MCA proposes higher penalties and wider leniency to combat cartels

Last updated: 24 May 2023

Higher penalty for cartels and greater leniency provisions introduced in competition law last month will go hand in hand in tackling cartels which are by nature difficult to prove, the corporate affairs ministry said in a monthly update, indicating what would be the competition watchdog CCI's approach in market correction after it got a new chair this month.

The amended competition law that received Presidential ascent last month allows a higher penalty of 10% of global turnover of an erring company, up from 10% of domestic sales earlier.

The amendments also provide for a ‘leniency plus’ scheme that aims at encouraging entities facing cartel investigations to disclose existence of other cartels. Under this scheme, the entity that discloses a second cartel stands to get reduced penalty in both the cases.

 

The ministry said in its monthly update that deterrence is key for an effective anti-cartel enforcement regime and that stringent penal measures not only provide an incentive for cartel members to defect from their conspiracy, but they also make leniency programs work.

It is indisputable that competition authorities face challenges in detecting and punishing cartels since they operate under a cloak of secrecy, the ministry said. Leniency programs play an instrumental role in dealing with challenges and they assist competition authorities in detecting, investigating, and punishing hard-core cartels, it said.

"The Leniency Plus tool will allow a cartelist to obtain further reduction in penalties in exchange of information regarding the operation of another cartel in the market. It was observed that the promise of added reward for reporting another cartel would incentivize more firms to come forward with disclosures regarding anti-competitive agreements," the ministry’s update said.

With the new amendments, the Commission has been empowered to tackle cartel cases more effectively and fiercely, the ministry said.

Last week, the government named civil servant Ravneet Kaur as the Chairperson of CCI, a move that resolves the manpower issue the regulator faced at its top that held up adjudication on cases for some time. The regulator is now set to issue orders in several anti-trust matters and Goods and Services Tax (GST) related profiteering cases.



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