INTRODUCTION
Leniency programmes are primarily designed to lure cartel members into making disclosures about the cartel, by providing amnesty and rewarding them with a waiver of penalty. Like other jurisdictions around the world, the Indian competition law framework also provides for leniency provisions in an attempt to eliminate cartel conduct. Section 46 of the Competition Act, 2002[1] (hereinafter the “Act”) read with the Competition Commission of India (Lesser Penalty) Regulations, 2009[2] (hereinafter “Regulations”) provide for the leniency regime in the country. These provisions permit the Competition Commission of India (CCI) to impose a lesser penalty on any member of a cartel that has allegedly contravened Section 3 of the Act, if such member makes “full and true disclosure” with respect to the activities of the cartel, to the satisfaction of the CCI.
An overview of the regime
The Regulations broadly provide for the eligibility criteria for filing an application, the procedure and substance of grant of lesser penalty, the confidentiality provisions and contents of a leniency application as provided in the Schedule appended to the Regulations. An application can be made by an enterprise that is or was a member of the cartel.[3] In order to obtain a marker status, submission of a marker letter, followed by a detailed leniency application in writing to the CCI within 15 days[4], is required. If the letter is not submitted, the priority status and grant of benefit are forfeited. The designated authority has to bring up the matter before the CCI within five working days.[5] The leniency applicants will be apprised of the priority in which the marker letters are submitted. The information is forwarded to the Director-General (henceforth “DG”), who initiates an investigation, evaluates the evidence and forwards a report with his findings (including co-operation extended), following which the applicant is expected to provide oral and written submissions. Post this, the CCI passes the final order.
The CCI can also withdraw leniency if the applicant fails to meet the conditions specified or does not co-operate adequately. Finally, the confidentiality provisions[6] protect the identity, information, documents and evidence submitted by the applicant. The exceptions to the rule include a disclosure required by law, if the applicant has consented to it or has made a public disclosure. The DG may also make such disclosures if deemed necessary by taking prior approval of the CCI and recording reasons in writing. In general, these provisions seem to provide for enough scope to approach the CCI (oral, fax and email applications and oral submissions are permitted). Further, the CCI can also extend the 15-day period. Despite this, the provisions suffered from certain inadequacies.
The 2017 Amendments
By way of the 2017 amendments to the Regulations[7], the CCI has widely increased the scope of and streamlined the process with regard to leniency. Some of the major changes include adding individuals (even current or former employees) to the list of entities allowed to approach the CCI and imposing an additional requirement on enterprises to submit details about individuals involved in a cartel.[8]This essentially allows enterprises to seek immunity for their employees (both current and former).
The cap on the number of applicants who can benefit from the Regulations has also been lifted; now, more than three applicants can be granted immunity of up to 30% if they provide “significant added value” to the evidence already possessed by the CCI. This was required because there might be cases where the fourth applicant is able to significantly add value to the information already in possession of the CCI but is unable to do so merely because of the three applicants limit; the removal of the cap, therefore, alleviates this problem.
Further, a dilution of the confidentiality provision is made; the DG can now disclose the information if he deems it necessary for the purpose of investigation. This could be detrimental to the applicants in terms of reputation and would deter applications under the leniency regime. Next, the list of items that a leniency application must necessarily contain required information regarding the volume of business affected by the cartel to be stated; this has been limited to the volume of business affected by the cartel in India after the amendment.
Finally, the addition of Regulation 6A, notably a non-obstante clause, allows for parties to inspect files containing information submitted by the applicants by extending the provisions of the Regulation 50 of the General Regulations[9] to the Lesser Penalty Regulations. This provision overrides the confidentiality provision enshrined in Regulation 6, further diluting the same. It is pertinent to note, however, that such inspection is limited to the non-confidential version of the DG’s report, thereby protecting sensitive business information.
Practical application manifested in CCI’s orders
The observations made by the CCI are very case-specific and subjective. The first order passed by the CCI applying the leniency provisions was in the case of Brushless DC Fans.[10] The DG suo-moto started an investigation on the basis of a CBI report suggesting cartelisation of electronic companies in respect of a tender floated by the Indian Railways for supply of electric appliances. The CCI, taking a conservative approach, granted only a 75% reduction in penalty to the applicant company because, despite the revelation of modus operandi and complete co-operation, the prima facie opinion had been formed by CCI of its own accord. In most of the subsequent cases, however, the CCI has granted a 100% waiver to the first applicant.
The next case related to cartelisation in respect of zinc carbon dry cell batteries.[11] On an application by Panasonic Energy India Co., an investigation was commenced which included Eveready, Nippo and subsequently the Association of Indian Dry Cell Manufacturers (AIDMC). Panasonic was granted complete amnesty, whereas Eveready and Nippo were granted 30% and 20% reduction respectively, because of the co-operation extended. In a subsequent application by Panasonic Corporation, Geep and Godrej were also implicated for price-fixing. Again, Panasonic was granted a 100% reduction because it helped CCI form a prima facie opinion and made additional vital disclosures.
In another case related to cartelisation in the flashlight market[12], an investigation was initiated based on information supplied by Eveready. At first, the parties alleged that since they had already been penalized in the dry cell battery case, they could not be penalized again under a separate case. The CCI rejected this argument holding that the end-use and characteristics of the two products differed and so a different case could very well subsist. It was noted by the CCI that the companies had exchanged commercially sensitive information under the aegis of the AIDMC. However, since there was nothing to show that the agreement was implemented, the CCI closed the case without the imposition of any penalty.
The next two cases related to bid-rigging in tenders issued by Pune Municipal Corporation (PMC)for municipal solid waste processing plants[13] and tenders issued for broadcasting rights to Sports Broadcasters.[14] In the first case, the application was filed by the Nagrik Chetna Manch and subsequently, the companies filed for leniency. Based on the dates of applications and value-added, the CCI granted leniency to four out of the six applicant companies; the other two were not granted any leniency because their disclosures did not have any significant added value. In the second case, Globecast was granted a 100% reduction whereas ESCL was granted a 30% reduction for the value added by its disclosures.
The latest case decided by the CCI was of cartelisation with regard to the supply of Electronic Power Steering Systems[15]to certain original equipment manufacturers. The first applicant NSK Ltd (implicating itself, JTEKT Corporation and their Indian subsidiaries) was given a 100% reduction for prima facie opinion whereas JTEKT was given a 50% waiver for significant value-added. A look at these cases would warrant the conclusion that the CCI had been liberal in its approach, providing reductions wherever possible. Further, due regard is, more often than not, exercised with respect to the factors listed down in Regulation 3, Clause 4[16] thereby providing sufficient guidance for applicants.
CRITICAL ANALYSIS
The leniency provisions suffered from inherent limitations, which have somewhat been mitigated by the 2017 amendments, as discussed in the preceding sections. Further, aspects like the satisfaction of the CCI and what constitutes vital information are left open for judgment.[17] Coming to another facet, despite the presence of the leniency provisions, the CCI had not given practical application to the same until as recently as 2017 when it decided the Brushless DC fans case.[18]
Next, the very bedrock of such provisions is predictability. If a comprehensive pattern and uniformity are not maintained in the decisions, the ability to predict whether a reduction will be granted or not is vitiated. CCI’s orders are seen as lacking predictability with respect to the requirement of corroborative value vis-a-vis mere co-operation in order for a later applicant to secure leniency.[19] While in some instances, the CCI has given some reductions for extending co-operation (the dry cell battery case), in other cases, the veracity of the information has been scrutinized, and the waiver is not provided even after minimal value addition (the PMC case). Further, while the same applicant in different cases has been penalized in subsequent cases too (dry cell battery case), the fact of having been penalized already has served as a reason to forgo penalty in the next case (PMC case). Therefore, it is desired that the CCI attempts to bring in some consistency in these aspects.
Another issue lies in the fact that the information as to whether any reduction has been granted can only be obtained at the end of the entire investigation. This provision, in my view, can be modified. There are two sides to this- on the one hand, it is only possible to obtain a correct and comprehensive assessment of the value of contributions made by a particular applicant once the entire process has been completed. On the other hand, the applicant must have at least some certainty of the reduction of penalty. This is because the applicant is, in essence, implicating themself by disclosing sensitive information. Providing such certainty to the applicant at an earlier stage would, in fact, enable an increased number of applicants to come forward making use of the provisions.
In fact, this becomes even more necessary after the 2017 amendment that increases the powers of the DG to make disclosures if required for the investigation.[20] It is important to keep in mind that the parties involved in such investigations are ones whose reputation is generally of extreme importance. In this light, if information about the on-going investigation is made public, it may adversely affect the concerned party. This would cause further reluctance among members to approach the CCI in the absence of any certainty as to a reduction in penalties.
CONCLUSION
All in all, the Indian leniency regime has come a long way since its enactment in 2009, the 2017 amendments significantly enhancing the same. For a relatively younger jurisdiction like India, in the author’s opinion, the leniency regime is rather commendable. Keeping in consonance with the needs of the time, the CCI has adequately incorporated and provided clarity to various aspects. Despite some minor limitations, the leniency regime could go a long way in achieving the very purpose of anti-trust laws; i.e., eliminating cartel conduct. The CCI could also, using these provisions as a tool, coordinate with other such authorities in foreign jurisdictions to possibly detect and dismantle global cartels.
This article has been authored by Tawishi Beria, Third year, O.P. Jindal Global University, Haryana.
[1] The Competition Act, 2002, No. 12, Acts of Parliament, 2003 (India).
[2] The Competition Commission of India (Lesser Penalty) Regulations, 2009, Gazette of India, pt. III, sec. 4 (Aug. 13, 2009).
[3] Regulation 2.
[4] Regulation 5, Clause 2.
[5] Regulation 5, Clause 1.
[6] Regulation 6.
[7] The Competition Commission of India (Lesser Penalty) Amendment Regulations, 2009, Gazette of India, pt. III, sec. 4 (Aug. 22, 2017).
[8] Regulation 3, Clause 1A.
[9] The Competition Commission of India (General) Regulations, 2009, Gazette of India, pt. III, sec. 4 (May 22, 2009).
[10] Suo Moto Case No. 3 of 2014.
[11] Case No. 2 of 2016, Case Nos. 2 & 3 of 2017.
[12] Suo Moto Case No. 1 of 2017.
[13] Case No. 50 of 2015, Case Nos. 3 & 4 of 2016.
[14] Case No. 2 of 2013.
[15] Case No. 07(01) of 2014.
[16] Regulation 3, Clause 4 reads as follows: “The discretion of the Commission, in regard to reduction in monetary penalty under these regulations, shall be exercised having due regard to – (a) the stage at which the applicant comes forward with the disclosure; (b) the evidence already in possession of the Commission; (c) the quality of the information provided by the applicant; and (d) the entire facts and circumstances of the case.”
[17]Nishikant Bibhu, Cartel Leniency Program in India- A Critical Analysis, SSRN (Dec. 14, 2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3503777.
[18] Anshuman Sakle& Anisha Chand, Leniency Regime in India: Beginning of a New Dawn, 13 Competition L. Int’l 115, 115 (2017).
[19] Nidhi Singh & Shivani Swami, Evolving leniency regime under the Indian Competition Law, OBLB (Aug. 13, 2018), https://www.law.ox.ac.uk/business-law-blog/blog/2018/08/evolving-leniency-regime-under-indian-competition-law.
[20] It is interesting to note here that the issue of confidentiality had been brought up in the PMC case. Inter alia, a claim of breach of due process by the DG was raised and it was contended that disclosure of the recorded statements led to harm in reputation. It was clarified by the CCI that confidentiality did not extend to evidence collected by the DG during the course of investigation.
Picture Source: HRMASIA
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