CCI issues draft regulations on Lesser Penalty and Lesser Penalty Plus for stakeholder comments

Effective cartel enforcement can yield tangible reduction in prices and increase consumer welfare. In fact, cartels are the only area of competition enforcement where there is consensus that they cripple economies. But cartels are also the hardest to catch, because the people and their companies involved usually don't leave any evidence. That's why competition regulators have leniency programs, which offer immunity from fines to companies and their employees who come forward and admit to being in a cartel.

The Indian leniency program has been reasonably successful so far, helping the CCI bust cartels in a range of sectors, such as dry cell batteries, automotive parts, and alcoholic beverages (beer). To make the leniency program even more attractive, the CCI is proposing to enhance the incentives for leniency applicants in a cartel case to disclose their participation in another unrelated cartel. Doing so could help them secure an additional reduction in penalty (up to 30%) in the first cartel, while continuing to be eligible for up to 100% reduction in penalty in both the cartel cases (Lesser Penalty Plus/LPP).

The draft Competition Commission of India (Lesser Penalty) Regulations, 2023 (Draft LP Regulations) introduce the LPP mechanism. While most of the proposed changes are focused on the procedure for the grant of lesser penalties under the LPP mechanism, the CCI proposes to introduce two other new provisions that are generally applicable to its lesser penalty mechanism. 

First, the CCI proposes to introduce a provision on “withdrawal” of leniency applications. Leniency applicants now have the option of withdrawing their applications all the way up to the receipt of the Director General’s (DG) investigation report. However, by doing so, they will risk the use of the information or evidence already submitted by the CCI or the DG.

Second, the Draft LP Regulations offer the CCI the ability to claw back the benefit of lesser penalty by introducing an express provision on “forfeiture”.

The introduction of the LPP mechanism and the other changes to the leniency regulations are all very welcome. The Draft LP Regulations may benefit from some fine tuning, in order to make the leniency and LPP mechanisms more attractive. 

Axiom5’s review of the proposed changes and initial thoughts are available here.