India: The Fate Of Individuals Under The Leniency Program In India: A Dubious Question

The leniency regime in India is embodied under Section 46 ¹of the Competition Act, 2002 (Act) and the procedure is laid down under the Competition Commission of India (Lesser Penalty) Regulations, 2009 ²(Lesser Penalty Regulations).

A leniency program is devised to detect cartels. It is a program, where a participant, independently of other undertakings involved in the cartel, voluntarily provides information and evidence regarding the participants knowledge of, and role in (either before an investigation has begun or after), the cartel in return of which the participant receives lenient treatment in the form of reduced fines and/or criminal sanctions (the competition regime in India does not envisage criminal sanctions). A Leniency program significantly reduces the difficulty, time and administrative cost of a competition authority of collecting intelligence and evidence of cartel infringements. The effect of leniency also leads to cartels breaking down earlier than they would otherwise, creating deterrence in respect of future conduct and such a program works not as a substitute but complementary to other methods of cartel detection.

An enterprise cannot enter into anti-competitive acts by itself and the best source of information/ evidence to detect cartels is only through an enterprise's directors, officers and employees. Thus, a comprehensive and efficient leniency program should not only incentivize companies to come forward but also its directors, officers and employees to cooperate with an investigation.

Lack of precedents on the instant subject in India, makes it difficult to understand the approach that the CCI is likely to adopt in leniency cases and whether it will adhere to international practices.

International practice

The Department of Justice, United States of America (US DoJ), ³has clarified that "If a corporation qualifies for Type A ⁴leniency, all directors, officers, and employees of the corporation who admit their involvement in the criminal antitrust violation as part of the corporate confession will also receive leniency if they admit their wrongdoing with candor and completeness and continue to assist the Division throughout the investigation. In addition, the applicant's directors, officers, and employees who did not participate in the conspiracy but who had knowledge of the conspiracy and cooperate with the Division are also covered by the conditional leniency letter. If their corporation qualifies for Type B⁵ leniency, the Corporate Leniency Policy states that individuals who come forward with the corporation will still be considered for immunity from criminal prosecution on the same basis as if they had approached the Division individually. In practice, however, the Division ordinarily provides leniency to all qualifying current employees of Type B applicants in the same manner that it does for Type A applicants".

The US DoJ has also observed that '[t]he promise of immunity for officers, directors and employees who come forward with the company and cooperate will often be the Amnesty Program's biggest reward' ⁶.

The United Kingdom's Office of Fair Trading (OFT), also adopts a similar approach⁷ , wherein it 'guarantees criminal immunity for all cooperating current and former employees and directors in cases where the applicant informs the OFT of cartel activity that it was not previously investigating', further, it also states that 'the availability of immunity or a reduced penalty for undertakings and/or employees/ directors where an applicant is the first to approach the OFT but there is already a pre-existing investigation'. Furthermore, it also notes that there is 'a commitment that the OFT will not apply for a Competition Disqualification Order ⁸ against any current or former director of a company which benefits from leniency in respect of activities to which the grant of lesser penalty relates' provided that the director cooperates with the leniency process. Moreover, Type A immunity, guarantees corporate immunity together with guaranteed 'blanket' immunity from criminal prosecution for all cooperating current and former employees and directors of the undertakings, further, Type B immunity/leniency, makes an applicant eligible for discretionary corporate immunity from penalties or reductions in penalty up to 100% and/ or discretionary criminal immunity for cooperating current and former employees and directors of the undertaking, which may be granted on a 'blanket' basis ⁹.

Australia's Competition and Consumer Commission (ACCC), also adopts a similar approach, wherein, it focuses on the US DoJ policy of providing full protection for cooperating corporate executives. The ACCC observes that 'If a corporation qualifies for conditional immunity, it may seek derivative immunity for related corporate entities and/or for current and former directors, officers and employees of the corporation who were involved in the cartel conduct'¹⁰ . It explicitly notes that an individual will be eligible for derivative immunity if the individual is a current director, officer or employee of the corporation that qualifies for conditional immunity or was a director, officer or employee of that corporation during the relevant period of the cartel conduct ¹¹.

Thus, jurisprudence developed in majority of the mature jurisdictions suggests that while adjudicating upon a leniency application, except in case of non-cooperating employees, competition authorities include the current and former directors, officers and employees of the organization applying for leniency.

It is hard to imagine a company applying for leniency, if its employees are at a risk of fine as a result of its leniency application. Assuming, that a company would make a leniency application, in the absence of provisions ensuring lenient treatment for its employees, implicit in the companies leniency application, a company may not be able provide the required cooperation without its employees assistance (as they are custodians of the vital information/ disclosures) and this will in-turn deter companies from coming forward or will make it a case of non-cooperation which would question the effectiveness of a leniency program.

Thus, in order to strengthen the functioning of the leniency regime and to bolster its implementation in India by ensuring organizations come forward, the CCI should adopt international best practices. Lack of precedents on the instant subject do serve as an impediment for organizations to come forward, however, the CCI should extend the benefit of immunity to a company's current and former directors, officers and employees. This is to ensure that those current and former directors, officers and employees who are custodians of vital information are not reluctant to provide crucial information/ evidence to the Office of the Director General, CCI (DG) during the course of investigation and this ultimately will improve the efficacy of the leniency regime in India.

Footnotes

1. The Competition Commission of India (CCI) has the discretion to impose lesser penalty upon a person who has made full and true disclosure in respect of alleged violations of Section 3 of the Act. However, the CCI may not provide the benefit of lesser penalty to the applicants who discontinue cooperating with the office of the Director General (DG) or the CCI till the proceedings are completed.

2. The imposition of lesser penalty by the CCI is in cases of violation of Section 3 of the Act, whereby a person (producer, seller, distributor, trader or service provider) makes full, true and vital disclosure of a 'cartel' to the CCI and fulfils certain pre-conditions which include ceasing to have participation in the cartel, providing of vital disclosures (information, documents and evidence), cooperating genuinely, fully, continuously and expeditiously throughout the investigation and does not conceal, destroy, manipulate or remove relevant documents (Please see Regulation 3 of the Lesser Penalty Regulations). The Leniency System is targeted at cartel participants and seeks to induce participants to break rank and turn approver against other cartel members. A successful applicant can avail the benefit of a reduction in penalty in the range of up to 100% or 50% or 30% keeping in view the first mover advantage (Please see Regulation 4 of the Lesser Penalty Regulations). However, lesser penalty shall not be imposed by the CCI in cases where the investigation report has been received by the CCI (Please see the proviso to Section 46 of the Act)

3. Please see Q. 23 of the 'Frequently Asked Questions regarding the Antitrust Division's Leniency Program And Model Leniency Letters' by Scott D. Hammond, Deputy Assistant Attorney General for criminal enforcement and Belinda A. Barnett, Senior Counsel, Antitrust Division, US DoJ. Available at https://www.justice.gov/atr/frequently-asked-questions-regarding-antitrust-divisions-leniency-program

4. Leniency before an investigation has begun.

5. Leniency filed by a company after the authorities have received certain information about illegal antitrust activity.

6. Scott D. Hammond, When Calculating the Costs and Benefits of Applying for Corporate Amnesty, How Do You Put a Price Tag on an Individual's Freedom?, Mar. 8, 2001 available at https://www.justice.gov/atr/speech/when-calculating-costs-and-benefits-applying-corporate-amnesty-how-do-you-put-price-tag

7. Please see 'Detailed Guidance on Applications for Leniency and No-action in cartel cases', available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284417/OFT1495.pdf

8. An order to disqualify company directors in certain specified circumstances relating to the violation of competition laws

9. It may be noted that the European Commission (EC) cannot impose sanctions on natural persons and it is only the National Competition Authorities (NCAs) which impose sanctions on natural persons. Please see 'Faull & Nikpay, The EU law of Competition, third edition', Para 2.187 and Para 8.106.

10. Please see Para 19 of the 'ACCC immunity and cooperation policy for cartel conduct', available at http://www.accc.gov.au/publications/accc-immunity-cooperation-policy-for-cartel-conduct

11. Para 24 (a)

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