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Amendment to Leniency Regulation, Competition Law 2002

With the emergence of new concepts such as globalization, liberalization and new market players, it was obligatory for the introduction of a law which was much advantageous for the new market conditions. Due to growing needs of the current market conditions, the Parliament introduced the Competition Act, 2002 which replaced the Monopolies and Restrictive Trade Practices Act, 1969. Under the Competition Act, 2002, the competition commission of India (CCI) was established to prevent the activities that have an adverse effect on competition in India. Adverse effect on competition means any market activties which harm the competition of a market. Basically, Adverse effect on competition is caused by anti-competitive agreement, abuse of dominant position by enterprises and/or ‘combinations and merger’ which tends to cause disturbance in the market.

The main aim to introduce Competition Act, 2002 was not only to protect the consumers from all sorts of market abuses but also to create consumers by increasing the purchasing power of the people living in poverty. In this article I will concentrate on Leniency regulations implemented by CCI (The Competition Commission of India ) to reduce cartels and new amendments to Leniency regulation. Before Anti-competitive Agreement and Cartels

Anti – Competitive agreement

Healthy competition is very necessary to take care of the market conditions. One of the vital objectives of the Competition Act 2002 is to prevent adverse effect on competition.[i] Any agreement between persons or enterprises which causes harmful effect to the competition and consumers is said to be anti-competitive agreement.

Under section 3(1) of the competition act, anti-competitive agreement is defined as No enterprise or associations of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provisions of services, which causes or is likely to cause an appreciable adverse effect on competition within India. [ii] In simple words, anti competitive agreement means two or more individuals or two or more companies being competitors in the market enter into an agreement to fix prices, control supply or any activity which limits the competition in the market.

There are many types of anti-competitive agreements such as tie-in-agreement, cartels etc.

Cartels

Cartelization is one of the horizontal agreements that shall be presumed to have appreciable adverse effect on competition under section 3 of the Act. [iii] Section 2(c) of The Competition Act, 2002 defines cartel, it states that “cartel includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, sale in goods or provision. [iv]

In simple words caretels includes group of producers, sellers, distributors, etc who enter with each other in an agreement to control production, distrubution , price of commodities and services, etc to limit the competition in a particular market.

Cartel formation not only disturbs the market competition but also causes harm to society at large. To reduce cartels in the market leniency programme was introduced. A transparent and predictable leniency program has been proven to be an effective tool to detect, investigate and combat cartels cases worldwide. [v]

What is leniency regulation?

Leninency regulation is explained in Section 46 of the Competition Law, 2002. Leniency program was introduced so that the cartel formation can be reduced and the members forming cartel can be granted leniency in the penalty if they choose to share and disclose the information with the commission. Cartel formation is an offence in the eyes of law and if a person or enterprise is included in cartel then a penalty of up to 3 times of its profit each year of the continuance of such agreement or 10% of its turnover for each year of continuance of such agreement, whichever is higher [vi] is charged.

Section 46 of the Act [vii] provides for such leniency provision which states that if the commission is satisfied that any producer, seller, distributor, trader or service providers, etc on violating the Section 3 of the Competition act, 2002 has made true disclosure in respect of the alleged violation then lesser penalty will be provided to the producer, seller, distributor, trader or service provides, etc than the actual penalty of such violation.

Amendment to Leniency Regulations (Lesser Penalty)

The competition Commission of India (CCI) recently on August 22, 2017 released to amend Competition Commission of India (Lesser Penalty) regulations, 2009. The leniency Regulations supplement Section 46 of the Competition Act, 2002, which sets out the provision for grant of leniency in the matters involving cartels and enables parties to ‘blow the whistle’ on cartel arrangements and avail up to 100% reduction in penalties. [viii]

Earlier, the leniency regime previously recognised the provision of markers to only three leniency applicants, in the order of priority. The first leniency applicant could receive up to 100% immunity from penalty, the second leniency applicant up to 50% reduction in penalty and the third leniency applicant up to 30% reduction in penalty.[ix] Almost after 7 years of introduction of the Leniency regime,[x] Re: Cartelization in respect of tenders floated by Indian Railway for supply of Brushless DC Fans and other electrical items[xi] was the very first cartel case to get leniency upto 75% in penalty.

The recent Amendments to the Leniency Regulation are as follows:

· No restrictions on number of markers-
Earlier, the lesser penalty regulation was extended up to 3 markers only on the basis of information submitted, that is the first leniency applicant would receive 100% reduction in penalty, the second leniency applicant would receive reduction up to 50% and the third leniency applicant would receive 30% reduction in penalty. This is a positive step as prior to the amendment the individuals or the enterprise hesitated to reveal about their cartel involvement as they were unclear that their leniency applicant is in first 3 markers list or if they will get the benefit of lesser penalty or not.With the introduction of this amendment any number of markers can apply for leniency application and openly come forward without having the fear of not being in first three markers list. Also this amendment can help CCI to bust cartels in future.

· Individual to seek benefits from lesser penalty regulation
Earlier, the lesser penalty regulation allowed only an enterprise to file leniency application. But now the scope of filing the leniency application is extended to individuals as well. The individuals who are involved in cartels can come forward and file for grant of leniency in their penalty.This will encourage individuals in organization which are part of a cartel to come forward in their individual capacity and receive immunity or reduction in penalty for their involvement in the cartels, based on the marker[xii]
· Volume of business affected
The amendment has made it clear that the applicant has to give details of volume of business affected in India due to cartelization.

· Access to non-confidential documents
Earlier the parties had the right to get access to the non- confidential document or evidence during the investigation process and even before receiving the report from Director General. With the introduction of the amendment, the parties has the right to obtain copies of non- confidential document or evidence only after the Director General has investigated and the CCI has forwarded the report to the Director General.

· Confidentiality
Prior to the notification, an obligation was imposed on CCI to maintain the confidentiality on the name of the applicant and the information disclosed by the applicant until specifically waived by the leniency applicant or the disclosure is required by law. [xiii] [xiv] The amendment permits the Director General to disclose information to the third party (party who have been impleaded in leniency proceedings), even if the approval of applicant is not there. If the Director General is of the opinion that disclosure is necessary for the investigation then with the approval of the CCI the information or evidence or documents can be disclosed even if the applicant does not give a waiver. In such cases reason for disclosure of the information must be given in writing by the Director General to CCI.

· Timing of the applicant
The Lesser Penalties Regulations require an applicant to apply before the CCI for the marker.[xv] Prior to the amendment, the applicant had to submit the detailed application within 15 days from the date of requesting the marker but now CCI has enforced strict deadline of 15 days and the application should be submitted within 15 days from the date on which the marker status is communicated to the applicant by the CCI. Therefore the applicant should be well advanced in the collection of evidence and information to meet the deadline.

Conclusion
Cartel formation is one of the most harmful anti-competitive agreements which cause damage to market in many ways. It can force community, consumers, businesses and even government to pay higher prices for goods and service and the consumers may also face scarcity of goods. Cartels also distort economic markets and leads to slow innovations. Therefore for the development of any economy it is very important for a country to fight cartels.

According to me, Competition Commission of India has taken a very good step by amending the Lesser Penalty Regulation, 2009. Prior to the amendment, Cartels cases was not coming forward that easily and effectively as the persons and enterprises had several fears. Most common fear was there was no whistle blow protection for all the applicants. After the amendment CCI has granted four orders in less than two years. On 19 April 2018, CCI has given 100% reduction in penalty to the leniency applicant, Panasonic Energy India Co. Ltd in a case involving a hard- core cartel in respect of zinc carbon dry batteries in India. [xvi] On 11 July 2018, CCI again awarded 100% reduction in penalty to the leniency applicants Globecast India Private Limited (GI) and Globecast Asia Private Limited (GA). It also awarded 30% reduction to Essel Shyam, Commucation Limited. [xvii]

The amendment has turned out to have a very positive impact as more and more cartel formation disclosure is being made and CCI is taking every possible step to grant leniency to the applicants. This will not only remove formation of cartels in near future but also give benefits to the society at large that is there will be no exploitation of customers and economy of the country will also take a good shape.

End-notes
[i] Abir Roy & Jayant Kumar, Competition Law in India, 53( 2nd edition,2004).
[ii] Abir Roy & Jayant Kumar, Competition law in India, 54,(2nd edition 2004).
[iii] Advocacy series 2, Provisions related to Cartels The Competition Commission of India,https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartelbook. pdf
[iv] Advocacy series 2, Provisions related to Cartels The Competition Commission of India,https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartelbook. pdf
[v] Advocacy series, Leniency Programme the Competition Commission of India, https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/leniency.pdf.
[vi] Advocacy series Leniency Programme the Competition Commission of India, https://www.cci.gov.in/sites/default/files/advocacy_booklet_document/leniency.pdf.
[vii]Competition Law 2002 Bare Act , https://www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012.pdf
[viii] Anshuman Sakle & Bharat budholia, Leniency Regulation Amended, https://competition.cyrilamarchandblogs.com/2017/08/leniency-regulations-amended/
[ix] CCI amends lesser penalty regulation, Trilegal, https://www.trilegal.com/pdf/create.php?publication_id=14&publication_title=cci-amends-lesser-penalty-regulations.
[x] Competition Commission of India’s First order granting leniency, Cyril amarchand mangaldas , http://www.cyrilshroff.com/wp-content/uploads/2018/03/Insight-Alert-%E2%80%93-CCI%E2%80%99s-First-Order-Granting-Leniency.pdf.
[xi] In Re: Cartelization in respect of tenders floated by Indian Railway for supply of Brushless DC Fans and other electrical items, Suo Moto Case No. 03 of 2014 18.01.2017, http://
[xii] Nisha Kaur Uberoi, CCI’s Amended Lesser Penalty Regulations Provide Clarity, BloombergQuintOpinion, (September 06 2017, 12:48PM), https://www.bloombergquint.com/opinion/2017/09/06/ccis-amended-lesser-penalty-regulations-provide-clarity.
[xiii] Regulations 6(a) and 6(b), Lesser Penalty Regulations.
[xiv] C&A eAlert – India’s leniency program 2.0, https://www.chandhiok.com/amendments-to-india-s-leniency-progam.
[xv] Regulations 5(1), Lesser Penalty Regulations.
[xvi] MM Sharma, CCI Penalizes Battery Manufacturers’ Admitted Cartel- Decides Its Second Leniency Case, mondaq, http://www.mondaq.com/india/x/696076/Cartels+Monopolies/CCI+Penalizes+Battery+Manufacturers+Admitted+Cartel+Decides+Its+Second+Leniency+Case.
[xvii] Bharat Budholia, Dhruv Rajain & Ruchi Verma, Fourth Order in Less than Two years: The CCI’s Leniency Regime Gathers Momentum, Competition law a Cyril Amarchand Mangaldas Blog.

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