Amendment in Leniency Regulations

– Shivam Garg*

The Competition Commission of India (“CCI“) recently on August 22, 2017 released a notification to amend Competition Commission of India (Lesser Penalty) Regulations, 2009 (“Lesser Penalty Regulation”) to promote whistle blow in cases of cartels by providing immunities at the same time. The penalties prescribed under Section 27 of the Competition Act, 2002 (“Act”) for involvement in cartelization or any breach in Section 3(3) of the Act for Horizontal Agreements can be in hundreds of crores as seen from past fines imposed on the cement and automobile industries. The fines ranged from Rs 206 crore on cement companies for alleged bid-rigging to Rs 2,500 crore on car makers for allegedly colluding in the spare parts market.[1]

The Regulations were framed to supplement the CCI power to grant leniency in matters of Cartels under Section 46 of the Act to the applicant, an individual or an enterprise who provide full, true and vital information[2]  and follows the conditions prescribed.[3] The parties under the Regulation can Blow the Whistle and get benefit of reduction in its penalties.

The first successful grant of leniency[4] was in matter, In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items[5], where leniency application was filed by Mr Sandeep Goyal and M/s Pyramid Electronics, Parwanoo. The case highlighted[6] that CCI while making decision to determine[7] the reduction in penalties takes into account the factors like –

  • Stage at which disclosure was made;
  • The quality of evidence already in possession; and
  • The quality of evidence provided by the Applicant.

The amendments taken by CCI supplements its ruling and shows the proactive approach[8] of CCI.  The significant changes are-

    1. Business affected in India– The applicant has to notify the details of volume of business affected in India due to the alleged cartelization. This clarification has cleared the clouds of ambiguity and is consistent with the provision of Act.
    2. Benefits in case more than one applicant apply Initially, the Lesser Penalty Regulation, permitted reduction in penalty to first three applicant by reducing penalty by 100%, 50% and 30% respectively along with abovementioned conditions. This inhibited the individual or enterprise from application as they were uncertain if they were among first three applicant to apply and secondly, whether CCI had requisite information to punish them and by application they might just self-incriminate. [9] The amended notification permits more than three people to avail this benefit. This can be seen as a positive step for promotion of Leniency programs as more people may will to avail the benefits of lesser penalty which will further be a great source of evidence and help CCI in conducting proper investigations in future.
    3. Discretionary power to the CCI for maintaining the confidentiality- It is a common apprehension that sharing of confidential information provided by leniency applicants would deter applicants from reporting antitrust violations[10]. The general confidentiality provision is Regulation 35 of the Competition Commission of India (General) Regulations, 2009, which provides that a party can file confidential version[11] and a public version of the document. But, the Lesser Penalty Regulations[12], provide that leniency applicant’s identity and documents shall be kept confidential without exception. Thus, there was a blanket provision. However, the amendment in Notification clarify that clarify that limited confidential information/evidence can be disclosed by the DG on its discretion, to any party (without the applicant’s prior approval) provided it record reasons in writing and had prior approval of the CCI.
    4. Inspection of Non Confidential Documents- Prior to the amendment the parties involved in investigation were allowed to inspect non confidential information/evidence during the investigation process even before receiving the report of the DG. However, the amendment provides that in case of leniency matters, the parties can inspect non confidential information/evidence only after the CCI has forwarded a copy of the report of the DG.
    5. Inclusion of Individual as an applicant- Initially, the Lesser Penalty Regulation, permitted reduction in penalty only to enterprise applicant as per the notification, although CCI provided benefit of notification to individual as can be seen from decision In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items[13]. But there was ambiguity among legal fraternity, regarding that whether individual application was to be attached to the enterprise application and was to be treated as one. The amended notification formally allow individuals involved in the alleged cartel to seek a reduction in penalty.

Conclusion

The amendment will promote the parties under the Regulation to come forward and Blow the Whistle and get benefit of reduction in its penalties. Further, now more than three applicant can take benefit, thus, party will no need to worry about the uncertainty if they were among first three applicant to apply. This will overall help the CCI in its investigation as more evidence will tend to be received from applicants.

 Disclaimer: This article has been written by a member. The article is just an opinion of the Author and no legal consequences follow from the same.

* Shivam Garg, permanent member and alumni of National Law University, Jodhpur. The author can be reached at shivamgarg24@gmail.com

[1] KVL Akshay, CCI reviews leniency rules for companies that blow the whistle on cartels, available at http://economictimes.indiatimes.com/articleshow/57722691.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[2] Regulation 2 (i) of Lesser Penalty Regulation states-

 “vital disclosure” means full and true disclosure of information or evidence by the applicant to the Commission, which is sufficient to enable the Commission to form a prima-facie opinion about the existence of a cartel or which helps to establish the contravention of the provisions of section 3 (which deals with prohibition of Anticompetitive agreements) of the Act.

[3] Conditions for availing lesser penalty

(a) cease to have further participation in the cartel from the time of its disclosure unless otherwise directed by the Commission;

(b) provide vital disclosure in respect of violation under sub-section (3) of section 3 of the Act;

(c) provide all relevant information, documents and evidence as may be required by the Commission ;

(d) co-operate genuinely, fully, continuously and expeditiously throughout the investigation and other proceedings before the Commission; and

(e) not conceal, destroy, manipulate or remove the relevant documents in any manner, that may contribute to the establishment of a cartel.

[4] Avaantika Kakkar, Sagardeep Rathi and Arunima Chatterjee , India: Competition Commission Of India Grants Leniency For The First Time, available at http://www.mondaq.com/india/x/562660/Antitrust+Competition/Competition+Commission+Of+India+Grants+Leniency+For+The+First+Time .

[5] 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 decided on 18.01.2017, available at http://cci.gov.in/sites/default/files/Order_Suo_Moto_03_of_2014%20%28Final%29_1.pdf

[6] MM Sharma, CCI by its order dated January 18, 2017 decided its first leniency application in favour of a cartel member by reducing the fine imposed by 75% on the cartel member, available at http://competitionlawyer.in/cartel-leniency-cci-competition-law

[7] Regulation 3(4) of the Lesser Penalty Regulation.

[8] Cartel cases: Individuals can seek leniency from CCI, available at: http://economictimes.indiatimes.com/articleshow/60210944.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[9] Anshuman Sakle & Bharat Budholia, Leniency Regulations Amended, available at http://competition.cyrilamarchandblogs.com/2017/08/leniency-regulations-amended/

[10] Kanika Chaudhary Nayar and Arjun Nihal Singh, Treatment of Confidentiality Under the Leniency Regime in India, available at http://www.luthra.com/admin/article_images/shorthend-ABA-cartel-comite-nwsltr-mar-2016.pdf

[11] The entity requesting for confidential treatment of information must provide cogent reasons why the material should be kept confidential; and that request is entertained if the confidential information contains trade secrets or information that could cause appreciable diminution of the information’s value or otherwise cause serious harm.

[12] Regulation 6 of Lesser Penalty Regulations –

“notwithstanding anything contained in the Competition Commission of India (General) Regulations, 2009…”

[13] 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 decided on 18.01.2017, available at http://cci.gov.in/sites/default/files/Order_Suo_Moto_03_of_2014%20%28Final%29_1.pdf

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