This article is written by Utkarsh Nigam of New Law College, Bharti Vidyapeeth University, Pune. The author through this article discusses the Leniency Programme of The Competition Commission of India. This article was written by the author while pursuing M.A in Business laws from NUJS.

Leniency Programme of Competition Commission of India

The Competition Commission of India has been set up by the Government under an Act of Parliament known as the Competition Act to promote competition in the market across various industries and also to prevent practises which would have adverse effects on competition. The main aim includes the protection of interest of consumers, to prevent practices having adverse effect on competition, to promote and sustain competition in market and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.

Cartel formation is a grave offence under the Competition Act. The Competition Commission of India has been authorized to enquire into any cartel and has the power to impose a penalty, on a person or an enterprise included in that cartel up to three times of its profit for each year of the continuance of such agreement or 10% of its turnover for each year of continuance of such agreement, whichever is higher. Also the Competition Commission has the power to pass the following orders-

1. A direct the parties to a cartel agreement to discontinue and not to re-enter such agreement
2. A direct the enterprises concerned to modify the agreement
3. Direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any
4. Pass such other order or issue such directions as it may deem fit.

Leniency Programme of the Competition Commission is inscribed under Article 46 of the Act. It is a type of an incentive to the cartel members who are ready to share information with the Commission. Also legally it can be said that it is a type of whistle-blower protection to a cartel member who is ready to share the information relating to the cartels. The Commission has framed various programmes to encourage the members, willing to provide information that are connected with the cartels or are in the process of infringing the competition laws, to come forward and disclose such anti-competitive agreements and assist the competition authorities in lieu of immunity or lenient treatment. The leniency programme is a sort of protection provided to the persons who come forward and disclose all the information about the cartel who would otherwise face stringent actions by the Commission if the cartel is detected by the Commission on its own.

Conditions for Availing the Leniency Programme

The conditions which should be fulfilled by an applicant for availing the benefits of lesser penalty regulations under Section 46 are-

1. The applicant should cease to have further participation in the cartel from the time of its disclosure unless otherwise directed by the Commission.
2. The applicant should provide all the vital disclosures in respect of violation of section 3(3).
3. The applicant should provide all the relevant information, documents and evidence as may be required by the competition commission from time to time for further investigation.
4. The applicant should also cooperate genuinely, continuously and expeditiously throughout the investigation and also in the proceedings before the Competition Commission.
5. The applicant should not conceal, destroy, manipulate or destroy or remove any relevant documents in any matter which could contribute to the establishment of a cartel or which would hinder any investigation process carried out by the Competition Commission.

The Competition Commission may subject the applicant to further restrictions and conditions in the matters of reduction of monetary penalty after due regard to-

1. The stage at which the applicant comes with the application of disclosure
2. The evidence already in possession of the government
3. The quality and the vitality of the information provided by the applicant.
4. The facts and circumstances of the case

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The Commission under Section 46 has the power to provide a lesser penalty than what is mentioned under the Act if it is satisfied that any person related with the cartel has provided the Commission with the full disclosure as needed. The Section also states that if a disclosure is made after the report has been submitted, directed under Section 26 then no provision of lesser penalty shall apply to the case. Also the leniency programme or the lesser penalty shall be imposed only on the producer, seller, distributor, trader or service provider who has made true and vital disclosures and that the lesser penalty shall only be imposed if the person making the disclosure continues to cooperate with the commission until the proceedings of the commission has been completed. If in between the proceedings if a cartel member who had agreed to share the information in lieu of lesser penalty does not complies with the conditions on which the lesser penalty was imposed or has given false evidence or has not made any vital disclosures then in such cases the abovementioned persons may be tried for the offence with respect to the lesser penalty but shall also be liable to be tried to the imposition of penalty to which such person was made liable in the first place, had the lesser penalty not been imposed.

The content of the application for lesser penalty has been mentioned under Section 5(1) and 5(2) of the Act. This would include the following-

1. Name and address of the applicant or of the authorized representative or of the enterprise or enterprises in the cartel.
2. In case the applicant is based outside the country, then the address of communication in India including the phone number and the email address.
3. A description of the cartel arrangement including the aim and objective of the cartel
4. The details of the activities and the functions carried out for securing such aim.
5. The nature of goods and services involved.
6. The geographic market coverage of the cartel
7. The commencement and duration of the cartel
8. The estimated volume of business that would be done by the cartel
9. The names, positions, office locations and, wherever necessary, home addresses of all individuals who, in the knowledge of the applicant, are or have been associated with the alleged cartel, including those individuals which have been involved on behalf of the applicant.
10. Details regarding the competition authorities, forum or courts to which the applicant has approached or intends to approach in relation to the cartel.
11. A list of evidence regarding its nature and content which is provided in support of the application for lesser penalty
12. Any other information as may be directed or asked by the commission

Recent Amendments

The Leniency programme is available to those persons or enterprises that disclose the Commission about their role in the cartel and are ready to cooperate in the investigations carried out subsequently by the Commission in lieu of lesser penalty or in some cases immunity from the penalty. For the same purpose the Commission has made the Competition Commission of India (Lesser Penalty) Regulations, 2009 as the leniency programme has emerged to be a successful weapon to combat the cartels. The Regulations for the lesser penalty have been amended in the year 2017.  The amendments relating to the Regulations are-

1. The definition of applicant was amended in the new regulations. Before the amendment according to Section 2(1)(b) an applicant meant an enterprise that is or was a member of a cartel and submits an application for lesser penalty. But according to the new definition an applicant means an enterprise as defined earlier but will now also include an individual acting on behalf of an enterprise and submits and application for lesser penalty.

A new definition of party has also been included which encompasses an enterprise or an individual defined under section 2 of the Act and against whom the inquiry is instituted and shall also include the central and the state government.

2. The words and expressions used but not defined in the regulations shall have the same meaning as assigned to them in the Act, rules, and regulations or in the Companies Act, 2013 which was earlier being referred to the Companies Act. 1956.
3. The conditions for availing the benefit of lesser penalty have also been amended. Earlier vital disclosures had to be made in respect of violation of Section 3(3) but now the vital disclosures have to be made in respect of contravention of the Act. Also a new section regarding the enterprise has been inserted in which it states that if the applicant is an enterprise it is the responsibility of the enterprise to provide the name of the individuals who have been involved in the activities related to the cartel and for whom the leniency is sought by the enterprise.
4. Prior to the amendment to the regulations, the leniency programme allowed reduction in penalty or lesser penalty to a maximum of three leniency applications on a first come first served basis which were subjected to factors like quality of information and the nature of information. The amendment has changed this scenario and now has brought up provisions which will allow additional applicants to avail the benefits of this programme. Now the first applicant may be granted up to 100% reduction in penalty and the second applicant up to 50% and the third applicant or any further applicant may be granted up to 30% reduction. With this notification it will not only help the people who are willing to provide vital information on cartels after the first three applicants have already availed the benefits of the programme for disclosing evidence, but will also help the Competition Commission of India to bust the cartels more effectively in future.
5. There were no provisions in the earlier version of the regulations regarding the disclosure of confidential information submitted as part of the application by the Director General during the investigation process. But after the amendment was brought it has now been clarified that certain confidential information can be disclosed to any party by the Director General without the prior approval of the applicant for the purposes of investigation, only if the Director General thinks that such information is necessary to be disclosed. But in such cases where the Director General discloses any confidential information he may do so subject to the recording of the reasons for the same in writing along with the approval of the Competition Commission of India.
6. In regular course an inspection of the documents can be done during the investigation process without waiting for the report of the Director General. The amendment has now specified that the inspection of non confidential documents in the matters related to leniency will be allowed for inspection only after the Competition Commission has forwarded a copy of the Director General to the concerned parties.
7. The amendment of the regulation has also clarified specifically that the information in the leniency application submitted by the applicant should be in relation to the volume of business in India only.
8. The Regulations requires an applicant under Section 5(1) to apply before the Competition Commission for a marker. This provides for an overview of the conduct. Then once the Commission assesses the application it communicates the marker to the applicant. After this the applicant is required to file a detailed application, containing all information and evidence in its possession. The original Lesser Penalties Regulations required this detailed application to be made within 15 days from the date of requesting the marker under Section 5(2). But after the amendment, there has been some reprieve to the timeline. The detailed application should now be made within 15 days from the date on which the marker status is communicated to the applicant by the competition commission, failing which the applicant could lose its marker. Therefore it is suggested that while applying for a marker the applicant should have collected the information to the meet the deadline.
9. The procedure for grant of lesser penalty has also been amended in regards to the previous version of the regulations. Earlier for the same purpose the applicant or its representative could make the application containing all the information or can also contact orally or through e-mail for furnishing the relevant information to the designated authority. The authority thereafter within three days should have put up the matter before the commission. This time limit of three days has now been changed to five days.

The Competition Commission has framed the leniency programme so as to encourage the various elements connected with the acts of competition infringements such as formation of cartels to come forward and disclose such anti-competitive agreements so as to assist the competition commission in establishing a fair competition regime and also help in investigation of these anti-competitive agreements in lieu of lesser punishment or complete immunity.

The amendments done to the previous regulations are in line with the policies of the Competition Commission of India, which it ought to have been applying over the time. With a steady increase in the leniency applications, the amendments are a reflection of Competition Commission’s experience and learning from such matters. The amendments done to the regulations is likely to encourage more and more individuals or enterprises to come forward and disclose the information regarding the anti-competitive practises undertaken by players in lieu of immunities and lesser penalties which will result in the benefit of both the parties.

Leniency programme acts as a protection to those individuals or enterprises that are ready to disclose the true and honest facts about the anti-competitive agreements they are the part of in lieu of lesser punishment or immunity which in regular course have been more stringent if these agreement had been identified by the Competition Commission of India. The Commission in the present period has opened or has enlarged its views towards the leniency programme. The recent amendments done such as the inclusion of individual in the definition of applicant has given the option to many individuals to come forward and avail the benefit of the provisions of the leniency programme which could help the Competition Commission to eradicate the chances of anti-competitive agreements regulating in the market. The inclusion of provision regarding the extension of number of applications in case of leniency programme has been a major step towards the eradication of the cartels.  The acceptance of applications beyond the previous prescribed number has resulted in many numbers of applications coming to the door of the Competition Commission in lieu of immunity, which results in more disclosure of vital information regarding the cartels. This would directly help the Competition Commission to investigate these arrangements in a systematic manner with plethora of information.

Conclusion

The Competition Commission has to see that the confidentiality of the application and the applicant is maintained and is not leaked out to the outsiders which can result in threat to the applicant as well as to the investigation procedure conducted by the Commission. Regarding the confidentiality provision the amendment done to the regulation is such that only that information which is required by the Commission for investigation procedure can only be told to third parties only after the approval of the commission. The confidentiality of the application will not be done except in cases where the disclosure is required by law or where the applicant has agreed to such disclosure in writing without any objection to the same and where the disclosure has been made publicly by the applicant.

The leniency programme is a good and a correct option undertaken by the Commission so as to fight the cartelisation in the market which affects the equilibrium of the market. But it is also important to keep in mind that a leniency programme is ineffective until the cartels are punished. If there are not stringent laws regarding the same then such programmes are deemed to fail.

The role of the Commission is vital in every aspect of the programme starting from when the application regarding these arrangements comes to its doors till the proceedings have been completed. The Commission should take the application seriously and should take appropriate actions within the given time frame. It should check that utmost care is taken so as to maintain confidentiality. The commission should also check and review that the information provided by the applicant is relevant or is vital or not in regards to the application. It should cooperate with the applicant at every stage and conduct the investigation accordingly. The Commission also has the duty to see that the applicant must cooperate with them at every stage of the investigation as much possible and then only the leniency provisions be applied to the case of the applicant. If the applicant fails to do so the commission must make sure that the applicant be held liable and be tried according to the penalty provisions, if he did not had made the disclosures to the commission. The Commission also has the duty to check and investigate the market about the new methods and new ideas which should be incorporated in the leniency provisions so as to compel the individuals or enterprises to come forward to disclose relevant information regarding the arrangements which harms the equilibrium of the market.

Introduction of Cartels and anti-competitive arrangements in an economy is a like a venom introduced in an economy. To fight the same the Commissions or bodies related to the Competition laws or the anti-trust laws in a country have to include not only a robust regime so as to fight these arrangements directly but also have to devise a plan like Leniency programmes to hit these arrangements at a point where their existence comes in a place of danger. The introduction of leniency programme in India has been a major advantage to the competition policy of the country which has an aim of fair competition in the market. Provisions like this will help the country to eradicate these arrangements which results in major economic problems such as inflation, poverty etc. The major role is of the apex body regulating the competition laws which should be vigilant every time regarding these activities and should be approachable by persons who are willing to avail the benefit of these provisions which have been inscribed in the Act.[1][2][3][4][5][6]

[1] Referred http://unctad.org/en/Docs/tdrbpconf7d4_en.pdf

[2]Referred http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf

[3] Referred https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=517

[4] Referred http://www.cci.gov.in/sites/default/files/regulation_pdf/regu_lesser.pdf

[5] Referred http://www.cci.gov.in/sites/default/files/whats_newdocument/178210.pdf

[6] Referred https://yoginakochar.wordpress.com/2017/08/23/amendments-in-cci-lesser-penalty-regulations/