By way of a January 18 2017 order, the Competition Commission of India (CCI) approved its first leniency application and granted a 75% reduction of the fine imposed on the leniency applicant.(1)
The leniency application was filed on March 10 2015 by a member of a cartel alleged to have rigged bids in the supply of brushless direct current fans and other electrical items to railways. During the investigation, Shri Sandeep Goyal – partner of M/s Pyramid Electronics – confessed to bid rigging and collusive bidding with the other defendants. Through statements before the director general, Goyal admitted that he had consulted a number of the defendants before quoting the bid prices in all of the railway tenders, and that roughly the same rates had also been quoted by the others in those tenders. Based on Goyal's revelations, the CCI was requested to grant Pyramid Electronics, as well as Goyal, full immunity against fines.
While considering the leniency application, the CCI noted that the applicant was the first and only party to admit to the existence of a cartel and the bid-rigging activities in the tenders for supply of brushless direct current fans. Further, it noted that the evidence submitted by Pyramid Electronics played a significant role in revealing the cartel's modus operandi. However, the CCI denied complete immunity or 100% waiver of the fine on the grounds that Pyramid Electronics had not offered its cooperation or admission at the earliest possible stage. Instead, Pyramid Electronics and Goyal had disclosed the information only after the CCI initiated its investigation and came into possession of critical email evidence.
The CCI therefore granted a 75% reduction of the penalty that the applicant would otherwise have received had it not cooperated with the CCI.
The Competition Act 2002 provides for a maximum penalty of up to three-times the profit or up to 10% of the turnover on each cartel member for the duration of the cartel – whichever is higher.
Given the stringency of the fines, cartel members understandably seek immunity or reductions by acting as whistleblowers before the CCI or cooperating with the CCI's investigation through the submission of evidence. However, cartels continue to be the most heinous violation of competition law and therefore call for the most stringent penalties when detected.
It is worth noting that immunity or leniency will be granted only upon the satisfaction of the criteria provided under the Competition Commission of India (Lesser Penalty) Regulations 2009 and Section 46 of the Competition Act.
Applications to reduce a fine should be filed at the first available opportunity. A leniency application cannot be entertained by the CCI if the director general report has already been submitted for its consideration. The CCI follows a 'marker' system, whereby:
- the first applicant to approach the CCI receives 'marker one' and is eligible for a fine reduction of up to 100%;
- the second applicant receives 'marker two' and is eligible for a reduction of up to 50%; and
- the third and last applicant receives 'marker three' and is eligible for a reduction of up to 30%.
The latest order demonstrates that the CCI is extending the leniency programme even to officials or persons in charge of companies under investigation.
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(1) CCI decision, January 18 2017. For full text, please see the CCI website.