Leniency programme for cartel members

As per the Competition Act, 2002, the Commission may impose a penalty upon each member of a cartel for violation of Section 3 of the said Act. The penalty may be upto three times of their profit for each year of the continuance of such agreement or ten percent of its turnover for each year of the continuance of such agreement, whichever is higher. The penalties which may be imposed are quite hefty and can put a serious dent into the revenues of any enterprise.

In June 2012, the Competition Commission of India imposed a fine of INR 6307 Crore (US$960 million) on 11 cement companies for forming/running  a cement cartel. The Commission claimed that the cement companies met regularly to fix prices, control market share and held back supply which earned them illegal profits.

Leniency Programme

Any enterprise which is a member of a cartel in any industry may make an application to the Competition Commission of India under ‘The Competition Commission of India (Lesser Penalty) Regulations, 2009’ for seeking a lesser penalty in exchange for vital disclosure regarding the activities of the said cartel. In exchange for lesser penalty, the enterprise would be required to make a full and true disclosure of information that is sufficient to enable the commission to form a prima facie opinion about the existence of a cartel or which helps to establish the contravention of Section 3 of the said Act.

The first applicant who makes  a vital disclosure to the Commission may be granted a reduction of penalty upto or equal to 100 percent of the fine that may be levied. Applicants subsequent to the first applicant may also be provided a lesser penalty if they provide evidence which adds significant value to the evidence already in the possession of the Commission, The second applicant may be granted a monetary reduction of upto or equal to fifty percent whereas the third applicant may be granted reduction of penalty upto or equal to thirty percent of the full penalty leviable.

Timing of the application to the Commission and the quality of assistance are extremely important in order to get the maximum reduction in penalty. The option for lesser penalty is lost if the report of investigation under Section 26 of the Competition Act, 2002 has been received prior to the making of the said disclosure. Further, it may be noted that the Commission shall treat the identity of the applicant and the information obtained from it as confidential and shall not disclose the same unless the same is required by law.

For those enterprises indulging in a cartel, it is crucial to understand that there is always a probability that some other member of the cartel may have already approached the Commission or may do so and get the benefit of total immunity from any fine that may be leviable. Therefore, timing of the application may result in saving of hundreds of crores.

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