Leniency Clause in India and Associated Challenges in the Future
Updated: Dec 21, 2019
Author: Randeep Dahiya
The author is a student at the O.P. Jindal Global University (Sonipat)
The Competition Act, 2002 governs competition within markets and punishes anti-competitive practices such as cartel formation. It also set up Competition Commission of India which overlooks cases pertaining to breach of violations of the 2002 Act. The provisions of the act also contain a leniency clause which benefits individuals and enterprises who come forward and report anti-competitive practices. The benefit involves reduction of penalty, the quantum of which is dependant on multiple factors. Problems like lack of confidentiality has slowed down the implementation of such clauses. If reforms are undertaken by the Commission to tackle these problems, then the leniency regime of India will be considered among the best international practices pertaining to competition laws.
I. Competition Law in India
The Competition Act, 2002 was enacted keeping in mind the current situation of international economic developments in the world and taking into consideration the obsoleteness of current laws and reforms pertaining to competition laws in India. Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was the law which governed competition law in India. But the provisions of the act became obsolete due to the dynamic nature of competition laws. There was a need for immediate change in order to understand the competition regime in India. Subsequently, MRTP Act was repealed by the government and was replaced by the Competition Act, 2002. The Act brought itself the setting up of Competition Commission of India (CCI). The objective of the Act was promotion of competition in the market, to encourage international competition in the country, prevention of practices which have a negative effect on competition and to encourage freedom of trade by all participants concerned.
II. CCI On Leniency Regulations
Leniency regulation provided by the CCI is a provision which offers benefit to applicants who come forward to report anti-competitive activities. Such a relief is available to both, enterprises and individuals, who offer to disclose material information regarding breach of provisions of the Competition Act, 2002 and their role in such breach. They are also required to assist and cooperate with the subsequent investigations taken up by the CCI. The relief involves lessening of penalty or complete amnesty. The provisions for leniency regulation are encoded in the Lesser Penalty Regulations- Competition Commission of India, 2009. The provisions empower the CCI to award a lesser penalty of up to 100% to the first applicant, up to 50% to the second and up to 30% to third and every subsequent applicant. A careful analysis of case laws pertaining to the leniency regime will allow a better understanding of these lesser penalty regulation are to be implemented.
III. Key takeaways from Case Laws
One of the factors that the CCI takes into consideration is the stage at which the applicant applied for leniency. A higher award of lesser penalty is given when the applicant discloses formation of a cartel before the CCI forms a prima facie opinion about the circumstances. If the information was given after the CCI has already taken cognizance of such a cartel, then the award of a lesser punishment is much less. This was evident in Re Cartelization by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters, Re Cartelization in respect of zinc-carbon dry cell batteries market in India (2 cases), Re Anticompetitive conduct in the dry-cell batteries market in India where CCI granted 100% lesser penalty to 1st applicants who provided information before CCI took cognizance of formation of such cartel. The CCI also places reliance on how much ‘significant value’ was added by the information disclosed by the applicant. The significant value-added is positively related to the quantum of punishment reduced. The approach taken by the CCI with the respect to the ‘significant value-added’ concept has been mixed. In Re: Anticompetitive conduct in the dry-cell batteries market in India, the applicants applied for leniency only after CCI had already conducted the raid and most of the evidence had been collected. In spite of the revelations made by the applicants not being able to add significant value to the investigation of the case, CCI decided to award 30% reduction in punishment. On the other hand, in Re: Cartelization by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters, the second applicant was only awarded 30% decrease in punishment instead of 50% even though the information was disclosed by the applicant before the raid took place. When it comes to calculation of penalty, there are no clear guidelines laid down by the CCI to establish uniformity in the quantum of punishment to be decreased. For instance, in the dry cell case, a penalty of 1.25 times was awarded even though the raid was conducted. This is in stark contrast to the broadcasting service providers case where a penalty of 1.50 times was awarded even though the raid had not been conducted.
IV. Challenges Associated with the Leniency Clause
The biggest concern of applicants with the leniency clause is the confidentiality of the cases. A careful analysis of the judgments passed by the CCI suggests that details concerning name of individuals/enterprises, evidence, customers and the method of working by these individuals/enterprises are disclosed in these cases. Such disclosure allows the effected parties in these cases to bring action to court or file for compensation claims against the applicants. Other challenges to the leniency clause include lesser number of applications, low awareness of leniency clause and its procedures, opaque procedural steps to apply for and be granted leniency and little or no incentive to come forward to report cartel formations.
India has implemented the leniency regime in the right spirit. But problems considering confidentiality inter alia are hindrances to the implementation of such clauses and consequently undermine the programme. Such issues will deter applicants from coming forward and reporting cartel practices in the market. The CCI should consider taking a more pragmatic approach to cases of leniency where the principle of minimal disclosure should be adhered to. In cases of no violation, for instance, Re Alleged cartelization in the flashlight market in India, the CCI should consider not giving final orders which may lead to disclosure. Instead, a high-level statement should be issued to ensure minimal disclosure. If such practices are implemented by CCI, then the leniency regime of India will be considered among the best international competition law practices.
 Chapter III of the Competition Act, 2002
 Section 46 of the Competition Act, 2002
 These regulations underwent significant amendments in August 2017 such as broadening of the definition of the term applied to include individuals in addition to the enterprise, potential lenient treatment to a greater number of applicants as opposed to three etc.
 Regulation 4 of the Lesser Penalty Regulations
 Suo Moto Case No. 02 of 2013, Order dated 11.07.2018
 Suo Moto Case No. 02 of 2016, Order dated 19.04.2018
 Suo Moto Case No. 02 of 2017, Order dated 30.08.2018
 Supra 7
 Suo Moto Case No. 01 of 2017; Order dated 06.11.2018