1. Proposed transaction ? Ltd is seeking to apply under the leniencyprogramme offered by the Competition Commission of India (hereinafter ‘CCI’). The application is sought to be filed underthe procedure as mandated by Section 46 of the Competition Act (hereinafter ‘Act’)1,The Competition Commission of India (LesserPenalty) Regulations, 2009 (hereinafter ‘Regulation’)2and The Competition Commission of India (Lesser Penalty) Amendment Regulations,2017 (hereinafter ‘Amendment’).3CCI may direct investigation against ? Ltd, an alleged cartel member in ? industry,who wants to file an application for leniency. This memorandum deals with the process of filingan application for leniency by ? Ltd. (hereinafter ‘the applicant’) upon the occurrence of aninvestigation by CCI in ? (hereinafter ‘Industry’). 2.
Guidelines for fillingan application under the leniency programme I. Introduction Cartelsare considered to be the most egregious competition law offence in India underthe Act4.Leniency programme under the present Act and Regulations is the most effectivetool for cartelists seeking leniency, to dodge significant punishment. LeniencyProgramme is available to businesses and individuals5that are part of a cartel agreement or concerted practice or trade associationsthat participate in or facilitate cartel activity. These programmes involve acommitment to a pattern of penalties designed to increase incentives in form oflesser penalties for cartelists to self-report to CCI.6If the applicant believes that the businessactivities carried on by the enterprise, may come under examination by the CCIfor disrupting fair competition then, in order to reduce thequantum of statutory punishment under the act for anti competitive activities, enterprise as a whole or an individual maynotify to CCI about the matter. A leniency application should be made to CCI assoon as possible. There should be substantial information or evidence of thecartel to apply to obtain a leniency marker on by the Applicant.
If the applicantmeets the relevant criteria then he may be entitled to obtain immunity or lesserpenalty than imposed under the Act.7It ispertinent to state that imposition of penalty is discretionary under theprovisions of the Act8and the Regulations9.The discretion of the CCI with respect to reduction in monetary penalty orimmunity will be exercised keeping in mind the stage at which the Applicantcomes forward with the disclosure, the evidence already in possession of theCCI, the quality of the information provided by the Applicant and the entirefacts and circumstances of the relevant case etc. II. Infringements ofcompetition law covered under the Leniency Provisions The leniencyprovision states, “The Commission may,if it is satisfied that any producer, seller, distributor, trader or serviceprovider included in any cartel, which is alleged to have violated section 3,has made a full and true disclosure in respect of the alleged violations andsuch disclosure is vital, impose upon such producer, seller, distributor,trader or service provider a lesser penalty as it may deem fit, than leviableunder this Act or the rules or the regulations.”10Thus it covers infringement of section 3(3) of the Act which deals with cartels,among other things like:• Price-fixing.
• Bid-rigging (collusive tendering).• The establishment of output restrictions or quotas.• Market sharing or market allocation.
There is no criminal liability for cartel conductunder the Act. The leniency programme only extends to the administrativeliability imposed on cartel members under the Act.11 III. Time Frame to beadhered to while filing leniency applicationTheapplication for leniency must be made at the earliest possible point. Althoughthe Regulations specifically provide that leniency applications can be made afterthe investigation has started, they do require that any application be madebefore the Competition Commission of India receives an investigation reportfrom the Director General.
12In the Brushless DC Fans case13,the applicant was only awarded a 75% reduction because the investigation of theDG had already commenced IV. Conditions to availBenefits of Leniency Provisions Regulation 314and the Act15provide the conditions for grant of lesser penalty, which include: · Applicant should ceaseto be a member of the cartel from the time of its disclosure unless otherwisedirected by the Commission.16· Applicant should provide’vital disclosure’ in respect of violation under the Act.17’Vital disclosure’ has been defined underRegulation18 to mean full and true disclosure ofinformation or evidence by the applicant to the Commission, which is sufficientto enable the Commission to form a prima facie opinion about the existence of acartel or which helps establish the contravention of the provisions of Section3 of the Act. The ambit of vital disclosure is extremely specific and it shouldassist the CCI in forming a prima facie view that there exists a cartel andbased on such disclosure provided in the leniency application, the CCI candirect the offices of the DG to investigate the matter.19· Applicant has toprovide all relevant information, documents and evidence as may be required bythe Commission.20· Applicant has to co-operategenuinely, fully, continuously and expeditiously throughout the investigationand other proceedings before the Commission.
21· Applicant should notconceal, destroy, manipulate or remove the relevant documents in any manner,which may contribute to the establishment of a cartel.22· The reduction inmonetary penalty levied upon the applicant will depend upon followingsituations:– The stage at which theapplicant comes forward with the disclosure.- The evidence alreadyin possession of the Commission.- The quality of theinformation provided by the applicant.
– The entire facts andcircumstances of the case.23In addition to the above conditions, the CCImay subject the Applicant to additional restrictions or conditions, as it maydeem fit. V. Categories of leniencyavailable (Marker system) The Lesser Penalty Regulationsalso provides for a priority status depending upon its marker (marker system isdiscussed below) · Firstapplicant: The applicant may be granted benefit of reduction in penalty up toor equal to one hundred percent, if the applicant is the first to make a vitaldisclosure by submitting evidence of a cartel, enabling the CCI to form aprima-facie opinion (as required under Section 26(1) of the Act) regarding theexistence of a cartel. It must be noted that the immunity would be given onlyif the CCI did not have, at the time of application, enough evidence to formsuch a prima facie opinion. Further, the CCI may also grant immunity up to 100%if applicant is the first enterprise to make a vital disclosure by submittingevidence in a matter under investigation which establishes a cartel contravention,and the CCI or the DG did not, at the time of the first leniency applicationpossess sufficient evidence to establish a cartel contravention; · Second andthird applicant(s): The applicant marked as second in the priority status maybe granted reduction of monetary penalty up to or equal to fifty percent of thefull penalty leviable; and the applicant(s) marked as third in the prioritystatus may be granted reduction of penalty up to or equal to thirty percent ofthe full penalty leviable.
It is interesting to note that under the LesserPenalty Regulations, there can be more than one applicant which can be markedas third applicant. Having said that, each and every applicant must add valueto get lesser penalty benefit. · It isimperative to emphasize on the aspect that, Lesser Penalty Regulations providethat second and third applicant (s) would also be entitled to reduction inpenalty on making disclosure by submitting evidence, which in the opinion ofthe CCI, provided significant added value to the evidence already in thepossession of the CCI or the DG to establish an existence of a cartel. Addedvalue has been defined to mean the extent to which the evidence so provided bythe concerned applicant enhances the ability of the CCI or the DG to establishthe existence of a cartel, which is alleged to have violated Section 3 of theAct.1 2 3 4 Section 3, Act 5 6 Statement of objectand reason 7 Punishment for ACActivities 8 9 10 Section 46 11 Civil not criminal Liabilitysection 46 12 Provision from theregulation + 2nd proviso to section 46 13 Case citation 14 The regulation 15 16 17 Section 3(3) Act 18 2(i) of the Leniency Regulation19 Regulation 4 20 21 22 23