Issue 3

in Nagrik Chetna Manch v. Fortified Security Solutions.
The parties were involved in

bid rigging/collusive bidding of five tenders floated by the Pune Municipal
Corporation (hereinafter “PMC”), during the period December 2014 to March 2015
for “design, supply, installation, commissioning, operation and maintenance of
municipal organic and inorganic solid waste processing plant(s)”. Further, after
considering factors like the priority status of the application, cooperation and support
during the Director General (DG) investigation by way of a full, true and vital
disclosure of information, four out of the six leniency applicants involved in the bid
rigging were granted partial leniency.
the leniency programme in India provides for a marker system wherein “priority
status” is granted to leniency applicants in order to determine the quantum of
reduction in the penalties which could be imposed.
The CCI is empowered to grant “up to 100%” reduction in fines, i.e., complete
immunity, to the applicant who is the first to make “vital disclosure” to the CCI. Such
information should either enable the CCI to form a prima facie opinion of the
existence of the cartel or establish the contravention of Section 3 of the Act in a
matter under investigation by the DG.
Subsequent leniency applicants who disclose evidence that provides “significant
added value to the evidence” already in possession of the CCI or the DG may also be
granted leniency. The CCI can grant an applicant which is marked as second priority
a reduction in penalty of “up to 50%”, whereas the third and subsequent applicants
can be granted a reduction in penalty of “up to 30%”.
The term “vital disclosure” of information means full and true disclosure of
information or evidence which would be sufficient to enable the CCI to form a prima
facie opinion in relation to the existence of a cartel. We can contend that as
pricklepants info helped the DG form a prima facie opinion of a cartel being formed it
should be granted 100% reduction in the penalty.
In practice, the CCI does not grant the first applicant “up to 100%” reduction in fines
in cases where an investigation has commenced, and the parties subsequently file a
leniency application. In In Re: Cartelisation with respect to tenders floated by Pune
Municipal Corporation for Solid Waste Processing (Case No. 50 of 2015, Suo Motu
Case No. 3 of 2016 and Suo Motu Case No. 4 of 2016) (“PMC Cases”), all the parties
filed their leniency applications after the commencement of the investigation. In this
case, the CCI granted “up to 50%” reduction in fines to the first leniency applicant
followed by the other applicants. In In Re: Cartelisation in the supply of Electric
Power Steering Systems (“EPS Case”) (Suo Motu Case No. 07 (01) of 2014), wherein
NSK had disclosed the existence of the cartel, the CCI granted complete immunity by
way of a 100% penalty
In jurisdictions with advanced competition regulation regimes such as USA and EU,
such leniency programs have become the most important tool for detecting cartels
and are also purported to deter such infringements from occurring. 4 In the United
States, from 1996 to 2010, of the fines collected from companies for antitrust
violations, 90% came from investigations assisted by leniency applicants. 1
1
1 NLIU LR (2019) 47
Most recently, in 2019, this decisional practice of the CCI was evidenced in the EPS
Case wherein NSK, which had disclosed the existence of the cartel, was granted
complete immunity by way of a 100% penalty reduction, while JTEKT, which had filed
its leniency application during the pendency of the DG investigation, was granted a
reduction of 50% in the penalty imposed on it.
The CCI has been flexible with extending the benefit of leniency to more than three parties
(as was initially proposed in the Lesser Penalty Regulations). In the case of Nagrik Chetna
Manch vs. Fortified Security Solutions and Others (case no. 50 of 2015), CCI extended
lesser penalty to four applicants of which two applicants were given 1st priority status and
allowed reduction upto 50%, while the second and third applicant were allowed reduction
upto 40% and 25%, respectively.
n case of applicants who are either not first in priority or have approached the CCI at a stage
where it is already in possession of evidence of an existence of cartel, much of reduction in
penalty depends upon assessment and discretion of the CCI. Such discretion is usually seen
to be guided by the extent of 'significant value addition' made by applicants' information to
the evidence in possession of CCI or importance that could be attributed to such information.
The stage at which such information comes to the CCI is an important factor to assess its
significance or value addition. For example, in the case of dry cell batteries, the second and
third applicants were granted lesser penalty only upto 30% and 20% respectively, against
the expected reduction of 50% and 25% in such case as contemplated under the Lesser
Penalty Regulations. The considered shortfall in the reduction was for the reason that the
information and evidence provided by these applicants had a depreciated value given that
CCI was approached with evidence much after the search and seizure conducted by the DG.
As of May, 2018, 14 lesser penalty applications have been fled and adjudicated upon
by the CCI. The CCI has granted a 100%
waiver of penalty in only 1 instance, wherein, one of the cartel members in Zinc
Battery Manufacturers informed the CCI that a cartel existed even before there
existed any evidence to form a prima facie opinion that the cartel existed. The CCI
granted a 75% penalty waiver in Brushless DC Fans to the first informant and a 50%
penalty waiver to the first informant in Fortifed Security Solutions. The diference may
be attributed to the evidence supplied by the parties and the extent to which such
evidence helped in establishing existence of a cartel. In Brushless DC Fans, the first
informant provided details about the functioning of the cartel and evidence which
helped the Director General to establish collusion over pricing. In the Fortifed
Security Solutions case, however, the evidence provided by the first applicant helped
to complete the chain of events surrounding the contraventions and supplemented
the evidence already in the possession of the Director General.
Furthermore, the standard of ‘significant added value’ has caused more uncertainty.
In Fortified Security Solutions, the CCI adjudicated upon 6 lesser penalty
applications. On an analysis of the order, it can be seen that the CCI has provided
no rationale for the reduction in penalty i.e. how the evidence submitted made for
value addition to the evidence already in possession, whilst according a lesser
penalty for disclosures relating to the same issue such as modus operandi or role of
persons involved, etc. The CCI further stretched the concept to include ‘reasonable
value addition’ in Cartelization in re: Tenders No. 21 and 28. While the argument
may be made that this is within the discretionary power of the CCI, the language of
the Regulations gives another impression, defining ‘added value’ but still requiring
that for a reduction in penalties, the added value must be significant.Such an
approach is not conducive towards furthering the leniency regime in India. There is a
huge degree of uncertainty not only due to the small number of applications
adjudicated upon but more so due to the inconsistent approach of the CCI.
Furthermore, what has been described as the ‘carrot and stick approach’ 25 seems to
be followed in advanced foreign jurisdictions, wherein the parties may actually get
the carrot in the form of immunity or lesser penalties, as huge fines are imposed in
cartel matters (the EC imposed a fine of € 2.93 Billion on a truck manufacturers
cartel26 ) but full immunity is granted to corporations which have provided conclusive
evidence establishing the existence of a cartel even
after the investigations have begun. Therefore, even if a party is a part of a cartel, it
is in its best interests to make clear its role as great monetary penalties may be
otherwise placed upon them. The CCI, in Brushless DC Fans, missed out on the
opportunity to send a message to Indian entities that they too may be granted full
immunity even if they provide evidence after the commencement of investigations,
so long as it helps in conclusively establishing the existence of a cartel.
However, it may be noted that in proceedings before the EC, full immunity may be
granted to more than one party i.e. a party that provides sufficient evidence to initiate
investigations and also a party that that provides evidence to help conclusively
establish the existence of a cartel.38 It has been argued in India that post the 2016
amendment to the Regulations, the same approach exists in India 39 owing to the
deletion of a proviso which clearly stated that such full immunity shall only be
granted to one party. However,
he language of the amended regulations doesn't support the same view as the
Regulations still read that a partial reduction in penalties may be granted to
“applicants who are subsequent to the first applicant”, 40 creating further confusion.

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in Nagrik Chetna Manch v. Fortified Security Solutions.

The parties were involved in

status” is granted to leniency applicants in order to determine the quantum of

reduction in the penalties which could be imposed.

existence of the cartel or establish the contravention of Section 3 of the Act in a

matter under investigation by the DG.

Subsequent leniency applicants who disclose evidence that provides “significant

can be granted a reduction in penalty of “up to 30%”.

should be granted 100% reduction in the penalty.

leniency application. In In Re: Cartelisation with respect to tenders floated by Pune

followed by the other applicants. In In Re: Cartelisation in the supply of Electric

way of a 100% penalty

violations, 90% came from investigations assisted by leniency applicants. 1

reduction of 50% in the penalty imposed on it.

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