The Competition Commission of India (Lesser Penalty) Regulations, 2009 (Leniency Regulations) have been amended by a notification issued on 22 August 2017 (Notification). The Leniency Regulations supplement Section 46 of the Competition Act, 2002, which sets out the statutory provision for grant of leniency in matters involving cartels and enables parties to ‘blow the whistle’ on cartel arrangements and avail up to 100% reduction in penalties.
The amendments have been introduced after nearly seven years since the introduction of the leniency regime in India, addressing substantive issues faced by the industry. The formal amendments are largely in line with the draft amendments issued in March 2017 wherein the Competition Commission of India (CCI) invited comments from various stakeholders.
This update briefly captures the key amendments and the potential implications on the effectiveness of the leniency programme in India.
- Individuals to benefit from leniency: Prior to the Notification, the Leniency Regulations were restricted in its application to enterprises alone. The Leniency Regulations now stand amended to allow individuals involved in the alleged cartel to seek a reduction in penalty as well. To this end, the leniency application is required to specify the names of such individuals at the time of submission to the CCI. This is a welcome move to encourage enterprises as well as individuals to come forward and provide information on cartel arrangements.
- No limitation on number of markers: Prior to the Notification, the Leniency Regulations allowed reduction in penalty to a maximum of three leniency applicants on a first-come-first-served basis, coupled with the quality of information/evidence submitted and other factors. The Notification has done away with this limitation by allowing additional applicants to avail of the benefits of the leniency programme. Presently, while the first applicant may still be granted up to 100% reduction in penalty and the second applicant up to 50%, the third applicant or any subsequent applicants may be granted up to 30% reduction in penalty. This amendment is significant considering that often enterprises/individuals shied away from conceding to their involvement in cartels due to the risk of submitting self-incriminating evidence without being certain as to whether they will eventually rank within the first three markers and consequently, be able to receive reduction in penalty. With the introduction of this amendment, not only will more enterprises/individuals be encouraged to disclose evidence on their respective collusive conduct but also will enable the CCI to actively bust cartels in the future.
- Confidentiality provisions further clarified: Prior to the Notification, the Leniency Regulations were silent on disclosure of confidential information submitted as part of the leniency application by the Director General (DG) during the investigation process. The amendments clarify that certain confidential information/evidence may be disclosed by the DG to any party (without the applicant’s prior approval) for the purposes of the investigation, should the DG deem such disclosure necessary. However, going forward, in such a situation, the DG may disclose such information/evidence to any third party subject to recording reasons in writing and receiving prior approval of the CCI. Further, the amendments also specify that inspection (of non-confidential information/evidence) in leniency matters will be allowed only after the CCI has forwarded a copy of the report of the DG to the parties concerned. This provision is in contrast with regular investigations initiated by the CCI, where parties are allowed to inspect information/evidence during the investigation process itself without having to wait for the report of the DG.
- Clarification on the contents of the application: The Notification has clarified that the information in the leniency application in relation to the volume of business affected as a result of the cartel should be limited to India. This amendment is consistent with and seeks to formalize the general practice that was typically being followed by leniency applicants in India.
The Bigger Picture
The amendments introduced by the Notification appear to be in sync with the CCI’s pro-active and aggressive enforcement outlook over the years. With a steady increase in the number of leniency applications (including the first decision of the CCI in the Brushless DC Fans case), these amendments seem to be a reflection of the CCI’s experience and learnings from such leniency matters. Given that cartels are hatched in secrecy and are therefore, difficult to detect, the amendments are likely to encourage more enterprises/individuals to ‘blow the whistle’, secure immunities and at the same time, enable the CCI to effectively preserve competitiveness in the market.
* The authors were assisted by Anisha Chand, Principal Associate and Aishwarya Gopalakrishnan, Senior Associate