Understanding CCI’s Leniency Plus Regime for Cartel Disclosures

The Competition Commission of India (“CCI”) notified the CCI (Lesser Penalty) Regulations, 2024[i] (“LP Regulations”) on February 20, 2024.  The LP Regulations arrived shortly after the Ministry of Corporate Affairs (“MCA”) notified the Leniency Plus regime paving the way for the CCI to roll out a new cartel-detecting tool. The Competition (Amendment) Act, 2023, provided for the introduction of a ‘Lesser Penalty’ or LP regime through delegated legislation.[ii] A draft of the LP Regulations was released for public consultation by the CCI in October 2023.[iii] This article aims to analyse the changes brought forward by the LP Regulations and its potential impact on the anti-trust regime in India.

The Competition (Amendment) Act, 2023 amended Section 46 of the Competition Act, 2002 (“Act”). The amended provisions cover any producer, seller, distributor, trader, or service provider (“Entities”) included in a cartel which has violated Section 3 of the Act. Section 3 of the Act prohibits Entities from partaking in anti-competitive agreements. The amended provision permitted such Entities to make true and honest disclosures regarding the violations to the CCI. If the disclosures are deemed to be vital, a lesser penalty may be imposed on the Entities by the CCI. This mechanism is generally known as the ‘Leniency’ regime, interchangeably used with the ‘Lesser Penalty’ regime. [iv] The LP Regulations deal with both the Lesser Penalty (“LP”) and Lesser Penalty Plus (“LP Plus”) regimes, which have been discussed below.

The LP Regulations impose a few conditions for Entities seeking the benefit of the LP or LP Plus regime, as per which the Entities have to:

  • cease to participate in the cartel after disclosing information to the CCI;
  • provide vital as well as all relevant information regarding the contravention of section 3 of the Act;
  • cooperate genuinely, fully and throughout the investigation and not destroy or conceal any relevant documents or give any false evidence[v];
  • provide names of all individuals who are involved in the cartel on whose behalf either LP or LP Plus regime is sought;
  • comply with other requirements as prescribed by the CCI under Regulation 3 of the LP Regulations.

Understanding the Lesser Penalty Regime

The LP regime has been operationalised in a tiered approach, with the first applicant receiving the maximum benefit, and subsequent applicants getting a lesser reduction in the monetary penalty imposed.

Applicant

Requirements

Benefit

1st Applicant

The applicant is the first to make a vital disclosure by submitting evidence of a cartel to the CCI. This evidence should enable the CCI to form a prima facie opinion regarding the cartel’s existence.[vi]

Reduction in penalty of up to or equal to 100% of the penalty imposed by the CCI.

The applicant is the first to make a vital disclosure which establishes the contravention of Section 3 of the Act by a cartel, in a matter which is under investigation by the CCI.[vii]

2nd Applicant

The applicant discloses evidence which provides ‘significant added value’ as per the CCI, to the evidence already in possession of the CCI. [viii]

It is clarified that ‘significant added value’, for the purposes of the LP Regulations, means the extent to which the evidence provided enhances the ability of the CCI to establish the existence of a cartel.[ix]

Reduction of monetary penalty up to or equal to 50% of the penalty imposed.

3rd or subsequent Applicants

The applicant discloses evidence which adds ‘significant added value’ as per the CCI, to the evidence already in possession of the CCI. This information should help in establishing the existence of the cartel.[x]

Reduction of monetary penalty up to or equal to 30% of the penalty imposed.

Lesser Penalty Plus Regime

The LP Regulations provide for the LP Plus regime, in addition to the LP regime. LP Plus regime permits an applicant, who had earlier made a full, true, and vital disclosure regarding the contravention of Section 3 of the Act by a cartel (“First cartel”), makes a full, true, and vital disclosure regarding the existence of another cartel (“Second cartel”) of which it was a part of, and has allegedly violated Section 3 of the Act, is eligible to get reduced monetary penalty.

The reduced monetary penalty for the applicant sharing information about the Second cartel will be two-fold. Firstly, the applicant may be granted an additional reduction in penalty up to or equal to 30% of the penalty imposed as regards the First cartel. Secondly, the applicant may receive the benefit of a reduction in penalty up to or equal to 100% in terms of the Second cartel i.e. the newly disclosed cartel.

Other Features

The LP Regulations provide for the procedure for the grant of either LP or LP Plus. The procedure involves the applicant filing an application with all the requisite details. The details to be included in the application have also been listed in the LP Regulations.[xi] Another key feature of the entire scheme is the identity of the applicant being kept confidential. This includes all information, documents, and evidence furnished by the applicant to the CCI.[xii]

Analysis

The LP Regulations are a positive step for regulating anti-competitive cartels in the economy. It will enable any entity and individual who is facing potential penalties from the CCI, to apply for a lesser penalty. The earlier applicant under this regime gets a greater reduction in monetary penalty as compared to subsequent applicants. Additionally, the confidentiality norms safeguard the identity of the ‘whistle-blower’ during the course of the investigations.

These Regulations also appear to be in line with anti-trust regulations across multiple jurisdictions. To name a few jurisdictions, the Leniency Plus regimes are currently being followed in the United States, United Kingdom, Singapore, and Brazil. The new LP Regulations, which mark a watershed moment in competition regulation in India, would hopefully lead to enhanced enforcement against cartels and anti-competitive agreements, act as a deterrent for possible wrongdoers and increase market transparency by bringing into light previously unknown cartels, which is bound to ensure fair competition in the market.

References:

[i] Available at: https://www.cci.gov.in/images/whatsnew/en/gazzete1708451685.pdf

[ii] Section 33 of the Competition (Amendment) Act, 2023; available at: https://prsindia.org/files/bills_acts/acts_parliament/2023/The%20Competition%20(Amendment)%20Act,%202023.pdf

[iii] The draft CCI (Lesser Penalty) Regulations, 2023; available at: https://www.cci.gov.in/images/stakeholderstopicsconsultations/en/draft-lesser-penalty-regulations1697431514.pdf

[iv] FAQ 4 of the CCI’s FAQs on Lesser Penalty Regime; available at: https://www.cci.gov.in/images/whatsnew/en/faqs-on-cci-lp-regime1708500979.pdf

[v] Regulation 3(1) of the LP Regulations.

[vi] Regulation 4(a) of the LP Regulations.

[vii] Proviso to Regulation 4(a) of the LP Regulations.

[viii] Regulations 4(b) and 4(c)(i) of the LP Regulations.

[ix] Explanation to Regulation 4(b) of the LP Regulations.

[x] Regulations 4(b) and 4(c)(ii) of the LP Regulations.

[xi] Schedule I and Schedule II of the LP Regulations.

[xii] Regulation 8(1) of the LP Regulations.

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The LP Regulations provide for the LP Plus regime, in addition to the LP regime. LP Plus regime permits an applicant, who had earlier made a full, true, and vital disclosure regarding the contravention of Section 3 of the Act by a cartel (“First cartel”), makes a full, true, and vital disclosure regarding the existence of another cartel (“Second cartel”) of which it was a part of, and has allegedly violated Section 3 of the Act, is eligible to get reduced monetary penalty. The reduced monetary penalty for the applicant sharing information about the Second cartel will be two-fold. Firstly, the applicant may be granted an additional reduction in penalty up to or equal to 30% of the penalty imposed as regards the First cartel. Secondly, the applicant may receive the benefit of a reduction in penalty up to or equal to 100% in terms of the Second cartel i.e. the newly disclosed cartel.

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