INTRODUCTION

In India, the Competition Act 2002, prevents practices which have adverse effect on competition, promotes and sustain competition in markets, and ensures freedom of trade carried on by the other participants in markets. The Competition (Amendment) Act 2023 was notified in February 2024 and one of its significant changes was the introduction of the Lesser Penalty Plus, which basically means that if an individual/company while disclosing one cartel during investigation also discloses another cartel to the Competition Commission of India (CCI), it can get additional leniency by reduction of penalty in the original cartel case as well as reduction in penalty or immunity in the second cartel.

Leniency policy creates a win-win situation for both, the individual/company who gets the advantage of leniency in penalty and the Commission, who gets information about cartel. A cartel is said to exist when two or more enterprises enter into an agreement to fix prices, to limit production and supply, to allocate market share, or to engage in bid-rigging.

The intention of introducing a leniency plus regime is novel, however, whether it will be able to show its effectiveness in India is the real question – an issue this article will examine in detail.

LENIENCY PROGRAMME IN INDIA

“You tell us and help us discover cartel, we reduce your penalty.”

Leniency programme is a type of whistleblower protection which offers a lenient punishment/penalty to the member who discloses the cartel to the Commission. The leniency programme is regulated by Section 46 of the Act and the CCI (Lesser Penalty) Regulations 2009, the Commission has a discretion and not an obligation to reduce penalties but this benefit is available only if: the disclosure is genuine and important, the applicant cooperates fully throughout the investigation and the Commission did not already know about the disclosure made. 

The first leniency order was passed by the Competition Commission of India in 2017, in the case In Re: Cartelization in respect of tenders floated by Indian Railways for supply of Brushless DC Fans and other electrical items (Brushless DC Fans) involving the procurement of brushless direct current fans by Indian Railway, a reduction in penalty of 75 per cent was also granted to the leniency applicant. Additionally, in the case In Re: Cartelisation in respect of zinc carbon dry cell batteries market in India (Panasonic), the CCI observed that Panasonic leniency application contained substantial disclosures that allowed it to establish a prima facie view about the cartel, it also offered complete cooperation and supplied important evidence about the cartel and therefore the CCI reduced the penalty imposed on Panasonic employees by 100%,

EMERGENCE OF LENIENCY PLUS IN INDIA AND GLOBAL PARALLELS

Additionally, now the CCI has notified CCI (Lesser Penalty) Regulations 2024 paving the way for Leniency Plus regime as a new cartel detecting tool. By virtue of the Plus regime, an applicant may be eligible for a reduced monetary penalty if they disclose the existence of a cartel ("First cartel") and then disclose the existence of another cartel ("Second cartel") of which they were a part and which is accused of violating Section 3 of the Act. The reduced monetary penalty for the applicant will be two-fold. First, the applicant could get a further penalty reduction of upto or equal to 30% of the penalty assessed for the first cartel, for the second cartel, the applicant may benefit from a penalty reduction of up to or equivalent to 100%.

In many countries, such as the US and the UK, such provisions have been adopted and have proved to be successful. In the US, the leniency plus programme, called ‘Amnesty Plus’, was developed by the US DOJ in 1999, likewise, in the UK, the additional leniency was introduced in 2013 by the NCA.

ANALYSIS

Though, the introduction of Leniency plus programme marks a watershed movement in India’s Competition Law history, but despite its potential, the framework is not free from challenges which are discussed below:

1. Increase of pro-collusion behaviour in markets

On paper, leniency plus looks like a smart move, but in reality it could lead to pro-collusive behaviour. Basically, leniency plus comes into play only in cases of more than one cartelist, and therefore instead of discouraging cartels, it could lure more individuals/companies to participate in more than one cartel. Imagine a company which is already involved in one cartel, knows that joining another cartel could provide it a power to decrease future penalties, the company may see value in expanding its collusive behaviour across more than one marketplace and hence may participate in more than one cartel, also known as creating perverse incentive. In simple terms, a perverse incentive exists when a law meant to discourage illegal behaviour ends up encouraging it. A firm already engaged in cartel conduct may calculate that participating in an additional cartel could later help it negotiate lower penalties through disclosure. This possibility risks weakening the deterrent effect of competition law and may defeat the very objective of the leniency framework, turning it into a double-edged sword for regulators. 

Though, it could be managed by keeping the penalty under leniency plus lower than the regular leniency provision so that the incentive of bargaining in future penalties does not arise. Moreover, the Commission should also enforce clear rules on when Leniency plus provisions can be applied so that it acts as a genuine tool and not a loophole.

2. Risk of strategic withholding of information 

The leniency plus provision can unintentionally allow cartelists to engage in a strategic activity. The incentives of leniency may motivate parties to engage in a waiting game with regulators. During an ongoing investigation, an individual/company may knowingly suppress/withhold important information regarding a cartel functioning in a market and instead of disclosing everything then, the individual could selectively declare its involvement later, when it thinks that maximum profits could be gained.

This situation can get worse when it is not possible by the Commission to see the second cartel, in such cases, cartelists may keep the second cartel a secret because if the authority is unaware, it is more beneficial for the company to operate the cartel rather than reveal it, only when discovery becomes unavoidable does the motivation to divulge kick in, allowing the corporation to maximize leniency benefits while avoiding risks. Such strategic non-disclosure undermines the basic purpose of leniency system, instead of promoting transparency and deterrence, it allow cartels to operate various collusive arrangements, with leniency serving as a calculated shield rather than a true path to compliance.

3. When vagueness breeds silence

The basic principle amongst various jurisdictions for leniency provision is that the earliest applicant receives the greatest reduction in penalty. This "first through the door" and “prisoner’s dilemma” strategy is intended to spark a race amongst cartel members to give information about the cartel. In India, this framework, however, is quite ambiguous, this ambiguity creates uncertainty which could lead to misuse of the provision. For instance, Rule 5 LP Regulations, authorizes the CCI to grant or deny leniency based on a number of considerations, including the importance of information, the applicant's cooperation, and the CCI's ability to detect the cartel. While this appears genuine, it also grants the Commission very broad discretion as to what extent is the information "vital"? These limits are not well defined.  As a result, if the width of leniency is unpredictable and the Commission works at its own discretion, the cartelists may choose to withhold information strategically, providing it only when it is most advantageous to them, which undermines the very purpose of leniency provision. Therefore, the lack of clarity and discretion of the CCI in how leniency reductions are applied makes the programme less effective.

The ambiguity in India's leniency framework is primarily rooted in Rule 5 of the LP Regulations, which serves as the central provision governing penalty reductions, with various other provisions supplementing the uncertainty.

Rule 5 acts as the heart of the problem by granting the CCI sweeping discretion to determine leniency based on factors like the "vitality" of information and the degree of cooperation - terms that remain undefined. Section 46 of the Competition Act, 2002 reinforces this discretionary approach by using permissive language ("may" impose lesser penalties) without prescribing any binding methodology.

Further, Regulation 3, while designed to secure an applicant's position, doesn't clarify how preliminary disclosures are evaluated or how long markers remain protected, questions that ultimately tie back to Rule 5 undefined standards for what constitutes sufficiently "vital" information. Similarly, Regulation 4's follow-up requirements lack clarity on what constitutes adequate supplementation of initial disclosures, leaving applicants uncertain about whether they are meeting the cooperation standards. The absence of published precedents or detailed guidelines compounds this core problem, as potential applicants have no framework to predict how the CCI will exercise the broad discretion that Rule 5 affords. Rule 5 establishes the discretionary foundation, while the surrounding provisions layer additional procedural ambiguities onto this already uncertain base, collectively undermining the predictability essential for an effective leniency regime.

4. The all-or-nothing gap

A natural question in the context of Leniency Plus is what happens if a company applies for leniency in one cartel but deliberately decides not to disclose another cartel to which it is a part of at the time of investigation of first cartel and later the regulator discovers it on its own? The Indian framework is notably silent on this issue. The 2023 amendment do not specify whether such withholding will result in harsher penalties or prevent the applicant from receiving leniency benefits. This silence presents a loophole, allowing a cartelist to report only one cartel while continuing to operate another without any fear.

In contrast, United States and Canada follows the all-or-nothing approach. When an individual/company comes forward to report one cartel, it must also reveal all other cartels in which it participates and failure to do so is taken seriously resulting in significant fines, also known as “penalty plus”. This comparative perspective demonstrates that without consequences for non-disclosure, the program's deterrent effect is reduced. 

CONCLUSION

The introduction of the Lesser Penalty Plus regime marks a meaningful shift in India’s cartel enforcement strategy. If used effectively, the provision has the potential to uncover collusive arrangements that would otherwise remain hidden, thereby strengthening deterrence and expanding the enforcement reach of the Competition Commission of India.

However, the current design of the regime exposes critical gaps that threaten to dilute its impact. The possibility of pro-collusive incentives, strategic withholding of information, and the wide discretion available to the Commission undermine the predictability that leniency programmes fundamentally rely upon. Without clear benchmarks on the timing, quality and value of disclosures, cartelists may treat the Lesser Penalty Plus provision as a strategic safety net rather than an immediate incentive to cooperate fully.

To bridge these gaps, India’s Lesser Penalty Plus regime would benefit from clearer eligibility thresholds, stricter timelines for disclosure and more transparent guidance on how additional reductions are calibrated. Learning from jurisdictions such as the US and the EU where Leniency Plus is accompanied by tighter procedural safeguards can help ensure that the Indian framework rewards early, comprehensive cooperation rather than calculated delay. Only through such refinements can the Lesser Penalty Plus provision evolve from a promising innovation into a robust tool that meaningfully strengthens cartel deterrence in India.

About the Author

Preksha Nagpal is a fourth year law student at Rajiv Gandhi National University of Law, Punjab.