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Part 5: Competition Compliance in India - leniency

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This is part 5 of a ten part series - that was authored by AnantLaw and published by Lexology on 30 April 2020. All laws stated in this series were accurate on 24 February 2020.


Part5: Leniency

Cartel leniency programmes

As per Competition Law, is a leniency programme available to companies or individuals who participate in a cartel in your jurisdiction?

The Competition Act (under section 46as a cartel detection mechanism’) grants the Competition Commission of India (CCI) the power to impose lesser penalties and provides for parties to file applications seeking the reduction of penalties under the leniency regime. The leniency regime is a result of a policy decision to offer whistle-blower protection to encourage the discovery and disclosure of cartels that owing to their secrecy are difficult to unearth and substantiate or prove. The Competition Commission of India (Lesser Penalty) Regulations 2009 (the Leniency Regulations) charters the procedure and lends discretion to the CCI to reduce penalties if full, true and vital disclosures are made, and the applicant continues to cooperate with the CCI until the completion of proceedings before the CCI. To obtain a lesser penalty, all relevant evidence must be disclosed and provided, and nothing should be concealed, manipulated, destroyed or removed by the applicant while filing the leniency application. In addition, the applicant should continue to cooperate with the CCI and participate in the proceedings.

The first case under the Leniency Regulations was filed in 2013 with respect to a cartel in the conveyer belt sector. Although several applications have been received by the CCI under the Leniency Regulations, the first leniency order was passed by the CCI in 2017. In the 2017 case involving the procurement of brushless direct current fans by Indian Railway, not only were penalties imposed on three bidders and their respective office bearers, but in terms of section 46 of the Competition Act, a reduction in penalty (of 75 per cent) was also granted to the leniency applicant. This case was followed by five leniency orders in 2018 and two leniency orders in 2019. Individuals involved in a cartel or any anticompetitive agreement on behalf of an enterprise can also benefit from leniency if they meet the conditions. This was introduced by way of amendment, in 2017, to the Leniency Regulations (the 2017 Leniency Amendment Regulations).

The amount of the reduction in penalties that may be awarded by the CCI also depends on when the disclosure is made (before initiation of investigation, etc). In In Re: Cartelisation in the supply of Electric Power Steering Systems (Suo-moto Case No. 07(01)/2014), the CCI, imposing a penalty on the basis of the marker system, granted a 100 per cent reduction to NSK, which was the first to approach the CCI. Consequently, JTEKT, who approached the CCI for a penalty reduction after NSK, was only granted a 50 per cent reduction. The individuals of these corporate leniency applicants, as identified under section 48 of the Competition Act, were granted the same reduction in penalty by the CCI as was granted to the corporate leniency applicants. Similarly, in In Re: Cartelisation in respect of zinc carbon dry cell batteries market in India (Suo-moto Case No. 02/2016) and in Nagrik Chetna Manch v Fortified Security Solutions & Ors (Case No. 50/2015), the percentage reduction granted by the CCI to individuals was the same as the percentage reduction granted to their corporations. The CCI specifically considered the role played by the individual of Ecoman Enviro Solutions Private Limited (another company under investigation), along with other factors, in facilitating the cartel while granting the reduction in penalty in the Nagrik Chetna case.

As per Competition Law, can the company apply for leniency for itself and its individual officers and employees?

The benefit under the Leniency Regulations is extended to the individuals of an enterprise who have been involved in the cartel on behalf of the enterprise. Regulation 3(1)(A) of the Leniency Regulations provides that the enterprise applying for leniency shall also provide the names of the individuals who have been involved in the cartel on its behalf and for whom the lesser penalty is sought by the enterprise. The benefit of leniency was extended to the individuals by the 2017 Leniency Amendment Regulations. Further, for the individual to take advantage of the benefit of leniency, he or she has to adhere to the same standard of cooperation as is applicable on an enterprise. In this regard, the individual should cease participation in the cartel from the time of its disclosure unless otherwise directed by the CCI, provide vital and all relevant information and documents and cooperate expeditiously and without fail throughout the investigation and other ongoing proceedings before the CCI. There shall be no concealment or manipulation in any manner whatsoever of the relevant documents that may be material to the factual existence of a cartel.

As per Competition Law, can the company reserve a place in line before a formal leniency application is ready?

The Leniency Regulations under Regulation 5 recognises the concept of a ‘marker system’ for leniency applications. The leniency applicant or its authorised representative may make an application containing all the material information. The information for the purpose of the Leniency Regulations, includes a detailed description of the alleged cartel arrangement, the activities and functions carried out for giving effect to the cartel arrangement, the goods or services involved, the geographic market covered, the date of commencement and the duration of the cartel and the estimated volume of business. The applicant can also approach the designated authority orally or through email or fax for furnishing the information and evidence relating to the existence of a cartel. Once the designated authority receives the application, it has to present the matter within five working days before the CCI. The CCI marks priority status on those applications. Where the priority status has been marked on the basis of information provided orally or through fax or email, the CCI directs the applicant to submit a written application. For granting priority status, the CCI relies upon the date and time recorded by the designated authority or recorded on the server or the facsimile transmission machine of the designated authority. Priority status plays a vital role in determining the reduction of penalty, with the first applicant eligible for up to or equal to a 100 per cent reduction, the second applicant up to or equal to a 50 per cent reduction and the third applicant up to or equal to a 30 per cent reduction. However, apart from the priority status, the reduction also depends on whether the subsequent applicants add substantial value (in terms of ‘full, true and vital disclosures’) to the information already provided by the first applicant.


Whistle Blowing

As per Competition Law, if the company blows the whistle on other cartels, can it get any benefit?

In accordance with the Competition Act section 46, read with the Leniency Regulations, a leniency applicant or a whistle-blower can only be a producer, seller, distributor, trader or service provider who is (included or) involved in a cartel. However, if one applicant is a participant (as a producer, seller, distributor, trader or service provider) in more than one cartel, then the same provisions of section 46 of the Act as well as the Leniency Regulations can continue to be enjoyed. There have been cases before the CCI where an enterprise was ‘included’ in a cartel for more than one product and accordingly filed separate leniency applications for each product (for which they were in a cartel). A third party or a person who is not a participant of a cartel can (as an ‘informant’) file information with the CCI under section 19(1)(a) of the Competition Act.

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