow for the same if the proposal is found appropriate. The amendment does not clarify when and how a CR would be formed; it only states that the CCI is empowered to set up a CR.
Like the CCI, the European Commission (EC) is also obligated to protect confidential information. However, such obligation can be said to be released in forming a CR because, in the EU, the parties are asked to sign a waiver agreement whereby they waive their rights to claim damages from the EC in case of disclosure of confidential information. Though the amendment is silent in this matter, it is to be seen whether the formation of an agreement can be classified as a grant of permission under Section 57 of the Act. If so, it would absolve the CCI of its obligation to protect information under the said provision as in presence of the permission, the CCI would no longer be bound under Section 57 to protect information.
Further, when it comes to appointments, internal representatives are generally refrained from participating in a CR for they could be a part of the operational stream of the clients and thus, access to information can give an unwarranted competitive advantage to their clients. Notwithstanding, in some cases, external representatives may lack knowledge and need assistance from internal representatives to adequately represent their clients especially where the technical or industrial knowledge is required to make valuable assessments. To address the absence of internal representatives that may impair the party’s right of defence, the Guidelines provides for partial sharing as well as bifurcation of rings.
When internal representatives are not a part of the ring, the national courts are advised to share confidential information with them upon request made in that regard and typically when external representatives need their assistance. Further, according to the Guidelines, a bifurcation of a ring can be made into an outer ring which may include internal representatives and an inner ring which shall exclusively comprise of external representatives who will have access to the most sensitive information.
In India, for appointment, the amendment states that as far as practical, internal representatives can be included in a CR if they are from non-operational streams. This stance is seemingly vague as the usage of the term “practical” does not clarify as to how and when internal representatives will be included in a CR. Moreover, there is no apparent provision to include representatives from operational streams. As noted above, the purpose of including internal representatives is to provide assistance to external representatives; however, when only internal representatives from only non-operational streams are allowed to be appointed, it is unclear if they will have the technical knowledge to provide assistance in representation.
Furthermore, perhaps the most important aspect of CR is the nature and magnitude of penalty on lawyers upon sharing information with others as it is expected to deter lawyers from committing disclosure. In the EU, such disclosure invites disciplinary action by the bar association against the concerned lawyer(s). In India, in case of disclosure, the amendment provides for the imposition of penalty as per the provisions of the Act. It appears that for offences related to information as covered under Chapter VI of the Act, the penalty will be in the nature of the imposition of a fine. Moreover, each provision sets an upper limit on the amount of fine that can be imposed; thus, a lawyer can collude with its client and share information where the benefit of such sharing might outstrip the amount of penalty.
It will be interesting to see how India’s confidentiality regime in competition law shapes up and what changes do CCI make after receiving public comments. A key challenge before the CCI would be to balance the need to protect the confidential information of the parties vis-à-vis the need to recognise the opposite party’s right to defence. The former need entails restricting sharing of information whereas, the latter need implicates disclosure of information to lawyers of opposite parties insofar as it may be required to adequately represent their clients.
On the basis of the above critical comparison, it is expected that the CCI will mitigate the gaps that appear in the amendment. Specifically, the CCI can enhance the efficiency of the regime by refining the procedure for setting up a CR and the possibility of waiver of rights under Section 57. Further, the CCI should draw inspiration from the CR mechanism under EU competition law, particularly in aspects such as the appointment of internal representatives, partial sharing, bifurcation of rings, and extension of penalty in case of disclosure.