Introduction
The modus operandi of cartels runs along the lines of competing members relying on each other’s agreed course of action, reducing their incentives to provide new or better products and services at competitive prices. Consequently, their clients (consumers or other businesses) end up paying more for less quality.[1] Cartel formation is one of the major issues that competition regulators deal with on a daily basis and often the basis of the case rests either on a complaint that has been filed by an aggrieved party or the regulator takes suo moto cognizance. This often leads to a more intense procedure of investigation followed by the regulator along with long delays and procedural hurdles and a greater level of difficulty to show the presence of a cartel as opposed to simple price parallelism due to prevailing market conditions.
Leniency programs act as a “way-out” of incurring substantial liability in case the regulator finds the companies involved to be in violation of competition law, more specifically, in the formation of a cartel. Leniency programs[2] function on the very basis that eventually a company, which might face scrutiny from the Commission for cartelization, will give in and in order to evade extensive fines and liability, the company would provide the regulator with all aid that it requires. “The leniency policy also has a deterrent effect on cartel formation since it destabilizes the operation of existing cartels as it seeds distrust and suspicion among cartel members. It also benefits the Commission, allowing it not only to pierce the cloak of secrecy in which cartels operate but also to obtain insider evidence of the cartel infringement.”[3]
European Union
The European Commission (hereinafter, “Commission”) has always been at the forefront of vigilant and proactive jurisprudence of competition law being the highest competition regulator across the European Union, existing along with various state bodies known as the National Competition Authorities. Cartels are held liable under Article 101 of the ‘Treaty on the Functioning of the European Union’ which prohibits anti-competitive agreements.[4]
The leniency policy offered by the European Union is a comprehensive and robust a one. Procedurally, for total immunity, the leniency applicant should be the first one to report an undetected cartel to Commission and in the event, the Commission is already aware of such cartel, the applicant should provide the Commission with evidence that proves cartel infringement. In some cases where the evidence so provided is of “significant added value” and helps reinforce the Commission’s findings[5], the applicant may only be offered a reduction of fine.[6] The onus to help and furnish any required information lies on the leniency applicant and the same determines the quantum of the fine if any.[7]
Due to significant involvement of the leniency applicant with the Commission, it becomes paramount to safeguard the interests of the applicant. The identity of the applicant is kept confidential until the Statement of Objections has been released[8] and even then, the identity of the applicant is only disclosed to the other parties involved in the suit so the opposite parties can exercise their right to defense; the identity of the applicant is revealed to the public upon the final hearing of the Commission.[9]
The addressees of the Statement of Objection get access to all documents relied on by the Commission (only on Commission premises) except internal documents of the Commission, business secrets or other confidential information.[10] Although under general circumstances national courts cannot order the Commission to breach confidentiality of the applicant, Directive 2014/104/EU states that evidence in control of the third party or defendant may be disclosed as per the direction of the national court; per principle of proportionality used by the national courts.[11]
Directive 2014/104/EU has also recognized the right of third parties to claim full compensation for the harm caused to them by infringements of the EU antitrust rules. This compensation covers actual loss, loss of profit and interest from the time the harm occurs until compensation is paid. The grant of immunity or a reduction of fines does not preclude third parties from bringing follow-on damages against leniency applicants. However, the Antitrust Damages Directive provides that undertakings that benefit from immunity (as opposed to a reduction of fines) are in principle relieved from joint and several liability for the whole infringement. The directive also calls for the national courts to ensure that even when suits for damages are filed by affected parties, confidential information is not shared[12] and the liability of the applicant remains only to the extent of the harm they caused to their direct and indirect customers (or suppliers).[13] The European Union cartel provisions also do not contemplate any sanctions for individual employees who refuse to co-operate with a corporate leniency applicant.[14]
As with regards to foreign jurisdictions, the Commission has advanced agreements with the United States, Canada, Japan and Korea. The main rules of these co-operation agreements concern notifications, the co-ordination of enforcement activities and the exchange of non-confidential information.[15] The Directive 2014/104/EU also casts an onus on the leniency applicant to notify the Commission whether or not the leniency applicant has filed or intends to file an application with any other competition authority to facilitate better cooperation and investigation. Documents are generally not shared with foreign authorities and even when such exceptional circumstances arise, prior consent of the applicant is taken along with the ratification of the International Competition Network’s Waiver Templates and a completed Explanatory Note (2014). [16]
In cases involving leniency applications, situations may arise where authorities of foreign jurisdictions summon the Commission to submit documents, the European Union follows the principle of comity of courts debating whether the interest in production of documents is sufficient to warrant such an exemption under local European law in the interest of international justice. The same has been followed in re Jeffrey Laydon v. Mizuho Bank Ltd.[17], re Cathode Ray Tube Antitrust Litigation[18] etc.
India
The leniency provisions in India concerning cartels are enshrined in Section 46 of the Competition Act, 2002[19] and much similar to its European counterpart, the leniency provisions be invoked anytime with the quantum of reduction in fine varying with the passage of time.[20] Leniency provisions under Indian law are codified in the shape of the Competition Commission of India (Lesser Penalty) Regulations, 2009 (hereinafter, “Old Regulations”).
The Old Regulations called for confidentiality of the identity and information provided by the applicant save, disclosure being required by law, terms of disclosure agreed upon by the applicant or public disclosure of information by the applicant himself.[21] Deviating from European Law, the Old Regulations impose liability on the company involved in the formation of a cartel in its own legal capacity as well as individuals in charge of the aforementioned.[22]
The Brushless Fans case[23] is an authority on leniency granted to companies and persons in India wherein the Competition Commission of India (‘CCI’) in this case granted the informant a 75% reduction in penalty due to the investigation being already commenced and stated that leniency provisions could extend to individuals as well.
On 22nd August 2017, the Old Regulations were amended. The Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017 (hereinafter, “Amended Regulations”) have now acknowledged and integrated into statute the protection and leniency that may be granted to individuals,[24] as was done in the Brushless Fans case[25]. Another significant change is that the restriction of top three leniency applicants (in terms of evidence provided) and their respective reductions of 100%, 50% and 30% have been done away. This is expected to result in more companies applying for leniency applications without worrying about their information not being good enough to qualify for the top three spots available.
Relating to confidentiality of documents, the Amended Regulations provide for confidential documents to be disclosed to any party deemed fit by the Director-General without the approval of the applicant; the reasons for the same are to be recorded in writing and prior approval is to be taken from the CCI.[26] The amendment also makes clear that in cases of leniency applications, parties may only access (non-confidential) documents once the Director-General has finished preparing his report and the same is sent to the parties concerned,[27] unlike usual cases dealt with by the CCI. The geographical jurisdiction for leniency cases has also been set to India vide the Amended Regulations further iterating that the completion violation should occur and affect parties in India.[28]
The Competition Act, 2002 remains silent on the fact whether third parties like in the European Union can bring an action against the cartel or informant in case they have been affected directly or indirectly. However, the language of Section 53N(1) of the Competition Act, 2002 signifies that damage by affected individuals and organizations may be claimed.
Section 18 of the Competition Act provides for co-operation between the CCI and competition authorities from other jurisdictions. The CCI has entered into co-operation arrangements with the United States, Russia, Australia, Canada, Europe as well as the BRICS nations.[29]
Conclusion
The European Union already has its viewpoint well defined as with regards to confidentiality provisions for leniency applicants and India is not far behind especially with the recent amendment to its Leniency Regulations. Definition of liability of individuals and codified leniency provisions for individuals was necessary to aid in active discovery of cartels. It is still to be seen how current leniency applicants will be dealt with in light of the amendment that has taken place and what will be the stance of the Commission on cases where there is little impact on consumers in India of the cartel. The Commission’s take on the extensive power to the Director-General to share confidential information without prior consent of the applicant will unfold only with practical application and it is anyone’s best guess whether this provision will be used sparingly.
This post has been authored by Anmol Malhotra, a fourth-year student at Rajiv Gandhi National University of Law, Patiala.
[1] European Commission, Competition Cartels Overview European Commission, available at http://ec.europa.eu/competition/cartels/overview/index_en.html (Last visited on August 20, 2018).
[2] EUR-Lex, Directive 2014/104/EU of 26th November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union, December 5, 2014, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0104&from=en (Last visited on August 20, 2018).
[3] European Commission, About the cartel leniency policy – European Commission, available at http://ec.europa.eu/competition/cartels/leniency/leniency.html (Last visited on August 20, 2018).
[4] EUR-Lex, Official Journal 115, 09/05/2008 P. 0088 – 0089, May 9, 2008, available at https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E101:EN:HTML (Last visited on August 20, 2018).
[5] European Commission, supra.
[6] European Commission, Competition: revised Leniency Notice – frequently asked questions, December 7, 2006, available at http://europa.eu/rapid/press-release_MEMO-06-469_en.htm?locale=en (Last visited on August 20, 2018).
[7] EUR-Lex, Commission Notice on Immunity from fines and reduction of fines in cartel cases, December 8, 2006, available at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52006XC1208(04)&from=EN (Last visited on August 20, 2018).
[8] Id.
[9] EUR-Lex, Commission Notice on the rules for access to the Commission file in cases pursuant to Articles 81
and 82 of the EC Treaty, Articles 53, 54 and 57 of the EEA Agreement and Council Regulation
(EC) No 139/2004, 2005, O.J. C 325/07, December 22, 2005, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52005XC1222(03)&from=EN (Last visited on August 20, 2018).
[10] European Commission, Competition: Commission improves rules for access to the file in merger and antitrust procedures, December 13, 2005, available at http://europa.eu/rapid/press-release_IP-05-1581_en.htm?locale=en (Last visited on August 20, 2018).
[11] EUR-Lex, Directive 2014/104/EU of The European Parliament and of the Council, December 5, 2014, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0104&from=EN (Last visited on August 20, 2018).
[12] Id.
[13] Thomson Reuters, Cartel leniency in EU: overview – Practical Lawyer, July 1, 2017, available at https://uk.practicallaw.thomsonreuters.com/0-517-4976?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1 (Last visited on August 20, 2018).
[14] Id.
[15] Id.
[16] European Commission, Full waiver of confidentiality in cartel investigations, available at http://ec.europa.eu/competition/cartels/leniency/full_confidentiality_waiver.pdf (Last visited on August 20, 2018).
[17] In Re Jeffrey Laydon v Mizuho Bank Ltd. Case No. 12 Civ. 3419.
[18] In Re Cathode Ray Tube Antitrust Litigation 2014 WL 1247770 (N.D. Cal. Mar. 26, 2014).
[19] The Competition Act, 2002, §46.
[20] Competition Commission of India, Leniency, available at http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf (Last visited on August 20, 2018).
[21] Competition Commission of India (Lesser Penalty) Regulations, 2009, Reg. 6.
[22] The Competition Act, 2002, §48(1).
[23] In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items, MANU/CO/0003/2017.
[24] The Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017, Reg. 2(1)(a)(1).
[25] In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items, MANU/CO/0003/2017.
[26] The Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017, Reg. 2(5).
[27] The Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017, Reg. 2(6).
[28] The Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017, Reg. 2(7).
[29] Thomson Reuters, Cartel leniency in India: overview | Practical Lawyer, August 1, 2017, available at https://uk.practicallaw.thomsonreuters.com/2-520-7061?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1 (Last visited on August 20, 2018).
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