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The Ministry of Corporate Affairs (MCA) has officially introduced the ‘Leniency Plus’ framework, marking a significant stride for the Competition Commission of India (CCI) in enhancing antitrust enforcement within the nation. With the implementation of this new system, the CCI gains the authority to employ an innovative approach in uncovering cartels, ushering in a transformative phase in competition regulation.

Under this framework, companies under investigation for involvement in one cartel will be incentivized to disclose information about other undisclosed cartels to the CCI. Such a program is devised to aid competition authorities in unveiling covert cartels and obtaining insider evidence of antitrust violations.

With the recent directive from MCA, incorporating the notification of pertinent provisions in the Competition (Amendment) Act 2023, the groundwork has been laid for the CCI to devise corresponding regulations, as per insider sources. MCA has affirmed that the provisions related to ‘Leniency Plus’ have been operational since February 20, 2024, indicating a proactive stance towards fortifying anti-trust measures in the nation.

Leniency Plus embodies a proactive approach to antitrust enforcement, aimed at incentivizing companies already under investigation for one cartel to disclose additional cartels unknown to the competition regulator. By encouraging such disclosures, the strategy seeks to mitigate penalties for the disclosing party in the initial cartel case, while also potentially offering reduced penalties for the newly disclosed cartel. Although the Competition (Amendment) Act of 2023 establishes a framework for the CCI to handle leniency or lesser penalty applications, it had not previously acknowledged the concept of ‘Leniency Plus’ until recently.

Incentives and Deterrence

The introduction of the ‘Leniency Plus’ scheme signifies a significant advancement in India’s competition law landscape. This initiative incentivizes individuals and companies involved in one cartel to divulge information about another cartel they are part of, thereby mitigating penalties for both cartels. Cartels, which engage in covert practices such as price fixing, production limitations, market allocation, and bid rigging, pose challenges in legal prosecution due to their secretive nature. Detection often relies on insider knowledge or whistle-blowers. The primary objective of the leniency plus rules is to motivate informants or whistle-blowers to aid the CCI in effectively enforcing fair market practices. Similar leniency provisions are present in competition laws of various countries including the UK, US, Singapore, Canada, and Brazil. In India, penalties for cartel involvement are significant, calculated as a percentage of net profit or turnover during the cartel’s existence. However, providing timely and substantial information could potentially lead to a complete waiver of penalties for one cartel and a 30% reduction for another.

The latest regulations pledge anonymity to informants. However, the crucial question remains: Will this strategy of rewards and punishments effectively drive the desired changes? Despite the substantial penalties levied by the CCI against enterprises for engaging in anti-competitive practices, its track record has been lackluster. The CCI has struggled to enforce these penalties, casting doubt on its efficacy. Moreover, the existing leniency program for single cartels has seen minimal success, with few enterprises willing to confess culpability. Those that have cooperated haven’t seen significant reductions in penalties.

However, the suggested system poses potential risks. In contrast to nations such as the US, UK, Brazil, and Canada, Indian legislation lacks robust deterrence mechanisms against misinformation. It raises apprehensions regarding the potential exploitation of the law for personal agendas. Consequently, the new regulations must strive to strike a balance between encouraging truthful disclosures and thwarting misuse. The regulatory body needs to instill confidence in its ability to maintain confidentiality while swiftly acting on the information and rewarding whistle-blowers. Demonstrating fairness and consistency in enforcement could promote a culture of compliance. The addition of leniency provisions represents a positive step forward. Now, it is incumbent upon India Inc. to step up in good faith.