CCI: Leniency Program in India

September 24, 2019
leniency program

By Vikram Narula and Rupin Chopra

The Leniency Program is implemented with an objective to support the enforcement of the objective of the  Competition Act, 2002. Such program proves to be extremely effective mechanism to identify and investigate cartel cases.

Leniency program is available for enterprises / individuals who disclose to the Competition Commission of India (“CCI”) their role in a cartel and co-operate with the consequent investigations. For such an act, the enterprises/ individuals are rewarded by either a reduction/ complete waiver of the penalty amount payable by the enterprises / individuals. Leniency programs are universally accepted as a popular method to combat cartels.

In other words, the leniency program may be referred to as whistle-blower protection by offering lenient treatment to a cartel member who comes forward and reports to the CCI about the cartel.

The concerned authorities have framed leniency programs to encourage and incentivize enterprises/ individuals by taking an initiative and coming forward to disclose the anti-competitive practices in lieu of lenient treatment. This program shields and guards those who come forward and submit information who would otherwise face severe action by CCI if the existence of a cartel was detected.

The provisions pertaining to Leniency Program can be prima facie found under Section 46 of the Competition Act, 2002 which states that if any cartel member alleged to have entered into an anti-competition agreement makes full disclosure to the CCI with respect to the alleged violation, then the CCI may impose a lesser penalty on such cartel member. However, the disclosure shall be full, true and vital disclosures.

In furtherance of its objective to effectuate Leniency program, the Competition Commission of India formulated the Competition Commission of India (Lesser Penalty) Regulations, 2009 (“Regulations”) which govern the program.

Benefits of the Program

The benefits of the Leniency Program have been briefly mentioned below

  1. High probability of the detection of cartels. The sanctions imposed on participants of a cartel are higher than the advantages that can be availed by cartelization.
  2. Significant involvement of transparency and certainty in the leniency program. The applicant taking an initiative and coming forward to make crucial disclosures and following pre-determined conditions can avail leniency provisions offered under the program.
  3. The fear of adverse publicity, contravention of applicable laws and the incentives provided under the program will encourage violating enterprises to opt for the program.

Reduction in penalties

An applicant may be granted the benefit of a reduction in penalty of up to 100% if it is the first to make an important disclosure by submitting the evidence pertaining to the cartel, enabling the CCI to form a prima facie opinion regarding the existence of the cartel, and the CCI or Director General did not have sufficient evidence to form such an opinion at the time of the application.

The reduction in penalty upto or equal to 100% will only be considered, if at the time of the application, no other applicant has been granted such benefit by the CCI.

The applicants subsequent to the first applicant may also be granted the benefit of a reduction in penalty on account of making a disclosure by submitting evidence which, in the CCI’s opinion, may add value to the evidence already in CCI’s knowledge. The applicant marked second in the priority status may be granted a penalty reduction of up to 50%. Lastly, the applicant marked as third in the priority status may be granted a penalty reduction of up to 30%.

As per recent amendments to the Regulations, where the applicant is an enterprise, it must provide the names of the individuals involved in the cartel on its behalf for whom it seeks a reduced penalty. Based on previous decisions of the CCI, employees are usually given a similar reduction in penalties as granted to the enterprise.

The CCI has discretion in regard to the reduction in penalty. The discretion is exercised with regard to the:

  1. stage at which the applicant has come forward with the disclosure,
  2. evidence already in the CCI’s knowledge,
  3. quality of information provided, and
  4. full facts and circumstances of the case

As per the Regulations, the identity of the applicant as well as information obtained from the applicant shall be treated as confidential and will not be disclosed except in the following scenarios:-

  1. disclosure is required by law; or
  2. applicant has agreed to such disclosure in writing; or
  3. public disclosure by the applicant.

The arrangement of maintaining confidentiality would encourage submission of crucial and critical information with the CCI.
It will be essential to mention that the CCI may withdraw the leniency if the applicant breaches any of the conditions which are essential for grant of leniency. Accordingly, the applicants are required to adhere to the following:

  1. cease additional involvement in the cartel from the time of disclosure, unless directed by the CCI;
  2. provide crucial and critical disclosure in respect of the violation;
  3. provide relevant material and documentary evidence as required by the CCI;
  4. extend full co-operation throughout the investigation proceedings before the CCI; and
  5. not destroy or hide relevant information that may contribute to the establishment of the cartel.

Cartels have been classified as one of the most distorted activity under the Antitrust Law across the globe. In order to restrain formation of cartels, the Competition Act also imposes a hefty penalty on individuals/enterprises engaging in formal of cartels. Thus, rooting out cartels has emerged as one of the essential objectives of the Competition Policy and initiation of Leniency Program is a further step in this direction.

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