Leniency Plus Regime: MCA Unveils Regime to Crack Down on Cartels

What’s in Today’s Article?

• Why in News?
• What is Cartelisation?
• What is Leniency Plus?
• Significance of the Leniency Plus Regime

Why in News?

• The Corporate Affairs Ministry (MCA) has notified the introduction of the ‘Leniency plus’ regime, which is already recognised in jurisdictions like the UK, US, Singapore and Brazil.
• This will pave the way for the Competition Commission of India (CCI) to roll out a new Cartel detecting tool that is expected to revolutionise Anti-Trust enforcement in the country.

What is Cartelisation?

• According to the CCI, cartelisation is a practice in which a group of competitors (manufacturers, sellers, distributors, etc.) form an agreement to limit competition.
• It reduces output while increasing prices, driving customers out of the market (if they refuse to pay a higher price) and unknowingly transferring wealth (if they want to pay).
• A cartel protects its members from full market exposure, which reduces costs while harming overall economic performance and innovation.
• Cartels vs monopoly: A monopolist completely dominates a particular market (since there is no rival), whereas cartels are formed (with the goal of limiting competition) to dominate the market.
• The Competition Act of 2002 intends to foster and preserve market competition, safeguard consumer interests, and secure market players' freedom to trade.
  • It created the CCI to eliminate practices that harm market competition.
• The Competition (Amendment) Act 2023 codifies cartel facilitators' liabilities. The CCI can now impose fines of up to 10% of an enterprise's entire global turnover.

What is Leniency Plus?

• Leniency plus is a proactive antitrust enforcement strategy aimed at attracting leniency applications by encouraging companies already under investigation for one cartel to report other cartels unknown to the competition regulator.
• The benefit of such disclosure would be a reduction of the penalty in the first cartel for the individual sharing the information, without prejudice to the company receiving a lower penalty for the newly disclosed cartel.
• While the Competition (Amendment) Act 2023 provides a framework for CCI to deal with leniency or lesser penalty applications, it until recently did not recognise leniency plus.

Significance of the Leniency Plus Regime

• The CCI had (in October 2023) issued draft Lesser Penalty regulations.
  • The draft regulations offer leniency applications in an ongoing cartel inquiry the incentive to disclose the details of another unrelated cartel.
• Under leniency plus, an applicant who has filed an existing lesser penalty (LP) application, and who makes 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.
• A leniency plus regime is expected to further incentivise applicants to come forward with disclosures regarding multiple cartels, thereby enabling the CCI to save time and resources on cartel investigation.
• This will give the CCI the requisite tools to focus their enforcement efforts at successfully prosecuting cartels which have a direct impact on the economy and consumer welfare.

Q1) What is the Competition Commission of India (CCI)?

The CCI is a statutory body within the Ministry of Corporate Affairs and is responsible for enforcing the Competition Act 2002 to promote competition and prevent activities that have an appreciable adverse effect on competition in India.

Q2) Why was the Competition (Amendment) Act 2023 enacted?

The Competition (Amendment) Act 2023 aims to bring the antitrust law in India at par with changing Indian and global markets. The amendments aim to strengthen competition regulation, streamline operations, and foster a business-friendly environment.

Source: MCA unveils ‘Leniency Plus’ regime to crack down on cartels