CCI’s Leniency Plus scheme — how’s it going to break the cartels
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Under leniency plus, an applicant who has filed an existing lesser penalty (LP) application, and who makes a full, true and vital disclosures in respect of the existence of a second cartel is eligible to receive an additional reduction in monetary penalty of up to 30% in the first cartel. However it remains to be seen if CCI’s recent initiative sanctified by the Parliament is going to rein in paper, cement and steel cartels operating in the country with impunity, writes Chartered Accountant S Murlidharan.
The British are credited with the dubious honour of dividing and ruling i.e., pitting one section of the nation against another or worming into the hearts of Maharajahs of the then Indian princely states to win them over to its side, thereby muting considerably the resistance to its conquest of India. The lessons from its time-tested stratagem predictably came to be adopted with alacrity in other walks of life as well.Â
Many an Indian family-controlled company started appointing two vice-presidents in the same establishment with parallel powers not only to keep a check on each other but also to test the credibility of reports submitted by them. Â
Also Read:Â Artificial Intelligence may lead to discriminatory pricing, facilitate subtle anti-competitiveness: CCI chief
Now the Competition Commission of India (CCI) has unrolled from February 20, a scheme called Leniency Plus with a view to breaking up business cartels arguably the most difficult to rein in. Collusive price fixation is the most deleterious effect of cartelisation be it in the paper industry or cement industry in India or at the international level petroleum price fixation by the formidable oil cartel the OPEC. Â
What’s Leniency Plus
Under leniency plus, an applicant who has filed an existing lesser penalty (LP) application, and who makes a full, true and vital disclosures in respect of the existence of a second cartel is eligible to receive an additional reduction in monetary penalty of up to 30% in the first cartel. The applicant would also get a reduction of penalty of up to or equal to 100% in respect of the newly disclosed cartel. Â
The dawning realisation seems to be that when you are at your wit’s end mobilising evidence against a cartel, it is so much better to persuade someone privy to the clandestine, hush-hush cartel without paper trail to sing like a canary and spill the beans.Â
The clever scheme is akin to the age-old provision in criminal law allowing a partner in crime to turn approver. In some quarters, a parallel is being drawn between the intrepid tribe of whistleblowers but the analogy is not on all fours as whistleblowers are driven by the noble motive of public spiritedness —exposing the pretenders for what they are.Â
In the infamous Enron scam that rocked the United States, Sherron Watkins former Vice President of Corporate Development at the Enron Corporation made bold to come clean with how the corporation cooked its books by booking future sales as present.Â
The difference should be stark — the seeker of leniency under the CCI scheme has both a guilty conscience and his own skin to save whereas a whistleblower is not someone who is under a cloud. Be that as it may.
In the US, the leniency law in respect of antitrust activities is more in the nature of mea culpa than divide and rule or triggered by whistleblowing. It spares a corporation from criminal liability if it makes a clean breast of its antitrust or anti-competition activities at the early stage of its perpetration.Â
Leniency Regime In The EU
Under the Commission’s leniency programme, companies that provide sufficient information about a cartel in which they have participated may receive full or partial immunity from fines. Thus, in the European Union too it is mea culpa with waiver from penalty being the bait. Â
So, the Indian model seems to be unique and goes beyond mea culpa testifying to the difficulties encountered thus far by the CCI in nailing the cartels. That the CCI has been pushing for a formal leniency regime sanctified by the Parliament vide amendments to the Competition Act, 2002 is clear from its own initiative in this regard sans Parliamentary imprimatur.Â
In January 2017, the CCI issued its first order under such leniency regime in a case involving bid-rigging for tenders relating to the supply of fans to the Indian Railways. It granted 100% immunity to Panasonic in three cases involving cartel conduct in the dry cell batteries market in India. But critics have been wondering why it is not able to rein in big fishes while being fairly successful with the smaller ones. Â
To be sure, it has had a fairly decent record of disciplining large companies enjoying dominance from exploiting consumers and buyers through one-sided agreements as was the case in the famous DLF case. The builder had to cough up ₹630 crore by way of penalty kicking and screaming when the Supreme Court rejected its contention that the penalty was excessive.Â
It however remains to be seen if its recent initiative sanctified by the Parliament is going to rein in paper, cement and steel cartels operating in the country with impunity. Will a member of these industries summon enough courage to rock the boat to its own detriment as well as to the detriment of others operating the surreptitious cartel sub rosa ? Hitherto, the Sicilian law of omerta has been the unwritten code among their members. Will they break ranks taken in by the bait of reduction in penalty despite knowing that it could be business as usual with the CCI unable to rein them in? Â
Tax amnesty schemes have been a miserable failure in India. It remains to be seen if the antitrust amnesty scheme is going to work any better.
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