India: Competition Violators Escape: Lean On Leniency Regime

Last Updated: 6 December 2018
Article by Pierre Uppal

Introduction

Cartels are agreements amongst market competitors which have significant adverse effect on competition. But without effective sanctions, it becomes very difficult to detect the existence of cartels as they are concerted actions and work in secrecy. The colluders might get an impression in the absence of strict penalties that the benefits associated with the cartelization outweigh the associated risks of penalties.

This is where the Leniency Regulations i.e. Competition Commission of India (Lesser Penalty) Regulations, 2009 under the Competition Act, 2002 came into play. The Competition Act, 2002 (hereinafter referred as the "Act"), which replaced the erstwhile Monopolies and Restrictive Trade Practices Act (under which the commission could only pass cease and desist orders), has given the Competition Commission of India ("CCI") the freedom to decide upon lesser penalties in case of disclosure of existence of cartel by a member under Section 46 of the Act. The Act has extended the benefits of such provisions to not just a corporation but to individuals as well with the amendments in the Leniency Regulations vide Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017 which were notified in August 2017 (hereinafter referred as "Amended Regulations").

Essential ingredients to claim relaxation under the Leniency regime

The protection provided under Section 46 of the Act is subject to the fulfillment of the following conditions:

1. The producer, seller, distributor, trader or service provider must have been part of the cartel.

2. It / He /She must have made a full disclosure.

3. Such disclosure shall be a true and vital disclosure.

4. The disclosure shall be before the report of investigation of the Director General ("DG") under Section 26 of the Act, or even where the matter is under investigation, without the disclosures made by the applicant, the Commission or the DG would not have been able to establish contravention due to insufficient evidence.

5. Such applicant must cease to be a further part of the cartel.

Quantum of the penalties

The corresponding Regulations post-amendment, provide the benefit of such leniency on disclosure to not just the applicants with first, second or third priority status but also to such subsequent applicants fulfilling the requirements of disclosure under Section 46 of the Act. The quantum of such penalty post the Amended Regulations stand as follows:

1. The first applicant may still be granted up to 100% reduction in penalty;

2. The second applicant may enjoy a reduction up to 50 %; and

3. The third or any subsequent applicant may be granted relaxation in penalty up to 30%.

The addition of subsequent applicants within the ambit of the regulations to provide relaxation in quantum of penalty has helped in instilling confidence among enterprises and individuals to come out in open and blow the whistle against the contravention of Section 3 of the Act. Earlier, the enterprises used to shy away from furnishing self-incriminating evidence under the uncertainty of making it to the list of first three applicants and to fall outside the ambit of the Regulations. But the Amended Regulations has taken care of this apprehension and developed much more confidence in the minds of the offenders to come out in open.

Recent verdicts on the Leniency Regime

After coming into force of the Amended Regulations, the Competition Commission of India has been very proactive and passed various judgments and given the benefits of the provisions of the leniency regime to applicants. Some of the important judgments relevant to understand the issues are summarized herein below.

1. Brushless DC Fan case - the first in history of Competition laws

The CCI took suo moto cognizance under Section 19 of the Act of the bid rigging or collusive bidding of tenders floated by the Indian Railways for brushless DC fans. M/s. Pyramid Electronics, one of the contravening firms out of the three disclosed the modus operandi of the cartel to CCI and confirmed the existence of a cartel. In the instant case, the cartel was proved with the help of scrutiny on communication and correspondences of the key personnel of the firms during and after the period of bidding of tenders and exchange of quotations between the firms for the purpose of upcoming tenders.

M/s. Pyramid Electronics was given the benefit of the leniency provisions under the Act and was granted reduction of 75% in the quantum of penalties after taking into account the cooperation provided to CCI and the stage at which the application was made.

2. Suo Moto Case No 02 of 2016

In the case of Re: Cartelisation in respect of zinc carbon dry cell batteries market in India, Panasonic was the first applicant to reveal the existence of cartel in the industry and hence was awarded a full reduction in penalty by the CCI marking a departure from the first leniency order of CCI. Panasonic was awarded with waiver of full penalty for providing continuous cooperation, making an application when there was no incriminating evidence available against the offenders in the industry of anti-competitive activities being committed. Nippo and Eveready which were also the members of Association of Indian Dry Cell Manufacturers (AIDCM), being the other parties to cartel were the subsequent applicants under the leniency regime and were granted some reduction in penalties. However, CCI observed that both of the subsequent applicants did not provide any "significant value addition" to the already incriminating evidence available. The reduction was granted to the subsequent applicants taking into consideration the corroborating evidence, admission of being a party to the cartel and the stage at which application was made.

3. Suo Moto Case No 50 of 2015

The case was filed on information filed by Nagrik Chetna Manch through its President against Fortified Security Solutions (hereinafter, 'OP-1'), Ecoman Enviro Solutions Pvt. Ltd. (hereinafter, 'OP-2'), and Pune Municipal Corporation (hereinafter, 'OP-3'). The parties were found to be involved in bid rigging/collusive bidding in contravention of Section 3(3) read with Section 3(1) of the act. On an investigation conducted by the DG, Lahs Green India Pvt. Ltd. (hereinafter, 'OP- 4'), Sanjay Agencies (hereinafter, 'OP-5'), Mahalaxmi Steels (hereinafter, 'OP-6') and Raghunath Industry Pvt. Ltd. (hereinafter, 'OP-7') were included as Opposite Parties in the instant case.

The CCI granted a reduction in penalty of 50% to the OP4 and OP6. The order suffers because the Commission despite acknowledging the fact that the OP1(having the first marker status)supported the investigation and co-operated with the investigation/ inquiry throughout and disclosed the modus operandi of the cartel and provided evidence in its possession to the Commission. However, the Commission exercising its discretion held that there was no significant value addition made by the OP1. The subsequent applicants OP2 and OP5 were also granted a reduction of 25% and 40% respectively in the penalties payable by the Commission.

4. Suo Moto Case No 02 of 2013

The most recent decision of CCI which was delivered on 11.07.2018 came in the case of Globecast which had disclosed the existence of a cartel in the bid rigging arrangement with Essel Shyam Communication Limited (now Planetcast Media Services Limited) or ESCL in the broadcasting service industry and was thus granted the first applicant status in the case. ESCL on the other hand was also accorded the second priority status as it had filed its leniency application only after a prima facie opinion had been formed by the CCI on the information of Globecast. It was further held in the given case that collusion for even a single event is sufficient to establish contravention of provisions of Section 3 and which party has derived a higher benefit becomes immaterial.

The CCI had granted a reduction in penalty of 100% to Globecast and its employees due to its "vital disclosure" in the form of exchange of correspondences, role of ex employees, exchange of commercially sensitive information which in turn helped CCI form a prima facie opinion and disclose the modus operandi of the cartel. On the other hand, even ESCL was granted 30% reduction in penalty due to its role in providing additional information such as non disclosure agreement between the parties and the correspondence exchanged.

Conclusion: Still a long way ahead

Despite several orders being passed in the short span of time after enforcement of Amended Regulations and provision of leniency to contraveners of Section 3, there are still a lot of loopholes that continue to make leniency provisions less impactful. Regulation 4 of the Amended Regulations mentions in the provision the words "may" and "added value" which leaves it to the discretion of the CCI to decide upon how much reduction in penalty is to be provided to a contravener despite them/him being the first applicant in the matter, taking into account considerations like the quality of information disclosed and when the application was filed with the Commission. Equally, ambiguous is the term "added value" finding place in the same Regulation no. 4 of the Amended Regulations. What constitutes an added value is highly vague and ambiguous and falls upon the discretion of the CCI. For instance, in the Brushless DC fans case, despite M/s. Pyramids Electronics being the first priority applicant, it couldn't secure a 100% reduction in penalty.

Such ambiguity in provisions is significant enough to make the contraveners apprehensive and reluctant to blow the whistle and come out in open about the contravention which would ultimately defeat the purpose behind the leniency regulations. The proactive and aggressive role of the Commission has been playing to enforce a free competition market is highly appreciable but there is still a long way road ahead to give the intended effect to the leniency provisions in India.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions