The Competition Regulator’s latest addition to the ‘whisteblower’ mechanism to trace cartels | Explained

What is the new regime for leniency for a cartel member disclosing information about another cartel in the ecosystem to the Competition Commission of India? We explore.

The story so far: Striving to strengthen the existing ‘whistleblower’ mechanism in the Competition Act, the Ministry of Corporate Affairs (MCA) notified the ‘Lesser Penalty’ Regulations, 2024 to introduce the ‘Lesser Penalty Plus’ regime. It incentivises existing industry participant(s) turned ‘whistleblowers’ to present “full, true and vital disclosures” about another cartel in the ecosystem which is unknown to the Competition Commission of India (CCI). The regulations were finalised subsequent to a draft regulation floated for comments in November last year. 

The existing ‘lesser penalty’ provisions, under Section 46 of the Competition Act, incentivise enterprises, accused of cartelisation, to come forward and disclose information, documents and evidence to help the competition regulator establish potential cartel conduct. The idea is to refine the regulator’s investigation with insider information, potentially throwing light on their secret agreements and concerted practices.

The latest provision, that is, ‘lesser penalty plus,’ provides for existing leniency candidates to disclose information about the existence of any other such cartels. The candidates are in turn granted reduction in penalty with respect to their involvement in the second cartel. This is over and above the reduction in penalty levied for their involvement in the initial cartel. 

The ‘lesser penalty’ applicant is required to state their role in the cartel, goods or services involved, entities involved, geography covered, date of commencement of the alleged cartel, its present status and the estimated volume of business affected in India by alleged anti-competitive act. The ‘lesser penalty plus’ applicants, on the other hand, are required to elaborate if there are any similarities or differences in the conduct, product, service or parties with respect to the first cartel, among other things. 

The benefits to be accorded are assessed using two broad parameters, namely, priority status and significant added value. 

Priority status is the applicant’s position in the queue, as compared to other applicants, for being accorded leniency. Timing is the primary determinant here because, as argued by the regulator, the idea is to encourage disclosing the cartel “as soon as possible” for securing maximum benefit. 

Significant Added Value is assessed based on qualitative parameters. It examines the quality of evidence presented— how far it strengthens the regulator’s ability to prove the existence of a certain cartel. This relates to the nature and level of details presented, keeping in mind the timing of perusal (by the applicant) and the amount of corroboration needed from other sources.