On 22 August 2017, through a notification, the Competition Commission of India (CCI/Commission) amended the Competition Commission of India (Lesser Penalty) Regulations, 2009 (Lesser Penalties Regulations). Given below is a brief analysis of the key changes made to the leniency regime in India.
Individual as leniency applicants
The main provision dealing with leniency is Section 46 of the Competition Act, 2002 (Competition Act). Section 46 provides that a producer, seller, distributor, trader or service provider included in a cartel can avail the benefit of lesser penalties by making necessary disclosures to the CCI. The original Lesser Penalties Regulations mirrored the statutory provisions by limiting the definition of applicants to enterprises only.1
In a departure from the Competition Act, the amendments, by expanding the definition of "applicant", now allows individuals (involved in a cartel on behalf of an enterprise) to apply to the Commission for leniency. The intention for this appears to be to develop a regime which encourages individuals to come forward and report the conduct. However, a joint reading with the Competition Act, indicates that this definition may go beyond the statute.
Inclusion of Individuals
One of the most important changes is the extension of benefit of leniency to individuals. Under the Competition Act, individual employees, responsible for the infringing conduct, could also be penalized in their individual capacity.2 The original Lesser Penalties Regulations were silent on whether such individuals could also receive benefit of lesser penalties. Although the CCI – through case law3 – has clarified that the benefit would extend to such individuals, the amendment now codifies this position.
Confidentiality and Inspection
The amendments now provide a discretionary power to the Commission in relation to confidentiality. The original Lesser Penalties Regulations imposed an obligation on the CCI to maintain confidentiality on the identity of the applicant and the information provided in the leniency application, unless specifically waived by the leniency applicant or the disclosure is required under law.4
The amendment now permits the Director General (the investigating arm of the CCI) to disclose information even if the applicant does not give a waiver. The amendment states that if during the course of the investigation, the Director General deems it necessary to disclose the information to another party5, it can disclose such information, even without a waiver, subject to getting prior approval from the CCI. The Director General must also provide reasons in writing for making such a disclosure. While the language of the amendments seems to permit such unilateral disclosure only for a limited purpose, the exact extent is still unclear. It is hoped that the Director General provides the applicant with prior notice of such disclosure and an opportunity to be heard.
Additionally, the amendments now also provide inspection of non-confidential version of the case file. Inspection can only be given once the investigation is complete and the report has been circulated to all parties6. Whilst inspection is typically granted to parties to the proceedings, third parties may still be permitted to inspect the files if they show sufficient cause.7
Timing of the application
The Lesser Penalties Regulations require an applicant to apply before the CCI for a marker.8 The marker application typically provides an overview of the conduct. Once the Commission assesses the application, it communicates the marker or priority status to the applicant. Subsequently, the applicant is required to file a detailed application, containing all information and evidence in its possession.9 The original Lesser Penalties Regulations required this detailed application to be made within 15 days from the date of requesting the marker.10 In recent times, the CCI has strictly enforced this 15 days deadline.
The amendments now provide some reprieve to this timeline – the detailed application now needs to be made within 15 days from the date on which the marker status is communicated to the applicant by the CCI, failing which the applicant could lose its priority status. Therefore, at the time of applying for a marker, the applicant should be well advanced in the collection of information and evidence to meet this short deadline.
Multiple applicants, multiple leniency
The original Lesser Penalties Regulation, while possibly intending to extend the benefit to multiple applicants, only provided express reductions to applicants with first priority, second priority and third priority.11 The amendments now also extend the benefit of lesser penalties to applicants with a subsequent priority status, i.e.:
- applicant marked with first priority status are eligible for a reduction of up to 100% of the total leviable penalty;
- applicant with second priority can get a reduction of up to 50% of the total leviable penalty; and
- applicant with third or subsequent (to the third) priority can get a reduction of up to 30% of the total leviable penalty.
Notably, the applicants now have to expressly provide details of the volume of business affected "in India" by the alleged cartel. This is perhaps a subtle indication of the CCI's enforcement priority to concentrate on cartels which have a direct and substantial effect in the Indian market. It is important to bear in mind that when enforcing the provisions of the Competition Act against cartels taking place outside India, the CCI is required to prove that such cartels have, or are likely to have, an appreciable adverse effect in the relevant market in India.12
The amendments are demonstrative of the Commission's practical experience in dealing with leniency cases. The amendments provide much needed clarity on issues such as status of individuals, benefit of reduction to more than one applicant etc. Nevertheless, it has also created several questions which would need to be settled going forward. Pertinently, two major open points are: (a) whether the CCI will pursue cases where there is negligible or no volume of commerce in the Indian market; and (b) whether, and in what manner, would these amendments apply to on-going cases.
Originally published August 2017
1. Regulation 2(b), Lesser Penalty Regulations
2. § 48, Competition Act
3. In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items, Suo Moto Case No. 03 of 2014, order dated 18 January 2017
4. Regulations 6(a) and 6(b), Lesser Penalty Regulations
5. Party has been defined as enterprise or person, against whom inquiry or proceeding is instituted and shall include the Central Government, any State Government or any statutory authority and shall include any person permitted to join the proceeding
7. Regulations 37 and 50, Competition Commission of India (General) Regulations, 2009
8. Regulation 5(1), Lesser Penalty Regulations
10. Regulation 5(2), Lesser Penalty Regulations
11. Regulation 4(c)(ii), Lesser Penalty Regulations
12. § 32, Competition Act
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.