Written by Pranav Gupta.

I. Introduction

Recently, the Indian anti-trust authorities proceeded with raids on the local offices of various media agencies, following tip-offs under the leniency scheme, raising potential questions about the functioning and effectiveness of the leniency regime in India. The Competition Act, 2002 (“the Act”) was enacted in order to maintain healthy competition in the market as per its preamble. Later, the Competition Commission of India (“CCI”) came up with the Competition Commission of India (Lesser Penalty) Regulations 2009 to incentivize entities to disclose their involvement in anti-competitive practices, specifically cartelization. In order to further streamline the process, the 2009 Regulations were repealed and CCI notified the CCI (Lesser Penalty) Regulations, 2024 (“2024 Regulations”), unveiling the framework of Leniency Plus in the country.

Though the 2024 Regulations encourage the identification of second cartels as well, apart from the one already detected, there exist certain loopholes for the practical enforcement of the same. This article firstly analyses the various decisions of the CCI with regards to the leniency programme in India. Secondly, it attempts to identify the potential gaps within the leniency plus framework to suggest changes in this regard. Lastly, it analyses best practices from various jurisdictions to make suggestions for strengthening the functioning of the leniency regime within the country.

II. Analyzing CCI’s Leniency Programmes through Judicial Precedents

While enforcing the above stated leniency norms, the CCI has various precedents, with the first decision in this behalf coming in the case of Brushless DC Fans. In the Brushless case, the cartelist received 100% leniency as it helped in the DG’s investigation, while cooperation with CCI, withdrawal from cartel, and non-coercion were treated as mitigating factors in this regard. However, in the Pune Municipal Corporation case, the CCI took a divergent view by granting only a 50% penalty reduction to a cartelist, despite its valuable disclosure of the cartel’s modus operandi.

After these cases, the CCI resorted to a balanced approach in the cases of Essel Shyam Communication and Moulded Fiber Glass, where the CCI assessed lesser penalties based on the timing, relevance, and quality of information provided in accordance with Regulation 3(4) of the 2009 Regulations (currently Regulation 3(9) of the 2024 Regulations). However, this balanced approach started facing roadblocks with the onset of the pandemic, as seen in the case of Paper Manufacturing Industry, where COVID-19 was considered as a supervening factor to waive penalties. Further, MSME status was considered in the Polyest Plastics and Ors. case, while on the other hand recidivism was overlooked in the Rakesh Khare case.

The above instances show how peripheral factors often overshadow core elements like timely reporting and quality of disclosure, highlighting the lack of uniformity in CCI’s interpretation of its leniency scheme. Granting such discretionary powers may lead to arbitrary outcomes, especially since the leniency regime relies heavily on voluntary reporting. To address these inconsistencies, legal provisions must be complemented by consistent interpretation and effective enforcement. While doing so, the CCI must account for India’s peculiar market conditions that foster collusion, such as instances where a Key Managerial Person (“KMP”) holds similar positions across enterprises in the same market, enabling the flow of commercially sensitive information.

III. Unveiling the Leniency Plus Framework of India

Regulation 2(k) of the 2024 Regulations defines ‘vital disclosure’ as one that aids the CCI in forming a prima facie opinion, or assists the DG in preparing its report. In order to incentivize the cartelists, a priority marker system has been introduced: the first cartelist to disclose qualifies for 100% penalty waiver, the second for up to 50% reduction, and the third for up to 30%. Additionally, the “leniency plus” mechanism allows a cartelist to secure a 30% reduction in the initial case alongside full immunity in a subsequent disclosure.

However, the efficiency of this regime in cartel prohibition has been subject to debates in many countries. The European Union has objected to adopting this Leniency Plus regime within its competition law framework as a result of its successful existing Leniency Program. Portugal also did away with the framework after in 2012 after it realized that the existing framework is not producing the desired results and rather leading to adverse effects. Among the countries with the established competition law jurisprudence, the framework has arguably been successful only in United States of America (“USA”). But in order to see the same results in India, it is imperative to understand the USA’s framework, where Amnesty Plus operates alongside Penalty Plus, under which an enterprise pleading guilty to an antitrust charge loses potential leniency in the initial case and faces enhanced sentencing by the Department of Justice if it fails to disclose subsequent violations. By contrast, Indian law does not address this gap, while South Korea’s optional leniency plus programme has faced misuse by cartelists.

The above international experiences advocate for adoption of penalty plus framework by the CCI subject to a two-pronged approach. Firstly, it helps in closing the multimarket loophole by making continued concealment of related cartels an aggravating factor, thereby effectively removing the incentive for firms to confess to a single, isolated cartel while hiding conduct in other markets. Secondly, it strengthens deterrence and cross-border cooperation by encouraging the multinational firms to come forward and provide the CCI with the necessary broader documentary and witness intelligence. To ensure the effectiveness of this mechanism, the CCI needs to complement this with certain procedural safeguards, such as mandating forensic preservation of digital records and requiring demonstrable corroboration, so as to deter tactical filings and transform the framework into a potent enforcement tool.

IV. Observations of Best Practices from Foreign Jurisdictions

The story regarding the leniency regime in India shows a saddened state as only 21 leniency applications have been received till date. On the other hand, USA’s leniency programme has  seen significant results, with a 59% decrease in cartel formation and an increased detection by 69%. Therefore, it becomes pertinent to juxtapose the best practices from other jurisdictions with the lacunes within the Indian leniency programme to strengthen the same:

1. Criminal Sanctions.

USA’s competition regime functions on the model of deterrence by the use of criminal sanctions and punishments for any anti-competitive behavior. Similar policies have been adopted by other countries including Brazil, UK and Canada to strengthen their quest against cartel prohibition.

Contrastingly, the India’s competition law mandates civil liabilities for entities and individuals involved in antitrust violations. Further, the CCI has adopted a relaxed approach in granting lesser penalties as reflected in the Dry Battery Cell case. In this case, a mere application of leniency by a company has been treated as the ground to grant significant reductions to the parties. Therefore, there is an increasing need to include criminal penalties in the antitrust framework in order to improve enforcement against cartels. 

2. Private Damages

According to USA’s jurisprudence, the penalties against anti-competitive behavior are often accompanied by treble damages along with criminal sanctions for individuals involved within the conduct. Also, the voices have raised in the European Union to facilitate  private damages claims within the Damages Directive of the EU. 

Though the Indian jurisprudence permits private damage actions under Section 53N of the Act, there is no specific regulation to enable private parties to seek compensation against cartel conduct by companies. Section 53N of the Act merely lays down the right to claim compensation for the contravention of the provisions of the Act and does not prescribe a detailed procedural framework on the adjudication of such claims. This leads to certain issues remaining unaddressed like evidentiary standards, method for calculating damages, nature of liability among cartelists, etc.. Hence, such issues make Section 53N largely symbolic, necessitating the need of specific regulations for establishing a holistic and effective compensatory mechanism.    

Such subsidiary regulations are well established in the EU and US models of leniency and private enforcement. The EU’s Antitrust Damages Directive, grants claimants access to competition authority files, with certain confidentiality safeguards and codifies rules on limitation periods, damage quantification, and passing-on. It also creates a rebuttable presumption of harm in cartel cases under Article 17(2), shifting the initial burden onto defendants. The US framework instead relies on broad discovery and class-action mechanisms under the Federal Rules of Civil Procedure, provides treble damages (under Clayton Act §4), and limits recovery to direct purchasers (Illinois Brick Rule), while EU law allows indirect purchasers to claim compensation.

3. Categorization of Leniency Policy 

In USA, there is a clear-cut distinction between Type A and Type B leniency applications. In Type A, the DoJ has no prior knowledge whatsoever about the existence of a cartel. Therefore, the entity’s top executives are exempted from criminal charges. All other cases fall under Type B where immunity from criminal prosecution is as per the discretion of the DoJ. 

However, the stance of India in this regard is reflected in the case of Brushless DC Fans where it is seen that  an entity contributing to the prima facie opinion of the CCI and an entity who contributes towards the DG investigation are placed at the same footing, if they are the first to blow the whistle. Therefore, India must incorporate a similar categorization within its leniency policy.

India must incorporate such a categorization because firstly, such categorization acts as a better incentive and has resulted in speeding up prosecutions in other jurisdictions, notably USA. Secondly, such a distinction can make India’s regime more cost efficient by lowering the investigation costs and resources spent per case. Finally, India’s leniency regime being based on the ‘no prior knowledge’ trigger produces operational ambiguity and non-uniform outcomes, further making such a distinction imperative for increasing procedural certainty. 

4. Diversifying the Toolkit 

The Brazilian Competition Authority has succeeded against cartel prohibition due to the use of multiple proactive and reactive tools to prosecute, prevent and detect cartels. Further, Projeto Cerebro, a state of the art tool developed in furtherance of the same uses screening, data mining and algorithms to detect cartels. These tools strengthen the investigative powers of the enforcement authority. The CCI should further strengthen its existing mechanisms for investigation to incentivize potential applicants to seek leniency by using such tools. 

V. Conclusion

The benign intent of the legislature to strengthen the framework for leniency by way of Leniency Plus and allied mechanisms is laudable. However, the following suggestions would further remedy the loopholes within the existing regime. Firstly, there is a greater need to incorporate criminal sanctions within the existing lesser penalty regulations by introducing a ‘penalty-plus’ rule to close the multi-market loophole. Secondly, there should be specific regulations to better enable private enforcement, which could be done by issuing the subsidiary procedural rules in order to make Section 53N operationalize. Thirdly, either a similar Type-A/Type-B distinction could be brought or ‘no prior knowledge’ framework could be clarified in order to make the leniency regime more effective. Lastly, whistleblower protections could be further enhanced by guaranteeing confidentiality, limited cost reimbursement measures, making the framework comprehensive.