India is currently exploring a leniency provision for cartels, allowing organisations under investigation for cartelisation to receive reduced penalties in exchange for providing information about other cartels. The Competition Commission of India has opened a window for stakeholder comments on its draft Leniency Plus regulations before the regime becomes operational. Under these regulations, entities associated with cartels will be encouraged to report unrelated cartels to the CCI during the initial leniency proceedings, with the incentive of an additional cut in monetary penalties.
The proposed regulations also grant the competition watchdog the discretion to determine the extent of penalty reduction based on the quality of information provided and the stage at which the applicant comes forward. If the commission already possesses evidence and facts regarding the case, the reduction will be less substantial. Members of cartels can potentially receive a penalty reduction of up to 100% for disclosing a newly identified cartel or being the first to make a significant disclosure.
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A cartel exists when businesses collaborate instead of competing, deceiving customers and hindering healthy economic growth. Cartels are notorious for driving up costs and stifling innovation and investment in a particular sector. Companies or individuals, whether current or former members of a cartel, can provide information about other cartels. This includes enterprises, associations of enterprises, or individuals involved or intending to participate in furthering a cartel.
The leniency programme is part of the joint agreements among BRICS competition authorities. Meanwhile, India’s antitrust regulator has been investigating several cases involving Big Tech companies such as Google, Apple, WhatsApp, and Facebook. Stakeholders are encouraged to offer feedback on the Draft CCI (Lesser Penalty) Regulations, 2023, to the regulatory body by November 6, 2023.
Is leniency towards cartels a viable strategy
The Leniency Plus regime, introduced in the new Competition (Amendment) Act, 2023, is not a novel idea initiated by the Indian competition regulator. It is a recognised approach in countries like the United Kingdom, the United States, Singapore, and Brazil.
The United States Corporate Leniency Programme, also known as the amnesty programme, has been instrumental in detecting and dismantling more international cartels than all other investigative methods combined, says the antitrust division of the US Department of Justice. This policy approach is hailed as the single most effective tool available to anti-cartel enforcers. Its success lies in the fact that, if implemented effectively, the leniency program can induce cartel members to confess their conduct even before an investigation begins.
Despite measures taken by some of the world’s strongest economies against cartels, the Organisation of the Petroleum Exporting Countries (OPEC) and OPEC+ have remained intact, going from strength to strength. OPEC is a group of 13 major oil-exporting nations founded to coordinate petroleum policies and provide technical and economic aid to member states. OPEC has transformed into a cartel that manages oil supply to influence global oil prices. In 2021, OPEC countries held 80.4% of the world’s crude oil reserves, making them the largest producers and exporters of crude oil and petroleum products globally. Any decisions made by OPEC have a significant impact on global energy prices.
In India, establishing that a company is part of a cartel involves complex procedures and demands rigorous efforts from the antitrust watchdog. For instance, the CCI must prove that competitors have entered into agreements to fix prices, control supply, limit production, manipulate markets, restrict technical development, regulate investments, allocate markets, or rig bids to establish a company’s involvement in a cartel. The workload can be significantly reduced with reliable information. Leniency arrangements are also essential given the secretive nature of cartels, where obtaining evidence is exceptionally challenging.
Cartels are widely regarded as the most harmful violation of competition law and are often referred to as a cancer on the free market economy. The US Department of Justice has a single lesson for the international community: a successful anti-cartel enforcement program should combine severe potential penalties, high detection rates, and transparent enforcement policies. They believe this formula can be the holy grail in the fight against cartels and can deter most companies from engaging in cartel activities.