THE DIALOGUE BLOG: Decoding India's Revised Lesser Penalty Framework: An Analysis of the Latest Regulatory Changes and Implications
The Dialogue
Indian tech. policy think tank ranked amongst the world's "top ten institutions to watch out" for by UPenn's 2020 Index.
On October 16, 2023, the Competition Commission of India (CCI) introduced the Draft Lesser Penalty Regulations (DLPR), signifying a shift in India’s approach to combatting cartel activities. The DLPR not only replaces the existing 2009 Lesser Penalty Regulations but also introduces a new Lesser Penalty Plus (LPP) framework via the Competition (Amendment) Act 2023. This move is lauded for its potential effectiveness in addressing cartel behavior in the Indian market.
The DLPR, as a comprehensive regulatory framework, raises critical considerations. The Dialogue conducted an in-depth analysis, examining key aspects within the DLPR and subsequently submitting comments to the CCI. The following are key considerations highlighted in The Dialogue's submission:
1. Absence of pre-filing consultation (PFC):
The DLPR lacks a PFC mechanism, crucial for applicants to assess their position as leniency applicants. The absence of this stage may deter potential applicants from approaching the Commission. Best practices from the European Union (EU) and the International Competition Network (ICN) underscore the importance of leniency applicants exploring leniency availability anonymously, a practice that the DLPR might consider incorporating.
2. Use of Information:
Regulations 3 (3) and 10 (2) within the DLPR cover the use of information, evidence, and documents submitted to the CCI in case of non-compliance or withdrawal and raise concerns about its potential to deter potential applicants from providing comprehensive and accurate disclosures. Comparatively, in the EU, if it is determined that immunity is not applicable or an undertaking cannot fulfil the conditions, the European Commission (EC) communicates this decision in writing, allowing the undertaking the option to retract the evidence provided for the immunity application.
Similarly, Brazil maintains confidentiality for rejected leniency agreements, treating rejection as separate from an admission of guilt. In Chile, leniency guidelines emphasise transparency by providing applicants with entire file content, excluding specific administrative documents, and permanently deleting returned information. This aspect of the regulation, aimed at ensuring the CCI receives crucial information for identifying and curbing cartel activities, may need careful reconsideration to balance regulatory needs and incentivisation of full cooperation by parties.
3. Time frame for filing an application:
The DLPR allows leniency applications before the CCI receives the Director General (DG) report. A recommendation proposes updating the DLPR to allow leniency applications before the DG report is received, enhancing predictability, and aligning with EU and UK leniency practices.
4. Meaning of Additional Significant Value:
Regulation 4(b) of the DLPR stipulates that the evidence submitted by an applicant must impart “significant added value” to the Commission’s existing evidence. However, the explanation only clarifies the term in light of the extent to which it helps the DG or the CCI establish the existence of a cartel. It does not clarify the nature, detail, relevance or other factors that would qualify the evidence as one that adds significant added value. In comparison, the EU leniency framework emphasises that evidence should substantially enhance the Commission’s ability to prove the alleged cartel, considering factors like the nature of the evidence, level of detail, and direct relevance.
The recommendation suggests that the CCI should furnish additional details clarifying the specific nature of evidence required to mean “significant added value” under the DLPR. This would align the Indian framework more closely with international best practices and provide clearer guidance to leniency applicants.
Although India’s DLPR marks a commendable stride in addressing cartel activities, the identified concerns must be diligently addressed. Tackling these major issues is imperative for the enhancement and fortification of the Indian regulatory framework, paving the way for heightened clarity, predictability, and overall effectiveness. Therefore, addressing these aspects will contribute significantly to the success and efficiency of the DLPR in its mission to curb cartel behaviour in the Indian market.
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