By Rupin Chopra and Apalka Bareja
For Indian businesses, fostering a healthy competitive environment is crucial for sustained growth. However, anti-competitive practices like cartels- agreements between companies to fix prices, limit production, or divide markets often stifle innovation and harm consumers. Recognizing this threat, India’s fair market watchdog in a new take to minimize cartel formation has notified new “leniency plus” mechanism. The new amendment came into effect on February 20th, 2024. It will act as a new cartel detecting tool that is expected to revolutionize anti-trust enforcement in the country. The regulation aims to attract more applicant by providing them additional 30% relief of the penalty imposed with regard to the first cartel. The applicant would also get a reduction of penalty of up to or equal to 100 % in respect of the newly disclosed cartel. The article has analysed the established eligibility criteria for applicants and key distinction between the earlier and the new regulation.
What is Leniency Plus regime?
Up till now, an applicant was eligible for leniency if he shares information of an existing cartel. Under the 2024 Regulations, the leniency plus facility has been introduced to provide an already existing leniency applicant a chance for incentive to share information about a second cartel that is not known to the Competition Commission of India. As per the latest notification, leniency applicant will additionally get a reduction in monetary penalty of up to 30% of the penalty imposed.[1]
Eligibility of Individuals:
There are certain prerequisites for the applicants to qualify themselves for the Penalty Plus mechanism:
- For instance, the applicant must be part of an existing investigation going on for a cartel where he has already disclosed to the CCI.
- Secondly, the applicant must discontinue to participate in the cartel from the time he/she makes disclosures.
- Further, the disclosures should be as such that it must be sufficient for the CCI to form a prima facie opinion and the applicant should also suffix it with all the relevant documents and evidence that may be required by the commission.
- Lastly, the applicant should co-operate genuinely and honestly with transparency throughout the investigation.
Key Distinctions amongst the Regulations[2]:
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2009 EXISTING REGULATIONS |
NEWLY ACTED 2024 REGULATIONS |
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Regulation 2: Definitions (c) “applicant” meant any member of the cartel or any individual who has been a part of a cartel on behalf of the enterprise and approach the commission for lesser penalty. |
Regulation 2: Definitions
Following new clauses have been inserted. (b) “admission”- means submission or statement made by a party that it has indulged in the alleged violation of Section 3 of the Act. (c) “applicant” includes an enterprise or association of enterprises or a person or association of persons who has been involved in the cartel though not engaged in identical or similar trade to be a leniency or leniency plus applicant. (h) “newly disclosed cartel”-means the second cartel discovered by the Commission pursuant to the disclosure made by an existing applicant for leniency in respect of a cartel under investigation. |
| Regulation 3: Conditions for lesser penalty
The regulation did not had any provision regarding rejection of application in case of any false evidence given during the cartel investigation. Further upon rejection the applicant was not given with the opportunity of being heard. Also, in case of rejection of the application due to failure to furnish information as asked by the DG or CCI during the process of investigation there was no provision for inquiry against the applicant, thereby creating fear of this provision being misused solely for the purpose of seeking monetary reduction in the penalty. |
Regulation 3: Conditions for lesser penalty or lesser penalty plus
(i) A new clause (f) in sub regulation (1) has been added which restricts an applicant from giving any false evidence or omitting any material information. (ii) Two new sub regulations (3) & (5) have been added which empowers the Commission to reject an application in case of failure of the applicant to provided full and true disclosure of the information and evidence or both as required by the DG or the Commission from time to time. (iii) However, a sub-regulation (6) added makes it mandatory for the Commission to provide an opportunity of hearing to the applicant before rejection under sub regulation (3) & (5). (iv) Further, in case of rejection of the application under sub regulations (3) or (5), a new sub regulation (8) has been added which empowers the Commission to conduct an independent inquiry against the application for reason leading to rejection of his application. (v) A new clause (d) has been added to sub regulation (9) which makes it obligatory for the Commission to grant reduction in penalty only upon fulfilment of the conditions specified in clauses (a) to (d). |
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Regulation 4: Grant of lesser penalty It provided clarification about “added value” |
Regulation 4: Grant of lesser penalty
It provides clarification about “significant added value”. |
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No provision for providing reduction for the lesser penalty plus applicants.
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Regulation 5: Grant of Lesser Penalty Plus |
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Regulation 5: Procedure for grant of lesser penalty
The designated authority was under a mandate to put the matter within 5 working days before the CCI for its consideration post receiving information from the leniency applicant. Further, the regulation does not gave any clarity as to at what stage of the investigation, a leniency application can be filled before the CCI. Also, CCI was required to provide a written acknowledgment to the applicants informing them of the exact priority status /marker of the applicant through the designated authority. |
Regulation 6: Procedure for grant of lesser penalty
Now, the timeline to put the matter before the CCI has now been increased to 10 working days from the existing timeline of 5 working days. Further, the regulation provides a clarity and explicitly mentions that application for leniency can be made at any time during inquiry but prior to the submission of the report by the DG to the CCI. Further, the statutory obligation upon the Commission to inform the exact marker/priority status has been replaced with the words “appropriate priority status has been marked.” |
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Regulation 10: Withdrawal A new regulation to provide the facility of withdrawal of the leniency application any time before the submission of the DG report to the CCI under Section 26(3) of the Act has been provided. |
Leniency Plus in the United States:
The United States, Leniency Plus regimes is known under the name ‘amnesty plus’. U.S. was the first to introduce Leniency provisions across the world. Under the U.S. norms on amnesty plus, the enterprise can also receive a substantial reduction in its fine for its participation in the offence for the first time. The fact that the scale of the additional reduction is not predefined in the United States makes it a little bit difficult for cartelists to strategically use amnesty plus. In the U.S., the level of additional discount varies on below-mentioned factors:
1) the strength of the provided evidence,
2) the impact of the uncovered violation and
3) the probability of the other conspiracy being uncovered without the voluntary disclosure.
Since 1993, Corporate Leniency Programme amendment in the United States the number of cartel detection has increased ever since in the nation. In India it is evident that the leniency programs have not been as effective as aimed and has failed to achieve the expected outcomes.[3] CCI issued its first decision under the leniency regime in 2017 after a decade of operation of its regulations in India.[4] Thus, the new regulations aim to boost the efficiency of the regime and increase the detection of cartels.
Conclusion:
The leniency plus regime holds immense promise for the Indian economy. By empowering companies to become partners in dismantling cartels, the CCI can uncover hidden webs of collusion and deter future attempts. This not only protects consumers from artificial price hikes but also fosters a level playing field where businesses compete on merit. As the leniency plus regime unfolds, its expected to serve as a powerful deterrent, paving the way for a more vibrant and competitive Indian market. The CCI’s proactive approach sends a clear message: cartels will not be tolerated , and cooperation will be rewarded. This is a win-win for businesses, consumers, and the overall health of the Indian economy.
Aishwarya Rajput, Assessment Intern at S.S. Rana & Co. has assisted in the research of this Article.
[2] Available at https://www.cci.gov.in/images/whatsnew/en/gazzete1708451685.pdf
[3] Available at https://www.internationalcompetitionnetwork.org/wp-content/uploads/2019/11/SP_Cartel2018.pdf
[4] Available at https://cci.gov.in/images/antitrustorder/en/suo-moto-case-no-0320141652437784.pdf