NEWS FLASH | CCI’s Revamped Leniency Regime Goes Live
Co-authored by Zenia Cassinath (Principal Associate) and Gunjan Jadiya (Associate)
The new leniency regime, under the Competition Act 2002 (“Act”) (as amended) was brought into force with effect from 20th February 2024. These changes were implemented through the simultaneous enforcement of certain provisions of the Competition Amendment Act, 2023 (“Amendment Act”) by the Central Government and the notification of the Competition Commission of India Lesser Penalty Regulations, 2024 (“Regulations”) by the Competition Commission of India (“CCI”), which replaced the earlier 2009 regulations in this regard. The CCI has also issued ‘FAQs on Lesser Penalty Regime’ (“FAQs”) to provide additional clarity on this new leniency regime. One of the most significant changes to the erstwhile leniency regime is the introduction of the leniency plus mechanism, which provides that if a cartel participant seeks leniency for its involvement in a known cartel (first cartel) and also provides information regarding another undisclosed cartel (second cartel) to the CCI then, it stands to benefit from additional penalty reductions for its conduct in the known cartel as well as the newly disclosed cartel. Set out below is a brief overview of the Indian leniency regime pursuant to these changes.
Quantum of Penalty Reductions
For Leniency Applicants: Leniency applicants who are awarded the first, second, and third (and subsequent) priority markers will have the respective right to claim up to 100%, 50% and 30% reduction in penalties that may be imposed on the enterprise and/or individuals of the enterprise for participating in anticompetitive cartel activity. Notably, the Regulations stipulate that the first priority marker would be awarded to the first leniency applicant that makes full and vital disclosures which enables the CCI or its investigative arm, the Director General, (“DG”) to establish either (i) a prima facie opinion regarding the existence of a cartel or (ii) contravention of the provisions of the Act relating to anticompetitive agreements, as the case may be. Additionally, applicants for subsequent priority markers are required to make disclosures with ‘significant added value’ that enhances the ability of the CCI or DG, to establish the existence of a cartel which is alleged to have contravened the provisions of the Act relating to anticompetitive agreements.
For Leniency Plus Applicants:Leniency plus applicants, that make full, true and vital disclosures in respect of a newly disclosed cartel, that enable the CCI to form a prima facie opinion regarding the existence of such newly disclosed cartel, may be granted (i) an additional penalty reduction of up to 30% in the first cartel and (ii) reduced penalties of up to 100% with respect to contraventions of the newly disclosed cartel.
Procedure for Grant of Leniency
In order to avail the benefits of these lesser penalty provisions, a leniency and/or leniency plus applicant can adopt one of two approaches to make their applications on the basis of information available with them. The first is where an applicant submits a complete application which includes all the material information required to be granted a priority status marker in the manner set out in the Regulations. Alternately, if the applicant does not have all material evidence readily available, then it can intimate the CCI of the existence of the cartel and thereafter within 15 days submit the material information required to support these claims in the manner specified under the Regulations, failing which the applicant would lose its priority status marker. It may be noted that as per the FAQs, while an applicant is intimated when a priority status is marked, the actual priority status awarded is intimated to the applicant only at the time of the final order by the CCI. As such, securing priority status doesn’t assure penalty reduction (which is determined on the basis of the factors discussed below). Additionally, the Regulations stipulate that until the evidence submitted by the first leniency applicant has been evaluated, the evidence submitted by the subsequent applicants will not be assessed.
Confidentiality
The CCI and DG are required to maintain strict confidentiality regarding the identity of the applicants and the evidence submitted by leniency applicants. To this end, it may be noted that the FAQs clarify that the identity of the applicant must be disclosed at the time of first contact with CCI when seeking a priority status and as such an anonymous application cannot be filed under the Indian leniency regime. That said, deviations from this confidentiality mandate are permitted to the extent that the disclosure is required by law, the leniency applicant has provided written consent, or there has been a public disclosure by the applicant itself. Further information can also be disclosed by the DG, without obtaining the applicant’s consent but after (i) recording its reasons in writing and (ii) obtaining the CCI’s approval, if such disclosure is required for the purposes of the investigation. Additionally, in the event a leniency application is withdrawn, the CCI and DG can use the information submitted in the application for the purposes of the Act, with the exception of any admissions made by the applicant.
Miscellaneous
Timelines: Leniency and leniency plus applications can be made and withdrawn at any time prior to the CCI’s receipt of the DG’s investigation report in the manner specified under the Regulations.
Persons making leniency applications: The Amendment Act has broadened the scope of cartel provisions to include cartel facilitators, as such the benefits of the Regulations will also extend to such cartel facilitators even if they are not involved in identical or similar trades but participate or intend to participate in furtherance of the cartel. Further as per the FAQs, (i) enterprises and their individuals, as well as (ii) non-competing group companies, can jointly apply for lesser penalty and/or lesser penalty plus. However, competitors in the same market (even within the same group) cannot jointly file a leniency application. Additionally, it may be noted that an association and its office-bearers can file a common application, however, individual members of an association cannot jointly make a leniency application.
CCI Discretion: The Regulations provide that at the time of determining and granting a reduction in penalty, the CCI must give due regard to factors such as (i) the stage at which the applicant came forward with the disclosure; (ii) evidence already in possession of the CCI; (iii) incriminating nature of the information provided; (iv) fulfilment of conditions that may have been imposed on the applicant by the CCI etc. Further, with respect to granting priority status to leniency plus applicants, the CCI is also required to give due regard to (i) factors that distinguish the newly disclosed cartel from the existing cartel; and (ii) the likelihood that the newly disclosed cartel would have been detected without the leniency plus application. That said, applicants stand to lose their leniency and leniency plus benefits in case of (i) non-compliance with the conditions upon which leniency/leniency plus was granted; (ii) submission of false evidence or wilful omission of material information; (iii) disclosures that do not meet the criteria of ‘vital disclosures’ and (iv) discontinued co-operation with the CCI before the completion of the proceedings before the CCI.