Leniency Program under Competition Act

Leniency Programme of Competition Commission of India

The Competition Commission of India was set up by the Government under an Act of Parliament recognized as the Competition Act towards promoting competition in the market across several industries and also to prevent practices which will have adverse effects on competition. The key aim consists of the protection of interest of customers, towards preventing practices having an adverse effect on competition, towards promoting and sustaining competition in the market and towards ensuring freedom of trade carried on by other participants in markets, in India, and for matters associated therewith or incidental thereto.

Cartel formation is a serious offense under the Competition Act. The Competition Commission of India was authorized to enquire into any cartel as well as has the authority to levy a penalty, on an individual or an entity included in that cartel up to three times of its profit for every year of the continuance of such agreement or 10% of its turnover for every year of continuance of such agreement, whichever is higher. Likewise, the Competition Commission has the authority to pass the following orders-

1.    A direct the individuals to a cartel agreement for discontinuing and not to re-entering such agreement.

2.    A direct the entities concerned to modify the agreement.

3.    Direct the entities concerned to adhere to such other orders as the Commission might pass and abide by the directions, which includes payment of costs.

4.    Pass such other order or issue such directions as it might deem fit.

Leniency Programme of the Competition Commission is stated under Article 46 of the Act. It is a kind of incentive towards the cartel members who are ready to share information with the Commission. Likewise legally it could be held that it is a kind of whistle-blower protection to a cartel member who is ready to share the information linking to the cartels. The Commission has made various programs to encourage the members, eager to provide information that is associated with the cartels or are in the procedure of violating the competition laws, to come forward and reveal such anti-competitive agreements and help the competition authorities in lieu of immunity or lenient treatment. The leniency program is a kind of protection provided to the individuals who come forward and reveal all the information regarding the cartel who will otherwise face severe actions by the Commission if the cartel is detected through the Commission on its own.

Conditions for Availing the Leniency Programme

The circumstances which must be fulfilled by an individual for availing the advantages of lesser penalty regulations under Section 46 are:

1.    The individual must cease to have further participation in the cartel from the time of its disclosure unless otherwise directed through the Commission.

2.    The individual must provide each and every vital disclosure regarding a violation of section 3(3).

3.    The individual must provide the relevant information, documents, and evidence as might be required through the competition commission for further investigation.

4.    The individual must also cooperate genuinely, continuously as well as expeditiously throughout the investigation and also in the trials before the Competition Commission.

5.    The individual must not conceal, destroy, manipulate or remove any relevant documents in any matter which can contribute towards the establishment of a cartel or which will hinder any investigation procedure carried out through the Competition Commission.

The Competition Commission might subject the individual to further restrictions and conditions in the matters of lessening of the monetary penalty after due regard towards:

1.    The stage at which the individual comes with the application of disclosure.

2.    The evidence is already in possession of the government.

3.    The quality as well as the vitality of the information provided by the individual.

4.    The facts and conditions of the case.

Leniency regulation

Leniency regulation is stated in Section 46 of the Competition Law, 2002. Leniency program was presented so that the cartel formation could be reduced and the members' forming cartel could be granted leniency in the penalty if they select to share and reveal the information with the commission. Cartel formation is wrongdoing as per law and if an individual or firm is included in cartel then a penalty of up to 3 times of its profit every year of the continuance of such agreement or 10% of its turnover for every year of the continuance of such agreement, whichever is higher is charged.

Section 46 of the Act offers for such leniency provision which states that if the commission is satisfied that any producer, seller, distributor, trader or service providers, etc on infringing the Section 3 of the Competition Act, 2002 has made true revelation regarding the alleged violation then lesser penalty would be provided towards the producer, seller, distributor, trader or service provides, etc than the actual penalty of such infringement.

Recent Amendments

The Leniency program is available towards those individuals or entities that disclose the Commission regarding their role in the cartel and are ready to cooperate in the inquiries carried out subsequently through the Commission in lieu of lesser penalty or in some cases immunity from the penalty. For the same aim, the Commission has made the Competition Commission of India (Lesser Penalty) Regulations, 2009 as the leniency program has begun towards being a successful weapon to fight the cartels. The Regulations for the lesser penalty were amended in the year 2017.  The amendments involving the Regulations are:

•    No limitations on the number of markers

Earlier, the lesser penalty regulation was extended up to 3 markers only on the basis of data submitted, that is the first leniency individual will receive 100% reduction in penalty, the second leniency individual will receive reduction up to 50% and the third leniency individual will receive 30% reduction in penalty. This is a positive step as prior towards the amendment the people or the entities hesitated to disclose about their cartel involvement as they were uncertain that their leniency individual is in first 3 markers list or if they would get the benefit of lesser penalty or not. Through the introduction of this amendment, any number of markers could apply for leniency application as well as openly come forward without having the concern of not being in first 3 markers list. Also, this amendment could help CCI to bust cartels in the future.

•    Individual to search for benefits from lesser penalty regulation

Earlier, the lesser penalty regulation permitted only an entity to file a leniency application. But now the range of filing the leniency application has been extended to individuals as well. The people who are involved in cartels could come forward and file for grant of leniency in their penalty. This would encourage individuals in the firm which are part of a cartel to come forward in their individual capacity and obtain immunity or reduction in penalty for their involvement in the cartels, based on the marker.

•    The volume of business affected

The amendment had made it clear that the individual has to give details of the volume of business affected in India because of cartelization.

•    Access toward non-confidential documents

Earlier the individuals had the right towards getting access to the non- confidential document or evidence during the investigation procedure and even before receiving the report from Director-General. Through the introduction of the amendment, the individuals have the right to get copies of non- confidential document or evidence only after the Director-General has inspected and the CCI has forwarded the report towards the Director-General.

•    Confidentiality

Before the notification, a responsibility was imposed on CCI to maintain the confidentiality on the name of the individual and the information revealed by the individual until specifically waived through the leniency individual or the disclosure is required by law. The amendment authorizes the Director-General to disclose information to the third party (the party who was impleaded in leniency proceedings), even if the approval of the individual is not there. If the Director-General is of the view that disclosure is essential for the investigation then with the approval of the CCI the information or evidence or documents could be disclosed even if the individual doesn’t give a waiver. In such cases, the reason for disclosure of the information should be given in writing by the Director-General to CCI.

•    Timing of the individual

The Lesser Penalties Regulations need an individual to apply before the CCI for the marker. Before the amendment, the individual had to submit the detailed application within 15 days from the date of requesting the marker but recently CCI has enforced strict deadline of 15 days and the application must be submitted within 15 days from the date on which the marker status is communicated towards the individual by the CCI. Thus the individual must be well advanced in the collection of evidence as well as information to meet the deadline.

A leniency program is a good option undertaken by the Commission for fighting the cartelization in the market which affects the equilibrium of the market. However, it is also significant to remember that a leniency program is ineffective until the cartels are penalized. If there are not severe laws concerning the same then such programs would fail. The Commission also has the responsibility to check and investigate the market regarding the new methods and new ideas which must be incorporated in the leniency provisions towards compelling the individuals or firms to come forward to reveal relevant information concerning the arrangements which harms the equilibrium of the market.

Competition Commission of India has taken a good measure by amending the Lesser Penalty Regulation, 2009. Before the amendment, Cartels cases were not coming forward that simply and effectively as the individuals and firms had several fears. A most common concern was there was no whistleblower protection for all the individuals. After the amendment, CCI has approved four orders in less than 2 years. 

The amendment had a very positive impact as more cartel formation disclosure has been made and CCI is taking every possible measure to grant leniency towards the individuals. This would not only remove formation of cartels in the coming times but also give benefits towards the society, in general, that is there would be no exploitation of consumers and economy of the country would also take a good shape.

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Author:

eStartIndia Team