Busting cartels through leniency

January 4, 2021 4:40 AM

Encouraging erring entities to come forward in leniency and cooperate with the regulator

Cartel arrangements are often hatched in secrecy and it is very difficult to obtain direct evidence of meeting of minds to establish the same.The CCI has embraced a pragmatic approach that, on one hand, encourages erring entities to come forward in leniency and cooperate with the regulator and, on the other, leads to effective and faster market correction.

By Sanskriti Jain

All over the world, including in India, antitrust authorities have leniency programmes, which, in these times, have proved to be the most effective tool to bust cartels. Cartels are commonly understood as associations of manufacturers/suppliers, etc, who, with the aim of maintaining prices at high levels or limiting supply in the market, restrict competition amongst themselves. But what does ‘leniency’ mean? Simply put, it means award of a punishment more merciful or tolerant than what is otherwise expected. The concept may be understood to be akin to the situation of a ‘state approver’ under the criminal law, whereby ‘tender of pardon to accomplice’ may be provided on him making full and true disclosures about commission of an offence and the persons involved therein.

Under competition law’s leniency programme, the antitrust regulator, i.e. the Competition Commission of India (CCI), may, if it is satisfied that a cartel participant has made full and true disclosures with respect to an alleged cartel arrangement and that such disclosures have been vital in establishing the cartel, impose upon it lesser penalty as it may deem fit than what is otherwise leviable under the law.

As is well known, cartel arrangements are often hatched in secrecy and it is very difficult to obtain direct evidence of meeting of minds to establish the same. Further, with every aspect of human life now being governed by digital media and highly secure modes of communication being available, collection of evidences to establish cartels has become even more difficult.

In such circumstances, if a cartel participant comes forward with a leniency application and provides disclosures and direct evidences, there is nothing better that a competition authority can look for. In return for such cooperation, the competition authority offers to the applicant leniency, i.e. immunity from criminal sanctions or imposition of lesser penalty, as is the case in India.

In three out of the last five cartels decisions pronounced by the CCI, which included even the first international cartel, the major evidence the CCI relied upon is the disclosures made by cartel participants themselves. This shows the effectiveness of the leniency regime in unearthing cartels.

The trend of decisions on leniency applications given by the CCI till date shows that the CCI adopts a balanced approach in giving reductions in penalty to leniency applicants. In every case till date, the CCI has given the maximum 100% reduction in penalty to the first leniency applicant, if disclosures made by such applicant led to commencement of a new case. In other cases also where the first leniency applicant approached the CCI during pendency of investigation in an ongoing case, the CCI has granted to the applicant reduction in penalty up to 75% or 50%, as the case may be. To the second leniency applicant, in the international cartel case, maximum 50% reduction in the penalty amount has been granted by the CCI. In other cases also, second leniency applicants have ended up securing up to 30% reduction in penalty amount. Benefit of such reduction in penalty has been extended by the CCI not only to the firms involved in cartel approaching the CCI, but also to their concerned individuals who were cartelising at the behest of the firms.

This shows the nuanced stance adopted by the CCI in implementing its leniency programme, keeping in mind the micro and macro impact that cartels have on the economy of a nation. An increasing number of cartel decisions involving leniency applications bear evidence to the fact that the investigations being done by the investigative arm of the CCI (the director general) are of par excellence quality, which prompts cartel participants to come forward and admit their guilt, seeking reduction in penalty rather than facing the brunt of entire penalty and filing and fighting multiple appeals there-against.

The CCI has embraced a pragmatic approach that, on one hand, encourages erring entities to come forward in leniency and cooperate with the regulator and, on the other, leads to effective and faster market correction. As India’s competition regime evolves, it is in the interest of all stakeholders including consumers as well as the Indian economy that a robust implementation of CCI’s leniency regime takes place so that egregious practices like cartelisation can altogether be eliminated.

The author is deputy director, Competition Commission of India. Views are personal

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