1. Penalty) Regulations, 2009 (hereinafter ‘Regulation’)[2] and The Competition

1.                 
Proposed transaction

 

? Ltd is seeking to apply under the leniency
programme offered by the Competition Commission of India (hereinafter ‘CCI’).  The application is sought to be filed under
the procedure as mandated by Section 46 of the Competition Act (hereinafter ‘Act’­­­­­)1,
The Competition Commission of India (Lesser
Penalty) Regulations, 2009 (hereinafter ‘Regulation’)2
and The Competition Commission of India (Lesser Penalty) Amendment Regulations,
2017 (hereinafter ‘Amendment’).3
CCI may direct investigation against ? Ltd, an alleged cartel member in ? industry,
who wants to file an application for leniency.

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This memorandum deals with the process of filing
an application for leniency by ? Ltd. (hereinafter ‘the applicant’) upon the occurrence of an
investigation by CCI in ? (hereinafter ‘Industry’).

 

2.                 
Guidelines for filling
an application under the leniency programme

 

                                
I.           
Introduction

Cartels
are considered to be the most egregious competition law offence in India under
the Act4.
Leniency programme under the present Act and Regulations is the most effective
tool for cartelists seeking leniency, to dodge significant punishment. Leniency
Programme is available to businesses and individuals5
that are part of a cartel agreement or concerted practice or trade associations
that participate in or facilitate cartel activity. These programmes involve a
commitment to a pattern of penalties designed to increase incentives in form of
lesser penalties for cartelists to self-report to CCI.6

If the applicant believes that the business
activities carried on by the enterprise, may come under examination by the CCI
for disrupting fair competition then, in order to reduce the
quantum of statutory punishment under the act for anti competitive activities, enterprise as a whole or an individual may
notify to CCI about the matter. A leniency application should be made to CCI as
soon as possible. There should be substantial information or evidence of the
cartel to apply to obtain a leniency marker on by the Applicant. If the applicant
meets the relevant criteria then he may be entitled to obtain immunity or lesser
penalty than imposed under the Act.7

It is
pertinent to state that imposition of penalty is discretionary under the
provisions of the Act8
and the Regulations9.
The discretion of the CCI with respect to reduction in monetary penalty or
immunity will be exercised keeping in mind the stage at which the Applicant
comes forward with the disclosure, the evidence already in possession of the
CCI, the quality of the information provided by the Applicant and the entire
facts and circumstances of the relevant case etc.

 

                             
II.           
Infringements of
competition law covered under the Leniency Provisions

 The leniency
provision states, “The Commission may,
if it is satisfied that any producer, seller, distributor, trader or service
provider 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 and
such disclosure is vital, impose upon such producer, seller, distributor,
trader or service provider a lesser penalty as it may deem fit, than leviable
under this Act or the rules or the regulations.”10
Thus 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 conduct
under the Act. The leniency programme only extends to the administrative
liability imposed on cartel members under the Act.11

 

                          
III.           
Time Frame to be
adhered to while filing leniency application

The
application for leniency must be made at the earliest possible point. Although
the Regulations specifically provide that leniency applications can be made after
the investigation has started, they do require that any application be made
before the Competition Commission of India receives an investigation report
from the Director General.12
In the Brushless DC Fans case13,
the applicant was only awarded a 75% reduction because the investigation of the
DG had already commenced

 

                          
IV.           
Conditions to avail
Benefits of Leniency Provisions

 

Regulation 314
and the Act15
provide the conditions for grant of lesser penalty, which include:

·        
Applicant should cease
to be a member of the cartel from the time of its disclosure unless otherwise
directed by the Commission.16

·        
Applicant should provide
‘vital disclosure’ in respect of violation under the Act.17
‘Vital disclosure’ has been defined under
Regulation18  to mean full and true disclosure of
information or evidence by the applicant to the Commission, which is sufficient
to enable the Commission to form a prima facie opinion about the existence of a
cartel or which helps establish the contravention of the provisions of Section
3 of the Act. The ambit of vital disclosure is extremely specific and it should
assist the CCI in forming a prima facie view that there exists a cartel and
based on such disclosure provided in the leniency application, the CCI can
direct the offices of the DG to investigate the matter.19

·        
Applicant has to
provide all relevant information, documents and evidence as may be required by
the Commission.20

·        
Applicant has to co-operate
genuinely, fully, continuously and expeditiously throughout the investigation
and other proceedings before the Commission.21

·        
Applicant should not
conceal, destroy, manipulate or remove the relevant documents in any manner,
which may contribute to the establishment of a cartel.22

·        
The reduction in
monetary penalty levied upon the applicant will depend upon following
situations:-

–         
The stage at which the
applicant comes forward with the disclosure.

–         
The evidence already
in possession of the Commission.

–         
The quality of the
information provided by the applicant.

–         
The entire facts and
circumstances of the case.23

In addition to the above conditions, the CCI
may subject the Applicant to additional restrictions or conditions, as it may
deem fit.

 

                             
V.           
Categories of leniency
available (Marker system)

 

The Lesser Penalty Regulations
also provides for a priority status depending upon its marker (marker system is
discussed below)

·       
First
applicant: The applicant may be granted benefit of reduction in penalty up to
or equal to one hundred percent, if the applicant is the first to make a vital
disclosure by submitting evidence of a cartel, enabling the CCI to form a
prima-facie opinion (as required under Section 26(1) of the Act) regarding the
existence of a cartel. It must be noted that the immunity would be given only
if the CCI did not have, at the time of application, enough evidence to form
such 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 submitting
evidence 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 application
possess sufficient evidence to establish a cartel contravention;

·       
Second and
third applicant(s): The applicant marked as second in the priority status may
be granted reduction of monetary penalty up to or equal to fifty percent of the
full penalty leviable; and the applicant(s) marked as third in the priority
status may be granted reduction of penalty up to or equal to thirty percent of
the full penalty leviable. It is interesting to note that under the Lesser
Penalty Regulations, there can be more than one applicant which can be marked
as third applicant. Having said that, each and every applicant must add value
to get lesser penalty benefit.

·       
It is
imperative to emphasize on the aspect that, Lesser Penalty Regulations provide
that second and third applicant (s) would also be entitled to reduction in
penalty on making disclosure by submitting evidence, which in the opinion of
the CCI, provided significant added value to the evidence already in the
possession of the CCI or the DG to establish an existence of a cartel. Added
value has been defined to mean the extent to which the evidence so provided by
the concerned applicant enhances the ability of the CCI or the DG to establish
the existence of a cartel, which is alleged to have violated Section 3 of the
Act.

1

2

3

4 Section 3, Act

5

6 Statement of object
and reason

7 Punishment for AC
Activities

8

9

10 Section 46

11 Civil not criminal Liability
section 46

12 Provision from the
regulation + 2nd proviso to section 46

13 Case citation

14 The regulation

15

16

17 Section 3(3) Act

18 2(i) of the Leniency Regulation

19 Regulation 4

20

21

22

23