The leniency regime under Indian Competition law comprises section 46 of the Competition Act 2002 (‘Act’), and the Competition Commission of India (Lesser Penalty) Regulations 2009 (‘Regulations’) as amended in August 2017. The amendments bring clarity and certainty to the leniency provisions and provide additional incentives: leniency to individuals, access to file and confidentiality of information obtained from leniency applicants. The Competition Commission of India (‘CCI’) has passed four leniency orders under the Regulations since 2017. Crucially, the CCI has extended the scope of leniency provisions to individuals. It has, thus, acknowledged that without incentivizing individuals there is no real carrot to drive forward a leniency regime. Even if a company were to apply for leniency in the absence of a provision for leniency for individuals, it would rarely be able to make full disclosures to the CCI given that the individuals involved would be the repositories of such information.
While dealing with leniency cases, CCI has laid emphasis on the ‘significant value added’ test which is enshrined under s 46 of the Act read with reg 4 of the Regulations which empowers the CCI to impose lesser penalties on an entity that makes a ‘vital disclosure’ by submitting evidence of a cartel; or in cases where applicants subsequent to the first make disclosures which provide ‘significant added value’ to the evidence already in possession of the CCI or the Director General (DG). However, there appears to be some inconsistency in the approach of CCI, wherein it has provided greater incentive to subsequent applicants, while encouraging them to withhold value adding information given that mere co-operation may earn them leniency at par with applicants who do make ‘value addition’.
Suo Moto Case No 3 of 2014
The CCI received the first leniency application related to cartelization of electronic companies in respect of tenders floated by Indian Railways (Suo Moto Case No 03 of 2014). M/S Pyramid Electronics applied for leniency during the investigation. In the order, the CCI carefully married its decision to the letter of law: it noted that Pyramid Electronics was the first and only party to accept the existence of a cartel, that the evidence submitted by them supported the evidence provided by the CBI and revealed the modus operandi of the cartel, and that complete co-operation was extended by Pyramid. The co-operation was considered ‘in conjunction with the value addition’ provided in determining the existence of cartel. Thus, as per the order, co-operation by itself would do little to earn leniency in the absence of such ‘value addition’. The time of application earned Pyramid only a 75 per cent, and not complete, reduction in penalty.
The CCI limited itself to the scope of the Regulations while deciding which factors to account for in granting leniency. Market players were ensured predictability in terms of their treatment under the law. Such predictability is key to encouraging admission of anti-competitive behavior. Even so, the CCI departed from the letter of law to extend leniency to individuals, ensuring workability of the law.
Suo Moto Case No 02 of 2016
The CCI in Suo Moto Case No 02 of 2016, clarified: first, when absolute immunity may be granted to an applicant with first marker status, and second, the treatment under law of subsequent applicants at various stages. Panasonic, the first applicant, disclosed cartelisation amongst three leading zinc-carbon dry cell battery manufacturers in India including Eveready and Nippo and their participation in the three-member strong Association of Indian Dry Cell Manufacturers (AIDCM), which disseminated information for monitoring the cartel. These disclosures, consistent co-operation and the lack of any evidence of anti-competitive activities in the industry prior to the application earned Panasonic complete leniency. The CCI observed that the second and third leniency applicants, Eveready and Nippo respectively, did not provide ‘significant value addition’ to the incriminating evidence already available. Still, given that they co-operated and corroborated the available evidence, the CCI factored their conduct (through depositions, admission of cartelization, marker status) and granted a reduction of penalty. This marks a departure from the first leniency order, wherein co-operation extended by even a first marker status carrying applicant was considered in conjunction with and not independent of the value of the disclosures made by it.
Case No 50 of 2015
In Case No 50 of 2015, the CCI granted 50 per cent. leniency to the first and third applicant. It noted that the evidence and co-operation provided by the first applicant helped proving the existence of a cartel in relation to two tenders. Similarly, it reduced the penalty of three more subsequent applicants based on the value addition of their evidence, priority status, co-operation, etc. The fifth and sixth leniency applicants were not granted any reduction in penalty as they made minimal value addition to the available incriminating material. The order suffers so: one, it admits to there being at least minimal value addition on part of the fifth applicant. Still, the applicant is not treated with the leniency afforded to subsequent applicants in the second leniency order, though the value addition by the latter was nil. Two, the CCI cites the fact of the applicant being the ringleader of the cartel and the consequent benefit accrued to it as factor for refusing leniency. It allows equal immunity to the primary participants of a cartel, as long as there was no evidence of coercion in ensuring the participation of other undertakings in the agreement. This approach ensures that a ringleader who is most likely to be the best source of information is not deterred from making an application for leniency.
Suo Motu Case No 02 of 2013
The latest leniency decision (Suo Motu Case No 02 of 2013) has carefully considered the relevant factors that have been defined by the Regulations and its own orders and the CCI has also taken care to explicitly mention these factors in its analysis.
The leniency orders passed by the CCI and the recent amendments to the Regulation move towards relaxation of the leniency regime through greater incentivization. However, a benefit becomes an incentive only upon certainty that it shall be the reward of a certain kind of conduct. The CCI’s orders initially failed to provide predictability. It is necessary for the CCI to spell out why two seemingly similarly placed parties are meted out differential treatment. For instance, in the second and third leniency orders, subsequent applicants are noted to have made no or minimal value addition in terms of evidence proffered. Both, however, provide full co-operation in the course of the investigation. While one is treated leniently, the other is not. A perusal of the orders reveals one possible reason for this differentiation: that the evidence provided by subsequent applicant in the second case was the first instance of confirmation of the evidence provided by the first applicant. To that extent it holds corroboratory value. The subsequent applicant’s admissions in the third order lack this quality. In the absence of any such elucidation of the difference in treatment, corroboratory value of evidence fails to become a set parameter for granting leniency. A possible subsequent applicant is, thus, left in a dilemma: is corroboratory value a sine qua non for being granted leniency or will mere co-operation suffice?
We submit that if the CCI will better define the basis of its decisions, then its approach of granting reductions will increase the number of leniency applications (including parties coming forward at an advanced stage of investigation). This will be the case even if the subsequent applicants do not provide ‘significant value addition’ but assist in corroborating evidence already available with the CCI.
Nidhi Singh is a Co-founder & Advocate at BlackPearl Chambers (Advocates & Solicitors), New Delhi.
Shivani Swami is a final year law student at National Law Institute University, Bhopal.