On March 22nd, 2017, nearly seven years since the introduction of the leniency regime in India, the Competition Commission of India (CCI) has proposed the first set of amendments to the Competition Commission of India (Lesser Penalty) Regulations, 2009 (Leniency Regulations) and invited comments from stakeholders.
In line with most developed competition law regimes, the Competition Act, 2002 (Competition Act) also provides for establishment of a leniency regime in India. Section 46 of the Competition Act, supplemented by the Leniency Regulations, draws up the leniency regime in India. The regime enables enterprises to come forward and provide information on cartel arrangements and, in return, avail themselves of up to 100% reduction in penalties.[i]
In view of the CCI’s powers and increasing awareness of the Competition Act, the past few years have seen a number of enterprises come forward to gain benefit of the leniency provisions. In fact, in January this year, the CCI passed its first ever order in a leniency matter[ii] and a glance at the proposed amendments indicates that the CCI is seeking to clarify issues relating to procedures in such matters.
The first of these changes introduces an inclusive definition of the term ‘party’ as any enterprise or person defined in Section 2(h)[iii] and (l)[iv] of the Competition Act against whom inquiry or proceeding is instituted. The term has been included to clarify the information disclosures that can be made by the CCI and the Director General (DG) (which is the investigative arm of the CCI) to these parties.
The extant Leniency Regulations grant complete confidentiality over the identity of the leniency applicant as well as the information provided by the applicant to get a grant in reduction of penalty. The proposed amendments stipulate that in the interest of principles of natural justice (which has been a pivotal concern in several of the CCI’s decisions and has resulted in the appellate body remanding matters for re-consideration by the CCI), a carve-out be made, granting the DG powers to ‘confront’ other parties with the information and evidence submitted by the leniency applicant. While such disclosure of information can be made by the DG only after recording reasons and towards the end of the investigation, the proposed amendments allow the DG to make such confrontational disclosures irrespective of whether the leniency applicant has agreed to it.
Further, the proposed amendments seek to allow other parties to the proceeding to conduct inspection and obtain copies of the evidence and information submitted by the leniency applicant. The amendments stipulate that once the DG’s report has been forwarded by the CCI to such other parties, provisions of the Competition Commission of India (General) Regulations, 2009 (General Regulations) relating to inspection and obtaining certified copies of documents would become applicable.
With the aim to simultaneously investigate the role played by individuals in charge of enterprises in the cartel, the other significant proposed amendments include requiring the leniency applicant to specify the names of the individuals involved in the alleged cartel in the leniency application. Correspondingly, although the order in the Brushless DC Fans Case had already clarified that a reduction in penalty may also be granted to individuals incharge of the enterprise seeking leniency, the proposed amendments specifically state that the individuals whose names are mentioned in the leniency application can also gain a reduction in the penalty.
In terms of timelines, the designated authority for leniency matters at the CCI (presently, the Secretary to the CCI) is afforded an additional two working days to put up the matter before the CCI.
The CCI has invited comments on its proposed amendments to the Leniency Regulations and the changes that are finally adopted may differ from the ones made public at this stage.
[i] The Competition Commission of India is empowered to grant reduction of penalties in the following manner:
- the CCI may grant a reduction of up to 100%, i.e. complete immunity, to the applicant who is the first to make “vital disclosure” to the CCI;
- the CCI may grant a reduction in penalty of up to 50% to the applicant marked second in priority, provided that such applicant discloses evidence that provides “significant added value to the evidence” already in possession with the CCI; and
- the CCI may also grant a reduction in penalty of up to 30% to an applicant marked as third priority provided that such applicant too discloses evidence with “added value” to the CCI.
[ii] In: Re Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items¸ Suo Moto Case No. 03 of 2014 (Brushless DC Fans Case).
[iii] Section 2(h) of the Act provides the definition of the term ‘enterprise’.
[iv] Section 2(l) of the Act provides the definition of the term ‘person’.
* The authors were assisted by Arunima Chandra, Associate