The Singapore Law Gazette

Navigating the Leniency Regime in India

The leniency regime in India has witnessed significant developments since the CCI issued its first decision in 2017. Over the last two years, the CCI has enabled enterprises and individuals to benefit from reduced penalties and has demonstrated its proactive approach in assessing leniency matters efficaciously. This article aims to provide a broad overview of the leniency regime and trends in India.

The Competition Act, 2002 (Act), is the principal legislation that governs competition law in India. The Competition Commission of India (CCI) is entrusted with preventing practices having an adverse effect on competition, promoting and sustaining competition in the market, protecting the interests of consumers and ensuring freedom of trade. The investigative arm of the CCI is the office of Director General (DG) which assists with investigating violations of the Act. Section 3 of the Act prohibits anti-competitive agreements that cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India. The CCI enjoys extraterritorial powers and is empowered to inquire into anti-competitive conduct that takes place outside India, if it has or is likely to have, an AAEC in India.

The Act enables enterprises and individuals to avail reduction in penalty for anti-competitive conduct and pro-actively assist in cartel enforcement through the leniency regime. Section 46 of the Act and the Competition Commission of India (Lesser Penalty) Regulations, 2009 (Leniency Regulations), govern the leniency regime in India. Appeals from the CCI lie before the National Company Law Appellate Tribunal (NCLAT) and appeals from the NCLAT lie with the Supreme Court of India (Supreme Court). Enterprises and individuals who provide vital disclosure by submitting evidence of a cartel and applicants who provide added value to the evidence that is already in possession of the CCI (for subsequent applications), may benefit from the leniency regime. The term “vital disclosure” means full and true disclosure of information or evidence which would be sufficient for the CCI to form a prima facie opinion about the existence of the cartel. The term “added value” refers to the extent to which the evidence provided by the leniency applicant enhances the ability of the CCI or DG to establish the existence of a cartel.

Overview of India’s Leniency Regime

The Act and the Leniency Regulations are aimed at incentivising enterprises and individuals and do not cap the number of applicants who can benefit from reduced penalties. Similar to other mature antitrust jurisdictions, India’s leniency regime provides for a marker system ie, priority status, wherein leniency applicants are provided a marker based on the sequence in which they approach the CCI. Lesser penalty will be granted to an enterprise or individual involved in a cartel, based on the vital disclosure, that is full and true in nature. The CCI can grant up to or equal to 100 per cent waiver, ie, complete immunity, to such an enterprise and individual, who is the first to make a vital disclosure. The second applicant may receive up to or equal to 50 per cent reduction, and third and subsequent applicants may receive up to or equal to 30 per cent reduction, of penalty. In the event the priority status of the first applicant gets rejected by the CCI, the subsequent applicants will move up in order of sequence for the grant of priority status.¹Regulation 5(7) and 5(8) of the Leniency Regulations.

The CCI has decided ten leniency cases to date and has provided complete immunity (100 per cent reduction in penalty) in five cases. Four of the 10 cases pertain to leniency applications filed by foreign enterprises.²In Re: Cartelisation in respect of zinc carbon dry cell batteries market in India, Suo Motu Case No. 02 of 2016; In Re: Anticompetitive conduct in the Dry-Cell Batteries Market in India, Suo Motu Case No. 02 of 2017; In Re: Cartelisation by broadcasting service providers, Suo Motu Case No. 02 of 2013 and In Re: Cartelisation in the supply of Electric Power Steering Systems (EPS Systems), Suo Motu Case No. 07 (01) of 2014. The highest penalty imposed on an individual has been INR 18,82, 989³Approximately USD 26,957 imposed on the Managing Director in, In Re: Cartelisation in respect of zinc carbon dry cell batteries market in India, Suo Motu Case No. 02 of 2016. and the highest penalty imposed on an enterprise, so far, has been INR 171.55 crores.⁴Approximately USD 24,616,937 imposed on Eveready Industries India Ltd. in, In Re: Cartelisation in respect of zinc carbon dry cell batteries market in India, Suo Motu Case No. 02 of 2016. Out of these 10 cases, two have been appealed before the NCLAT in relation to the penalty reduction granted by the CCI.⁵Eveready Industries India Limited v. Competition Commission of India & Ors., Competition Appeal (AT) 22 of 2018 and Planetcast Media Services Ltd. & Anr. v. Competition Commission of India & Ors., Competition Appeal (AT) No. 71 and 72 of 2018. The NCLAT has granted a stay on the CCI’s orders with respect to the penalty imposed on the appellants.

In its most recent case of Cartelisation in the supply of Electric Power Steering Systems (EPS Systems),⁶Suo Motu Case No. 07 (01) of 2014. the CCI imposed a fine of approximately INR 17 crores⁷Approximately USD 2.35 million. on Japan’s JTEKT Corporation (JTEKT) and its Indian subsidiary JTEKT Sona Automotive India Limited (JSAI) for colluding with NSK Limited, Japan (NSK) and its subsidiary Rane NSK Steering Systems Ltd. (RNSS). The cartel pertained to supply of EPS Systems to three automotive manufacturers, by means of directly or indirectly determining price, allocating markets, co-ordinating bid response and manipulating the bidding process. NSK/RNSS and its individuals benefitted from complete immunity and received a 100 per cent reduction in penalty, as the first leniency applicant. JTEKT/JSAI as the second leniency applicant availed a 50 per cent reduction in penalty on account of it providing a significant added value to the evidence already in possession of the CCI to establish the existence of the cartel. This case signifies the CCI’s willingness to grant complete immunity to leniency applicants and the individuals involved in such anti-competitive conduct. Notably, the CCI also investigated the conduct of former employees for their role in the anti-competitive conduct at the time when the contravention was committed. Interestingly, this case was a global cartel that was examined by several antitrust regulators, including the Competition and Consumer Commission of Singapore.⁸CCS Imposes Penalties on Ball Bearings Manufacturers involved in International Cartel, CCS 700/002/11. In case of global cartels, where the leniency applicant has participated in an anticompetitive conduct across multiple jurisdictions, such enterprises will need to collate evidence specific to each jurisdiction. Such leniency applicants would need to be swift in their approach to the respective antitrust regulators across jurisdictions, in order to secure a marker and benefit for reduced penalties.

In Cartelisation by broadcasting service providers,⁹Suo Motu Case No. 02 of 2013. the CCI granted 100 per cent immunity to Globecast India Private Limited and Globecast Asia Private Limited (Indian and Singaporean entities) (collectively, Globecast), who were engaged in a bid-rigging cartel with Essel Shyam Communication Limited (ESCL) for broadcasting services in India. Globecast and ESCL exchanged commercial and confidential price sensitive information (relating to bid prices, terms of offer, etc.) from 2011 to 2012, which enabled them to co-ordinate their bids for tenders for procurement of broadcasting services. Globecast was granted total immunity based on vital evidence which disclosed the modus operandi of the cartel, chronology of the events in which bid rigging took place, role of ex-employees, details of the internal inquiry conducted by Globecast at their offices in Singapore, e-mail correspondence, forensic report relating to electronic evidences and mirror images of the confiscated laptops and mobiles, etc. While granting total immunity, the CCI held that the evidence submitted by Globecast was crucial, not only to formulate a prima facie opinion, but also to establish the existence of the cartel. ESCL filed a leniency application during the pendency of the investigation and received a 30 per cent reduction in penalty. The conduct of Globecast and ESCL were found to adversely affect and manipulate the competitive process for bidding by eliminating competition for bids.

The key factors in determining reduction in penalty are, the stage at which the disclosure takes place and the quality of evidence submitted. A leniency applicant is unlikely to be granted a 100 per cent reduction in penalty in the following instances:

• if, at the time of disclosure, the CCI has sufficient evidence to form a prima facie opinion or arrive at a finding of contravention; or
• investigation in relation to the alleged anti-competitive conduct has commenced.

Notably, a leniency applicant will not be eligible for any reduction in penalty, if the investigation report has been submitted by the DG.

Key Trends

Under section 19 of the Act, the CCI is empowered to inquire into anti-competitive conduct on its own motion or on receipt of information from any person, consumer, trade association or on a reference made to it by the Central/State Government or a statutory authority. In Brushless DC Fans, the CCI suo moto initiated the inquiry, pursuant to information received from the Central Bureau of Investigation.¹⁰In Re: Brushless DC Fans, Suo Moto Case No. 03 of 2014. The CCI granted a partial waiver of 75 per cent in penalty, to the first and only party that acknowledged the existence of a cartel pertaining to the supply of Brushless DC fans and other electrical items. ¹¹In Re: Brushless DC Fans, Suo Moto Case No. 03 of 2014. The applicant in this case was granted leniency pursuant to its co-operation and value addition, as it substantiated the evidence available with the CCI and also completed the chain of events pertaining to the cartel.

The CCI through its decisional practice has elucidated the nature of co-operation rendered by an applicant that enables it to arrive at a definitive finding. In Cartelisation in respect of zinc carbon dry cell batteries,¹²Suo Motu Case No. 02 of 2016. the CCI considered Eveready Industries India Ltd.’s (Eveready) (second applicant) admission of cartelisation, oral statements supported by documents, corroboration of information available with the DG and assistance with connecting the evidence gathered during the search and seizure operations. On account of Eveready’s continuous and expeditious co-operation with the CCI during the investigation, a 30 per cent penalty reduction was granted. Notably, the CCI, through the DG, periodically conducts “dawn raids” as a part of the investigation. The dawn raids are conducted on the leniency applicant(s), as well as the competitors.

The CCI has followed a case-by-case approach in the grant of reduction of penalty based on facts specific to each leniency application. In Cartelisation in respect of zinc carbon dry cell batteries,¹³Suo Motu Case No. 02 of 2016. the second and third applicants were granted 30 per cent and 20 per cent reduction in penalty, as compared to a 50 per cent and 30 per cent reduction in penalty available under the Leniency Regulations. The disclosures made by these applicants did not result in significant value addition, as the documents seized from the premises of these applicants during search and seizure operations were sufficient to establish the contravention of the Act. Further, in Cartelization in Tender Nos. 21 and 28 of 2013 of Pune Municipal Corporation,¹⁴Suo Motu Case No. 03 of 2016. the first leniency applicant was granted a 50 per cent reduction in penalty as the CCI had already formed a prima facie view regarding the existence of a cartel. Some of the subsequent applicants in this case did not receive any reduction in penalty, as their disclosures added minimal value to the investigation.

A leniency applicant is required to fulfil the following conditions, in order to avail reduction in penalty:¹⁵Regulation 3 of the Leniency Regulations.

1. cease to have further participation in the cartel from the time of its disclosure, unless otherwise directed by the CCI;
2. provide vital disclosure with respect to the cartel;
3. provide all relevant information, documents and evidence as may be required by the CCI;
4. co-operate genuinely, fully, continuously and expeditiously throughout the investigation and other proceedings before the CCI; and
5. not conceal, destroy, manipulate or remove the relevant documents in any manner that may contribute to the establishment of a cartel.

Additionally, the CCI may also subject the leniency applicant to further restrictions or conditions, based on the specific facts and circumstances of the case.

The Indian regime also mandates continuous co-operation of the leniency applicant with the CCI. Leniency applicants risk losing their priority status, if they fail to continuously co-operate with the CCI and DG, until the completion of the proceedings. Additionally, leniency applicants are not entitled to reduction in penalty on account of provision of false evidence, disclosure of non-vital information and non-compliance under the Act and will be subject to proceedings under the Act for non-compliance.¹⁶Section 43 and Section 45 of the Act.

Filing a Leniency Application

A leniency application can be made directly by the enterprise/individual or by their authorised legal representatives. The Secretary of the CCI is the designated authority empowered to grant the priority status to the leniency applicant. In order to obtain a priority status, the applicant can approach the CCI either orally, by e-mail or fax and furnish information and evidence relating to the existence of a cartel. The applicant will be required to furnish a written application (as set out in the Schedule to the Leniency Regulations) within 15 days, as directed by the CCI. In the event the applicant fails to furnish the written application along with supporting evidence within 15 days, such an applicant risks losing the priority status. Further, if the disclosure provided is not full and true or as required by the CCI (from time-to-time), the CCI pursuant to orally hearing the applicant, may reject the leniency application.

Confidentiality

The CCI and the DG are mandated to keep the identity of the leniency applicant completely confidential. However, the CCI may disclose information received from leniency applicants, in certain circumstances, if such disclosure is required by law, if the applicant has agreed to such disclosure or if the applicant has made a public disclosure. In cases where the applicant has not agreed to such disclosure, the DG may disclose such information /evidence, for the purposes of the investigation, by seeking prior approval from the CCI, based on reasons duly recorded in writing.

Role of Individuals

The role of individuals plays a crucial role in CCI’s assessment of penalties. The CCI is empowered to impose penalties on individuals in the following circumstances:

• Firstly, under section 48(1), an individual who was in-charge of, and responsible for, the conduct of business of the company, at the time of contravention of the Act; and
• Secondly, where there has been an infringement under the Act, with the consent, connivance or negligence of any director, manager, secretary or other such officer of the company.

The CCI has investigated the conduct of employees, including former employees, in relation to their role in the anti-competitive conduct. Foreign companies that seek to avail leniency in India would need to extend complete co-operation, by requiring their employees (former and current) based overseas to be available for the investigation. Such co-operation would mandate responding to notices and summons issued by the DG and making themselves available for depositions and/or cross-examinations in person.¹⁷In Re: Cartelisation by broadcasting service providers, Suo Motu Case No. 02 of 2013. An applicant’s failure to co-operate with the CCI and DG may result in loss of their priority status and may also attract penalty for failure to furnish information. Accordingly, under the Act, an individual may be held liable for his conduct for an enterprise, based on the position held by such an individual or through participation in the anti-competitive conduct.

Evidence

The quality of information provided by a leniency applicant is an important parameter in addition to the time at which such disclosure is made, in determination of the penalty reduction. Global companies that plan to file a leniency application in India should submit substantial upfront evidence that can provide significant value to the investigation. The CCI has considered messages, call data records (frequent and long calls exchanged between the parties, before and after a meeting or submission of tender bids), e-mails, fax, oral statements, forensic reports, internal investigation reports, copies of agreements, handwritten notes, demand draft details, bank statements, digital keys/ pen drives, internet protocol addresses used for uploading tender documents, address and contact details of the parties, etc., to be vital pieces of evidence.

Interestingly, the CCI passed an order in 2018 arising from a leniency application that pertained to the alleged price-fixing of flashlights in India, wherein it held that, though there is evidence of exchange of production and sales data, draft press releases and price information indicating possibility of collusion between the parties, in the absence of an actual determination of prices, it would not be sufficient to establish a cartel.¹⁸In Re: Alleged Cartelisation in Flashlights Market in India, Suo Motu Case No. 01 of 2017.

Penalty

In contrast to the antitrust regime in Singapore, the CCI has not yet issued any penalty guidelines. The Act empowers the CCI to impose penalty for cartels which is either: up to three times the profit of the company for each year of the continuance of the cartel; or up to ten per cent of the average of the turnover for each year of the continuance of such cartel, whichever is higher. The Supreme Court in Excel Crop Care Limited v. Competition Commission of India and Anr., clarified that penalty should be determined based on the relevant turnover of the enterprise.¹⁹Excel Crop Care Limited v. Competition Commission of India and Anr., Civil Appeal No. 2480 of 2014, (2017) 8 SCC 47. The turnover for the purposes of the Act, is the relevant turnover of the company relating to the product/service, in respect of which the contravention has taken place, and not the “total turnover” of the company covering all its products. The key trends on the manner in which the CCI has imposed penalties in leniency cases are highlighted below:

Parameter of Penalty Imposition	Penalty Imposed on Company	Penalty Imposed on Individual
Turnover	In six cases, penalty has been imposed at the rates of 4%,20In Re: Anticompetitive conduct in the Dry-Cell Batteries Market in India against Panasonic Corporation and Ors., Suo Motu Case No. 03 of 2017, the penalty was levied on 4 per cent of the relevant turnover; and In Re: Anticompetitive conduct in the Dry-Cell Batteries Market in India, Suo Motu Case No. 02 of 2017, the penalty was levied at 4 per cent of the average turnover. 3%21In Re: Cartelization in respect of tenders floated by Indian Railways, Suo Moto Case No. 03 of 2014, the penalty was levied on 3 per cent of the enterprise’s relevant turnover. and 10%.22Cartelization in Tender Nos. 21 and 28 of 2013 of Pune Municipal Corporation for Solid Waste Processing, Suo Motu Case No. 03 of 2016, Nagrik Chetna Manch v. Fortified Security Solutions, Case No. 50 of 2015 and In Re: Cartelisation in the supply of Electric Power Steering Systems (EPS Systems), Suo Motu Case No. 07 (01) of 2014.	In eight cases, penalty has been imposed at 10% of the average income of the individual for the three preceding financial years.23Penalty imposed on the Chairman, Managing Director, Director, Vice President, General Manager, Senior Director of Sales, Chief Executive Officer, Chief Financial Officer, Partners and Head of Marketing & Sales.
Profit	In two cases, penalty has been imposed at 1.5 times and 1.25 times of the profit.24In Re: Cartelisation by broadcasting service providers, Suo Motu Case No. 02 of 2013, where the CCI calculated the penalty at 1.5 times the profit; and In Re: Cartelisation in respect of zinc carbon dry cell batteries, Suo Motu Case No. 02 of 2016, the penalty was levied at 1.25 times the profit.	None
No penalty	In two cases, the CCI did not impose any penalty.25In Cartelization in Tender No. 59 of 2014 of Pune Municipal Corporation for Solid Waste Processing, no penalty was imposed as penalty was imposed in an earlier case; and In Alleged Cartelisation in Flashlights Market in India, no contravention was found.	None

Mitigating Factors

The CCI also considers mitigating factors prior to imposing penalty, based on the specific facts and circumstances of the case. The existence of a compliance program is typically considered as a mitigating factor. In Cartelisation by broadcasting service providers,²⁶Suo Motu Case No. 02 of 2013. the CCI did not consider the leniency applicant’s commencement of a forensic audit after the receipt of the notice of investigation from the DG, to be a mitigating factor. In this case, the CCI also held that the initiation of a compliance program was not eligible for mitigation. Subsequent conduct of the leniency applicant can be considered a mitigating factor, but it cannot absolve the infringing entity from liability. The CCI also held that being a first-time offender will not be considered as a mitigating factor.

Conclusion

The leniency regime in India has been a game-changer in cartel enforcement in India. The coming years are likely to witness a surge in the number of leniency applications as the CCI’s decisions have paved the way for companies to reap the benefits of reduced penalties. Global companies that plan to benefit from India’s leniency regime, should invest in regular compliance programmes by conducting training, audits, and mock dawn raids that would identify potential antitrust issues, including participation in anti-competitive conduct. To avoid any antitrust risk, Singapore based companies with operations in India would do well by implementing robust compliance practices tailored to their sector. Additionally, sectors wherein the business and sales teams have frequent interactions with competitors must be sensitised of their conduct and implications to the company. Certain sectors such as, pharmaceuticals, automotive, automotive components, healthcare, media and broadcasting, and e-commerce platforms have been subject to antitrust scrutiny by the CCI and such companies should implement the required checks and balances to monitor their conduct.