1.1. On October 16, 2023, the Competition Commission of India ("CCI") published the draft CCI (Lesser Penalty) Regulations1 ("Draft LPR") inviting public comments. Relevant stakeholders can submit their comments with the CCI, till November 6, 2023.2 The Draft LPR has been published pursuant to the Competition (Amendment) Act, 20233 ("Amendment Act")4 which inter alia introduced a 'leniency plus'5 regime. Although the Amendment Act introduced the 'leniency plus' regime, such provisions are yet to be notified as they require supporting regulations to enumerate the modalities for their implementation. As such, the Draft LPR, in addition to ensuring implementation of the provisions pertaining to the 'leniency plus' regime, will also replace the CCI (Lesser Penalty) Regulations, 20096 ("LPR").7
1.2. The 'leniency plus' regime allows an applicant in one cartel to disclose a cartel in a separate market and avail reduction of additional lesser penalty for the cartel already being investigated. The Draft LPR inter alia provides for: (i) form and contents of the application for 'lesser penalty' plus; (ii) procedure for grant of 'lesser penalty plus'; and (iii) withdrawal of application for 'lesser penalty' and 'lesser penalty plus'. The key features of the Draft LPR are set out in detail below:
2. KEY FEATURES OF THE DRAFT LPR
2.1. Grant of 'lesser penalty plus'
According to the Draft LPR, an applicant in respect of one cartel, can make full, true, and vital disclosures pertaining to the existence of a second cartel, i.e., newly disclosed cartel, which is not in the knowledge of the CCI. As such, based on the disclosures provided by the applicant, if the CCI is able to form a prima facie opinion on the existence of a second cartel, the applicant will become eligible for an additional reduction in a monetary penalty of up to 30% (thirty per cent) of the penalty imposed in relation to the first cartel, in addition to obtaining a reduction in a penalty up to or equal to 100% (one hundred per cent) in respect of the second cartel.
2.2. Procedure for grant of 'lesser penalty plus'
An applicant may file an application for the grant of 'lesser penalty plus', in writing, at any time before receipt of the investigation report ("DG Report") of the Director General ("DG") by the CCI in the first cartel. Subsequently, within 5 (five) working days of the receipt of the 'lesser penalty plus' application, the designated authority8 shall put up the matter before the CCI for its consideration. Thereafter, the CCI shall grant the status of 'lesser penalty plus' to the applicant in relation to the first cartel and simultaneously mark the priority status of the applicant in relation to the second cartel. Further, in the case of more than one application for 'lesser penalty plus' in respect of the second cartel, the CCI shall not consider the application of the subsequent applicant unless the application of the first applicant has been rejected.
However, upon receipt of the application for 'lesser penalty plus', if the CCI is of the opinion that the applicant has not provided 'full, true, and vital' disclosures, the CCI may, after providing an opportunity of being heard to the applicant, reject the application for 'lesser penalty plus'.
2.3. Factors to be considered by the CCI
The Draft LPR has clarified that the CCI has the discretion to decide whether a reduction in monetary penalty should be granted under the 'lesser penalty plus' regime. As such, when exercising this discretion, the CCI must give due consideration to: (i) the likelihood of the second cartel being detected by the CCI or the DG in the absence of the 'lesser penalty plus' application; and (ii) any other factor(s), as may be deemed relevant by the CCI. Further, the CCI is also required to consider all the relevant factors that distinguish the second cartel from the first cartel.
2.4. Contents of the application for 'lesser penalty plus'
The application for 'lesser penalty plus' should inter alia include: (i) basic information of the applicant or its authorized representative, such as name, contact details, etc.; (ii) details of the first cartel in which the applicant has already obtained the priority status; (iii) disclosures in relation to the second cartel; (iv) similarity, in terms of conduct/ product/ service, between the first and second cartel; and (v) justification regarding how the two cartels are separate.
2.5. Forfeiture of leniency application
The Draft LPR proposes to introduce an explicit provision regarding forfeiture of the benefit of 'lesser penalty' or 'lesser penalty plus'. As such, an applicant may forfeit the benefit of 'lesser penalty' or 'lesser penalty plus' if the CCI is satisfied that during the course of inquiry/ proceedings, the applicant has: (i) failed to comply with the conditions on which the benefit of lesser penalty was granted by the CCI; (ii) submitted false evidence or omitted to submit any material information knowing it to be material; or (iii) has failed to make a vital disclosure.
2.6. Withdrawal of leniency application
The Draft LPR has also plugged the lacuna in the LPR by introducing a provision for the withdrawal of the 'lesser penalty' and the 'lesser penalty plus' application at any time before receipt of the DG Report. However, the DG or the CCI may use any information, evidence, or document submitted by the applicant, except its admission.
2.7. Expanding the scope of leniency to cartel facilitators
Under the Competition Act, 2002 ("Act"), only horizontal anti-competitive agreements are presumed to have an appreciable adverse effect on competition. Recognising that all anti-competitive agreements may not fall within the current pigeon-hole provisions of the Act, the Amendment Act expanded the scope of cartel prosecution to include within the ambit of the cartel: (i) hybrid anti-competitive agreements (such as hub and spoke cartels); and (ii) facilitators/ non-participants who had 'intended to participate' in the cartel. Hence, recognising the penal consequences for cartel facilitators, the Draft LPR has expanded the scope of the applicant to include cartel facilitators and the benefit of 'lesser penalty' and 'lesser penalty plus' has been extended to the participants of hub-and-spoke cartels as well.
While the Draft LPR, in line with the LPR provides confidential treatment to the identity of the applicant, it seeks to create a carve-out in relation to the confidential treatment to the information, documents, or evidence furnished by the applicant. As such, the Draft LPR empowers the CCI to disclose such information, documents, or evidence after the receipt of the DG report, in terms of provisions of Regulation 35 of CCI (General) Regulations, 2009.
3. QUICK VIEW
3.1. The introduction of the 'leniency plus' regime is a welcome development as it will further bolster the already successful leniency regime in India. Moreover, it will enable the CCI to unearth multiple cartels and save time and resources expended on cartel investigation. Further, given that the CCI, under the Amendment Act, now has the power to impose penalties based on global turnover and hence has a longer stick, the 'leniency plus' regime makes the carrot more attractive.
3.2. However, it is important to note that the grant of 'leniency plus' hinges on the 'likelihood' of the CCI or the DG detecting the second cartel, and the factors for determining such 'likelihood' are not enumerated in the Draft LPR. Thus, the applicants may not be able to undertake a self-assessment regarding the success of their 'leniency plus' application. Hence, it is probable that a multi-product conglomerate will have a higher success in availing the benefit of 'leniency plus' as there may be little similarity, in terms of conduct/ product/ service, between the first and second cartel as well as no overlap in the corporate participants and/ or the culpable executives involved in the first cartel vis-à-vis the second cartel which will enable them to get a higher credit for disclosures made to the CCI.
1. The Competition Commission of India (Lesser Penalty) Regulations, 2023, Available at: https://www.cci.gov.in/images/stakeholderstopicsconsultations/en/draft-lesser-penalty-regulations1697431514.pdf.
2. The comments on the draft Competition Commission of India (Lesser Penalty) Regulations, 2023 can be submitted here: https://www.cci.gov.in/stakeholders-topics-consultations.
3. The Competition (Amendment) Act, 2023, available at: https://www.cci.gov.in/images/legalframeworkact/en/the-competition-amendment-act-20231681363446.pdf.
4. Our detailed analysis the Amendment Act can be availed at: https://induslaw.com/publications/pdf/alerts-2023/infolex-alert-competition-amendment-act.pdf.
5. The terms "lesser penalty" and "leniency" have been used interchangeably throughout this document.
6. The Competition Commission of India (Lesser Penalty) Regulations, 2009, Available at: https://www.cci.gov.in/legal-framwork/regulations/6/0.
8. An officer of the CCI who is authorized by the Chairperson to function as such, for the purpose of the Draft LPR.
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