“Confidentiality is a virtue of the loyal, as loyalty is the virtue of faithfulness.”
—Edwin Louis Cole
Introduction
The principle of confidentiality and privacy are two basic requirements of commercial arbitration. It is, thus, quite imperative for the antitrust laws to include scope for confidentiality and privacy within its ambit. In India, the statutory provisions for confidentiality are provided in the Competition Act, 2002 (Section 57) and the Competition Commission of India (General) Regulations, 2009 (Regulation 35). The mandate for privacy has been provided under Regulation 47 of the Competition Commission of India (General) Regulations, 2009.
The Legislative Mandate to Confidentiality
A. The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969
Section 60(1) of the MRTP Act, 1969 corresponds with Section 57 of the Competition Act, 2002. However, the MRTP Act listed down several limitations to this provision under sub-sections (2) and (3) of this section. These limitations formed exceptions where the protection from disclosure was not available:
(i) when disclosure is made in connection with legal proceedings under the MRTP Act;
(ii) when disclosure is made for any criminal proceedings under the MRTP Act; and
(iii) when the disclosure is made for the purposes of any report relating to any proceedings, as stated above.[1]
However, these limitations have not been included in the Competition Act.
B. The Competition Act, 2002
The Competition Bill, 2001— notes on Clause 55 stipulates “This clause deals with restriction on disclosure of information by the Commission.”
C. The Competition (Amendment) Act, 2007
Later an amendment was brought to the Section 57 of the Competition Law in 2007, and the Competition (Amendment) Bill, 2007—notes on Clause 44 states “This clause seeks to amend Section 57 of the Competition Act, 2002 relating to restriction on disclosure of information. It is proposed to bring the Appellate Tribunal within the scope of Section 57 of the Competition Act, 2002 consequent to the proposal to insert a new Chapter VIII-A vide Clause 43 of the Bill. The proposed amendment is consequential in nature.”
Purpose of Confidentiality Clause
A. Protection of Trade Secrets
The purpose of the provision for confidentiality in the Act is to preserve commercial secrecy as such information if it comes to the knowledge of business rivals, may injure the interest of the enterprise concerned[2].
In Sterlite Industries (India) Ltd. v. Designated Authority[3], the Court held that in antitrust cases preservation of confidential information by the designated authority is necessary as the trade competitors would otherwise obtain information which are not made available to them for preserving competition in the market.
The section aims at protecting the information obtained by the Commission during its investigation. Section 41(3) of the Competition Act provides for the application of Sections 240 (Section 217 of the Companies Act, 2013) and 240-A (Section 220 of the Companies Act, 2013) of the Companies Act, 1956 in pursuance of the investigation activities undertaken by the Director General (DG) or any other person investigating under his authority[4].
Thus, the DG or any other person acting under his authority has complete access to the documents of any enterprise under investigation which might contain confidential and sensitive information. So, the company runs the risk of this information being leaked or disclosed.
In Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India[5], on the issue of apprehension as to a breach of confidentiality in relation to the confidential information provided to the Commission, the Delhi High Court held that it was the duty of the DG and the employees of the Commission to protect the confidential information of Ericsson for which adequate measures must be taken.
B. Protection of Identity of the Informant
Another aspect of this principle is to protect the identity of the informant or the applicant[6]. This is done so as to not put the informant in a position of disadvantage. Also, this ensures that the fundamental right of privacy guaranteed under Article 21 is also protected.
However, the DG may disclose the information, documents and evidence furnished by the enterprise if he deems it necessary but only after recording the reasons for the same and taking prior approval of the Commission[7].
C. Reputation Loss
Loss of reputation and consequent exposure to civil suits against them is another aspect of maintain confidentiality. It could also expose the financial position of a company or the existence of a defective product, situations that could compromise the image of a company in front of the public and favour its competitors.
Conditions Waiving Confidentiality Claims
Section 57 of the Competition Act, 2002 carves out an exception wherein the confidential information can be disclosed. Hence, the right can be taken away on two grounds:
(i) waving of the right by the enterprise itself; and
(ii) for the purpose of this Act or any other law for the time being in force.
Disclosure of the Identity of the Informant—The proviso to Regulation 6(a) of the Competition Commission of India (Lesser Penalty) Regulations, 2009 provides for the conditions under which the identity of the applicant may be disclosed, if:
(a) the disclosure is mandated by law; or
(b) the applicant has voluntarily consented to disclose in writing; or
(c) the applicant discloses it publically.
Grounds for Taking Away the Privacy of an Enterprise During a Proceeding—Regulation 47 of the Competition Commission of India (General) Regulations, 2009 requires the proceedings before Commission not to be open to public. However, the Commission may direct otherwise and record the reasons for the same. The factors to be taken into account by the Competition Commission of India (CCI) while deciding on this matter are:
(a) If no significant harm is caused to party owing to the disclosure.
(b) Level of encouragement in publishing the information.
(c) Efficiency and smooth functioning of the proceeding.
(d) Considerations for the Commissions such as its resources.
According to Rule 7(3) of the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, if the designated authority comes to the conclusion that the information does not need protection of confidentiality, he can “disregard that information”.
In Sterlite Industries (India) Ltd. v. Designated Authority[8], the Court held that whether an information warrants confidentiality depends on a case-to-case basis which is to be decided by the designated authority. Also, the Appellate Authority, Customs, Excise and Gold (Control) Appellate Tribunal (Cegat), can look into the information even where confidentiality is required.
In Shamsher Kataria v. Honda Siel Cars India Ltd.[9], the CCI agreed with the DG on his statement that “confidential information must be in fact confidential and backed by an obligation/duty of confidence owed between the parties sharing such information.” It held that party must satisfactorily prove that the information provided to the other party qualified to be protected as “trade secret”.
The ICN Guiding Principles for Procedural Fairness in Competition Agency Enforcement stipulates for the inclusion of a system for better identification and shielding the business information that is considered to be confidential and those covered within the ambit of privileged information.
Various determinants such as rights of defence, confidentiality claims, third-party rights, influence on the competition should be considered while disclosing any information mentioned as above.
Liability for Non-Compliance of Confidentiality
In case of negligence leading to a failure to maintain confidentiality and secrecy of the sensitive information provided to the Commission or the DG, a claim for loss or damages could lie against the Commission/DG[10].
According to Regulation 9 of the Competition Commission of India (Procedure for Engagement of Experts and Professionals) Regulations, 2009, any breach of agreement by or on behalf of any expert or professional, executed under sub-regulation (1), requiring the experts and professionals engaged in the proceeding to sign an agreement containing a clause of secrecy, shall be considered a sufficient ground for termination of the engagement made under contract and may further debar such expert or experts and professionals.
Conclusion: Balancing Confidentiality Claims with Due Process
The conflict between confidentiality laws and natural justice was long pending. Thus, the development of leniency regime in India has been welcomed from all quarters of the corporate sphere. Pursuant to Section 46 of the Competition Act, 2002, the Commission is empowered to impose lesser penalty in certain cases where “full and true disclosure” has been made and such disclosure is deemed to be vital. Interestingly, there has been an increase in the number of applications filed for leniency before the CCI in the recent years. The decision regarding what is “full” and “vital” disclosure lies with the Commission. The Commission rewarded its first 100% reduction in penalty in Anticompetitive conduct in the Dry-Cell Batteries Market in India v. Panasonic Corpn.[11]
Further, inspired by the EU, CCI has initiated the process to set up “confidentiality ring” in some cases.[12] This allows a restrictive use of information by the opposite party’s counsel in a manner not prejudicial to the party concerned. Also, efforts have been made by the CCI to facilitate a bilateral exchange of information allowing a speedy investigation process. In light of the above observations, it is thus concluded that the approach of India meets the best practices already implemented in other jurisdictions.
Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in.
Shashank Saurabh is a Student Researcher, 4th year student, BA LL.B. (Hons.) from NUSRL, Ranchi.
[1] S.M. Dugar, Guide to Competition Law 1002 (8th edn., 2019).
[2] ibid
[3] (2006) 10 SCC 386 : (2003) 158 ELT 673.
[4]. S. 240 of the Companies Act, 1956 enjoins a company to produce to an inspector all books and papers relating to the company or any other body corporate and provide any other assistance required by the inspector for his investigation. Sub-s. (1-B) of S. 240 also empowers the inspector to retain the books and papers for a period of six months.
S. 240-A empowers the inspector to apply for an order of seizure of books and papers relating to a company or managing director or manager of such company which he has reasonable grounds to believe would be destroyed, mutilated, altered, falsified or secreted.
He has the power to retain these books and papers till the conclusion of the investigation.
S. 2(8) of the Companies Act, 2013 provides an expansive definition of the expression “book and paper” which includes “acts or accounts, deeds, vouchers, writing and documents”.
[6]. Regn. 35, Competition Commission of India (General) Regulations, 2009. Also, Regn. 6(a) of the Competition Commission of India (Lesser Penalty) Regulations, 2009.
[7].Proviso to Regn. 6(a) of the Competition Commission of India (Lesser Penalty) Regulations, 2009.
[8]. Supra note 3.
[9]. 2014 SCC OnLine CCI 95 : 2014 Comp LR 1.
[10]. Supra note 5.
[12]. AZB & Partners, India: Balancing Confidentiality Claims with Due Process Requirements, Mondaq (26-9-2019 <https://www.mondaq.com/india/ Anti-trustCompetition-Law/848748/ Balancing-Confi dentiality-Claims-With-Due-Process-Requirements>.
