How CCI wants to bust hard core cartels via new “Leniency plus” regime

India plans to introduce a “Leniency plus” program — a new cartel detecting tool — that would encourage companies already under investigation for one cartel to report other cartels unknown to the competition regulator.

This proposed regime of “leniency plus” is part of the recent Competition (Amendment) Bill 2022 introduced in the Lok Sabha during the just concluded monsoon session, Ashok Kumar Gupta, Chairman, Competition of India (CCI), told BusinessLine.

“Our experience of enforcing leniency regime has been encouraging so far and has helped CCI in uncovering cartels through this route. The proposed framework of leniency plus would further incentivise applicants to come forward with disclosures regarding multiple cartels, thereby enabling CCI to save time and resources on cartels investigation. This will result in faster market corrections”, Gupta said.

This “leniency plus” regime is already recognized in jurisdictions like the UK, USA, Singapore and Brazil.

What is Leniency Plus

The current Competition Act, 2002 already has a leniency programme, which allows companies that provide sufficient information about a cartel in which they have participated to receive partial immunity from penalty. Such a program helps competition authorities to discover secret cartels and to obtain insider evidence of the infringement.

Under the existing leniency (lesser penalty rule) framework, CCI may impose a lesser penalty on a person involved in a cartel if such person has made a full and true disclosure in respect of alleged violations and such disclosure is vital.

Now the Indian authorities are going one step further through the proposed introduction of the “Leniency Plus” programme.

Under ‘Leniency Plus’, a cartelist who is cooperating with CCI for leniency, can disclose the existence of another cartel in an unrelated market in the course of original leniency proceedings in exchange for an additional reduction in penalty.

Leniency Plus is a proactive antitrust enforcement strategy aimed at attracting leniency applications by encouraging companies already under investigation for one cartel to report other cartels unknown to the competition regulator.

The benefit that would entail from such disclosure is reduction of penalty in the first cartel to the person disclosing the information, without prejudice to the company obtaining a lesser penalty regarding the newly disclosed cartel.

Leniency programs play an instrumental role in assisting competition authorities in detecting, investigating and prosecuting hard-core cartels.

Cartels are recognized as the most egregious violation of competition law and accordingly, it has been the focus of competition enforcement. It is indisputable that competition authorities face significant obstacles in detecting and prosecuting cartels since they operate under a cloak of secrecy. With a view to dealing with such challenges, most jurisdictions have developed leniency programmes. While the Competition Act provides a framework for CCI to deal with leniency/lesser penalty applications, it presently does not recognize leniency plus.

Anisha Chand, Partner, Khaitan &Co, said: “Thus far, the CCI has had a good run with the existing framework of the leniency regime which is probably the reason why leniency plus was contemplated to provide increased incentive and impetus to cartel members to disclose cartel actively. That said, since leniency doesn’t offer protection against damage claims by third parties, it remains to be seen if leniency plus will remain as attractive once the private damages regime develops fully”.

Another major reform embarked upon in the Competition (amendment) Bill is to enable leniency applicants to withdraw lesser penalty applications. Under the existing lesser penalty framework in the Competition Act, there is no provision enabling withdrawal of lesser penalty application. It may happen that certain enterprises apply for a lesser penalty application at the beginning of discovery of internal documents, yet, pursuant to a detailed internal investigation, the enterprise may learn that there has been no contravention of the law.

Published on

August 15, 2022

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