Leniency Programs: Evaluating the Effectiveness in Combating Cartels and Encouraging Cooperation

Around the world, competition authorities have utilized leniency programs as a means to address the menace that cartels create in the economy.

Leniency Programs are investigative tools within the competition law regime, wherein anti-competitive authorities have the power to grant total or partial immunity to companies or individuals involved in anti-competitive activities (e.g., cartels) in exchange for disclosing the existence of the cartel agreement or for their cooperation during the authorities’ investigation by providing evidence.

This tool helps detect secret cartels and deters companies from entering into cartel agreements. It is based on the prisoner’s dilemma; its objective is to create distrust among cartel participants, as there is a constant threat that one of them may report the cartel to the authorities. Therefore, in combination with severe penalties, leniency programs maintain constant pressure on companies to cooperate with competition authorities.

In India, the program operates on the principle of “first in, first out,” encouraging anti-competition actors to come forward early.

Section 46 of the Competition Act, 2002, provides for the leniency programme. For the programme to be availed certain conditions have to be followed:

• Disclosure of the cartel shall be done by the member of the alleged cartel.
• Such disclosure shall be vital, full, and true.
• Such disclosure isn’t done after CCI has already received a report for investigation under Section 26 of the act.
• The member shall continue to cooperate with the authority even after disclosure.