In view of the Competition (Amendment) Act, 2023 (“Amendment Act”), the leniency regime in India has been modified to introduce the ‘leniency plus/lesser penalty plus regime’ besides the already existing ‘leniency/lesser penalty’ regime. To give effects to the same, last year, the Competition Commission of India (“CCI”), issued the Competition Commission of India (Lesser Penalty) Regulations, 2024 (“LPR 2024”) repealing the erstwhile Competition Commission of India (Lesser Penalty) Regulations, 2009 (“LPR 2009”). The current leniency framework presently offers enhanced benefits to the whistleblowers under both - ‘leniency/lesser penalty regime’ and ‘leniency plus/lesser penalty plus regime’. The following Q&A provide insights into India’s prevalent leniency regime and attempts to address key concerns of the businesses considering to file for leniency in India.

Q.1. What is a leniency regime and why is it required?

A leniency regime is an enforcement tool employed by competition law authorities across the globe to crack down cartels. Cartels which are illicit alliances between competitors are difficult to detect and harder to prosecute as they are formed in secrecy and operate in silence for years. Cartels quietly distort the competition and harm consumers. Under a leniency regime, member(s) of a cartel are encouraged to voluntarily come forward and disclose details, documents, and evidence in relation to such cartel, in exchange for a reduction (as high as up to 100%) in the penalty otherwise leviable up on them if found liable.

Q.2. What is the legal framework and current leniency regime in India?

In India, the provisions related to leniency are prescribed under Section 46 of the Competition Act, 2002 (as amended in 2023) (“Act”). A whistleblower can file an application for leniency to the CCI as per the procedure prescribed under the LPR 2024.

Under the current leniency regime in India, a whistleblower can avail-

  1. Stipulated lesser penalty benefits for disclosure of the first cartel under the ‘leniency/lesser penalty regime’;
  2. Avail an additional reduction in penalty up to 30% with respect to first cartel in exchange for disclosure of a second cartel under the ‘leniency plus/lesser penalty plus regime’; and
  3. Avail reduction in penalty up to 100% in exchange for disclosure of the second cartel under the ‘leniency plus/lesser penalty plus regime’.

Q.3. What is the difference between ‘leniency/lesser penalty regime’ and ‘leniency plus/lesser penalty plus regime’?

Leniency/lesser penalty regime: Embodies penalty reduction benefits available to an applicant for disclosing a single cartel to the CCI.

Leniency plus/lesser penalty plus regime: Embodies additional penalty reduction benefits available to an already existent applicant for disclosing a second cartel not known to the CCI. The applicant is granted additional benefits for both the cartels disclosed by it.

Q.4. Who can file an application for leniency before CCI? Can foreign businesses file for leniency in India?

In view of Regulation 2(c) of the LPR 2024, an enterprise, a person, or an association of enterprises or person, may file a leniency application before the CCI. An enterprise who is or has been a member of a cartel and/or an individual who has been involved in the cartel on behalf of an enterprise may file for leniency before the CCI. Also, an association which is not even engaged in identical or similar trade may also file for leniency if it participates or intends to participate in furtherance of such cartel.

Yes, foreign businesses may also file for leniency before the CCI. The provision of Section 32 of the Act empowers the CCI to investigate into, inter alia, cartel(s) formed outside India but having or likely to have an appreciable adverse effect on competition in the relevant market in India.

Q.5. What are the stipulated penalty reduction benefits under the ‘leniency/lesser penalty regime’ and ‘leniency plus/lesser penalty plus regime’?

Stipulated benefits under leniency/lesser penalty regime: In terms of Regulation 4 of the LPR 2024, the CCI may grant following reductions in penalty to respective applicant(s) under the leniency/lesser penalty regime:

1. Up to 100% reduction to the 1st applicant if -

  • the disclosures made by the applicant enables the CCI to form a prima facie opinion regarding existence of a cartel and at the time of disclosure, the CCI did not have sufficient evidence to form such opinion.

OR

  • the applicant submits evidence which establishes the contravention of Section 3(3) of the Act in a matter under investigation and at the time of disclosure, the CCI / Director General (“DG”) did not have sufficient evidence to establish such evidence.

2. Up to 50% reduction to 2nd applicant and up to 30% reduction to 3rd applicant, if CCI is of the opinion that the disclosure(s) made by the applicant(s), and evidence submitted by them adds value to the evidence already in possession of the CCI / DG.

Stipulated benefits under ‘leniency plus /lesser penalty plus regime’: In terms of Regulation 5 of the LPR 2024, the CCI may grant following reductions in penalty to an already existing leniency applicant (who had earlier made a full, true and vital disclosure in respect of a first cartel) if such applicant makes a full, true and vital disclosure in respect of a second cartel not known to the CCI before receipt of the investigation report of the DG by the CCI in the first cartel:

  1. Additional reduction in penalty up to 30% with regards to the first cartel; and
  2. Up to 100% reduction in penalty with regards to the second cartel.

Q.6. Are there any conditions to be observed for availing the penalty reduction benefits under the leniency regime in India?

In view of provisions of Section 46 of the Act and Regulation 3(1) of the LPR 2024, an applicant may avail reduction in penalty under ‘leniency/lesser penalty regime’ and ‘leniency plus/lesser penalty plus regime’, only when it satisfies the following conditions -

  1. It ceases to participate in the cartel at the time of the disclosure;
  2. Provides vital disclosure (full and true disclosure that enables CCI to form a prima facie opinion) in respect of the alleged contravention;
  3. Provides all relevant information, documents and evidence as may be required by the CCI;
  4. Co-operates genuinely, fully, continuously and expeditiously throughout the investigation and other proceedings before the CCI;
  5. Does not conceal, destroy, manipulate or remove the relevant documents; and
  6. Does not give any false evidence or omit to submit any material information.

Q.7. Can a leniency application be withdrawn?

Yes, an applicant can withdraw its leniency application any time before the receipt of the investigation report of the DG by the CCI. In case of withdrawal, the DG and the CCI may use any evidence submitted by an applicant for the purposes of the Act, except its admission.

Prior to the Amendment Act, there was no provision for withdrawal of a leniency application. However, vide the Amendment Act, the CCI is now empowered to allow an applicant to withdraw its leniency application as well as leniency plus application as per the procedure laid down under the LPR 2024. A provision for withdrawal of a leniency application was introduced by the legislature as an applicant may apply for a lesser penalty at the beginning of discovery of internal documents. However, pursuant to a detailed investigation, the applicant may learn that there has been no contravention of Section 3(3) of the Act. Therefore, a provision thereto was introduced in the regime.

Q.8. Can the CCI reject a leniency application of a whistleblower?

Yes, an application for ‘leniency/lesser penalty’ and ‘leniency plus/lesser penalty plus’ may be rejected by the CCI if -

  1. The applicant fails to provide full and true disclosure of the information and evidence as referred and described in Schedule I (contents for leniency/lesser penalty application) or Schedule II (contents for leniency plus/lesser penalty plus application) to LPR 2024, or as required by the CCI; or
  2. Fails to comply with the conditions specified at Regulation 3(1) of the LPR, 2024 (mentioned at answer to question no. 6 above), either before the DG or the CCI; or
  3. Fails to comply with further restrictions and conditions imposed by the CCI as per Regulation 3(4) of the LPR, 2024, either before the DG or the CCI.

Q.9. What are the implications in case the CCI rejects the application of a whistleblower?

Post rejection of a leniency application, the applicant may be subjected to investigation for cartelization with respect to which the leniency application was filed by the applicant and a penalty leviable under Section 27 or Section 48 of the Act, may be imposed by the CCI if found liable for contravention of Section 3(3) of the Act. Further, the CCI and/or the DG may use the information, documents and evidence submitted by the applicant in the ongoing investigation.

Q.10. Is there any limitation period for filing leniency application(s)?

In terms of Section 46 of the Act, the CCI may grant reduction in penalty under the leniency regime only if an application has been made to it prior to the submission of report of the investigation by the DG. Further, in view of Section 19(1) of the Act, the CCI has been restricted from entertaining any information or reference, filed after three (3) years from the date on which the cause of action has arisen.

Conclusion

Filing of a leniency application does not ipso facto entitle the applicant for a guaranteed reduction in penalty as the same depends on multiple factors (as discussed above) such as standard of the evidence produced, status of applicant, adherence to other requirements under the LPR 2024 etc. While there are huge benefits in terms of reduction of penalty under the leniency regime, a leniency application is considered as an admission under the law. Be that as it may, if an applicant at any time before receipt of the investigation report of the DG by the CCI, learns that there is no violation, it has a flexibility to withdraw the same.

Authors:

Milind Jha (Partner)

Aditya Bhardwaj (Partner)

Rinki Singh (Senior Associate)

Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.