Draft Competition Commission of India (Lesser Penalty) Regulations, 2023
Updated: Oct 19
WHAT HAS HAPPENED?
The Amendment Act introduced the concept of ‘Leniency Plus’, or Lesser Penalty Plus with a view to further incentivize an existing leniency applicant (in the First Cartel) to disclose existence of another cartel (Second Cartel), in return for additional reduction in penalty up to or equal to 30% in relation to the First Cartel.
* Failure to file application within 15 days (or time as extended) will result in forfeiture of ‘Lesser Penalty Plus’ for First Cartel and priority status for Second Cartel.
OTHER KEY AMENDMENTS
Withdrawal of the Lesser Penalty and Lesser Penalty Plus applications
The draft Regulations enable the Lesser Penalty or the Lesser Penalty Plus applicant to withdraw their applications. Even if withdrawn, the CCI or the DG can use the information, evidence, or document submitted, except the applicant’s admission.
Forfeiture of the benefit
The draft Regulations clarify that the benefit of reduction in penalty may be forfeited if the Lesser Penalty or the Lesser Penalty Plus applicant (i) fails to comply with conditions on which the benefit was granted, or (ii) gives false evidence / omits to submit material information, or (iii) does not provide vital disclosure.
Scope of ‘applicant’ widened
The draft Regulations now permit any enterprise, or an association of enterprises not engaged in identical / similar trade which participates or intends to participate in furtherance of the cartel, to file for a lesser penalty and/or lesser penalty plus application.
This is in line with the recent amendment clarifying that the CCI can examine hub-and-spoke cartels.
Confidentiality ring for access to leniency disclosures
The draft Regulations provide that after the receipt of the DG Report, the CCI may disclose information or documents or evidence in terms of Regulation 35 of the Competition Commission of India (General) Regulations, 2009 (General Regulations). In terms of Regulation 35, once the DG Report is shared with the parties, the CCI can set up a confidentiality ring. This will allow confidential information, including information submitted as part of the leniency disclosures, to be disclosed to other parties included in the confidentiality ring. It is unclear if the identity of the leniency applicant will also be disclosed as part of the confidentiality ring.
Use of information, documents, and evidence upon a failure to meet the conditions for lesser penalty
Under the draft Regulations, a failure to meet the LPR conditions will enable the DG (along with the CCI) to use the information, documents and evidence submitted by the applicant in the ongoing matter.
CCI will consider the fulfilment of the LPR conditions for reduction in monetary penalty
In addition to the existing criteria mentioned in the Lesser Penalty Regulations for consideration of the reduction in monetary penalty, the draft Regulations require the CCI to assess the fulfilment of the LPR conditions.
Reduction to be in terms of the ‘penalty imposed’ and not ‘leviable’
The Lesser Penalty Regulations provided for upto 50% reduction in penalty for the second leniency applicant, and upto 30% reduction in penalty for the third leniency applicant. Such a reduction was based on the ‘full penalty leviable’.
In contrast, the draft Regulations now formalize the existing practice of providing reduction on the ‘penalty imposed’ as opposed to what is ‘leviable’.
New regulations are not applicable to ongoing matters: The draft Regulations indicate that the provisions, once enforced, will not be applicable to the existing matters.
Clarification on what is ‘significant added value’: The draft Regulations define ‘significant added value’ to mean ‘enhancing the ability of the CCI or the DG’ to detect a cartel’. However, there is no clarity on what will be considered to ‘enhance the ability’ of the CCI or the DG. Greater clarity in this regard will enable focused self-assessment by the prospective applicants.
Clarity on factors to determine monetary reduction for Lesser Penalty Plus: the factors for determining monetary reduction for Lesser Penalty Plus are vague and discretionary.
Opportunity for pre-filing consultation on a ‘no-name’ basis: the draft Regulations could have been used as an opportunity to enable consultation on a ‘no-name’ basis before the application is filed. This will be helpful for potential applicants to determine the sufficiency of their evidence, especially given the ability of the CCI and the DG to use the information in case of forfeiture or withdrawal of the application. This would also be in line with the practices followed by regulators in the United Kingdom and the European Union.
Enterprise-centric regulations: an individual can file for leniency under the draft Regulations. However, the draft Regulations do not account for the limited information that they may be able to provide. Accounting for the same would enable greater participation by individuals. A re-haul of the regime is also an opportunity to create protections and procedures for whistleblowers.
The C&M team will be submitting comments on the draft Regulations. In case of feedback, suggestions, or queries, please reach out to us at: email@example.com.