Whistleblower in the Anti Competitive Trusts

By Ayushi Singhal, NUJS

Editor’s Note: It often so happens that when a law, whether in the form of an act, a rule, order or anything of that category is passed, it is not exploited for several years. One of many such provisions is the Competition Commission of India[i] (Lesser Penalty) Regulations, 2009, for the utilization of which there hasn’t been even a single instance, though it has completed more than 4 years of its legislation. Many reasons can be identified for the same like the penalties other than the ones imposed by the CCI like the humongous claims from the consumers which arise after the cartel disclosure, the fear of being boycotted by the industry, etc. The present write-up will provide a briefing about the regulations and the possibility of the setting up of the first precedent for the 2009 regulations.


A cartel is “a consortium of independent organizations formed to limit competition by controlling the production and distribution of a product or service”.[ii]  Many organizations working for the promotion of competition worldwide have emphasized the disadvantages of such trusts. Such conglomerations control competition in the open market.

This is done through many mechanisms like fixing high prices for the products sold by the participants of the cartel, particularly when the products are uniquely available with the participants only. This raising of prices above the competitive levels leaves no choice with the consumers, forcing them to buy the product at that fixed price, distorting ‘allocative efficiency’.[iii]

This limiting of the competition artificially not only prevents innovation and efficient production, but also promotes poor quality, since the companies no longer thrive to produce the best goods. This ultimately leads to the decrease in consumer welfare.

The participation in the formation of such cartels is punishable with a fine of three times a company’s profit or 10% of its turnover, whichever is higher.[iv] However it is very difficult to gather proof for the existence of cartels. Taking note of this, various economies like UK, US, Singapore etc., had been tackling this problem by awarding people who disclose the existence of such trusts and help the investigation agencies.

The Competition Act, 2002 however had no such concrete provision until 2009 and it was realized that the lack of lesser penalty provisions for whistleblowers was a grave deficiency in the Act.[v] Thus, the aforementioned regulation was drafted by the Indian Antitrust organization, by virtue of the power vested in it by §46[vi] and §64[vii] of the 2002 Act.  §46 provided that the CCI should devise regulations to afflict lesser punishment on the people  who give a ‘full’, ‘vital’ and ‘true’ disclosure of the information related to cartelization. §64 gave the CCI authority to make rules and regulations.

The regulation was to serve the purpose of not only detecting cartels, but also of reducing the cost of the investigation. It was supposed to act as a watchdog to deter firms from entering into such competition abuses, by creating a fear of the traitor in the cartel among its members.[viii]

The provision is efficiently drafted. It gives up to 100% immunity from penalty imposed by the CCI in case “the applicant is the first to make a vital disclosure by submitting evidence of a cartel, enabling the Commission to form a prima-facie opinion regarding the existence of a cartel which is alleged to have violated Section 3 of the Act and the Commission did not, at the time of application, have sufficient evidence to form such an opinion.”[ix]

The percentage of reduction in the penalty changes depending on whether anyone else has made a similar disclosure and the status of the investigation regarding the same of the Anti-trust commission. It also depends on the extent of support provided by the whistle-blower during the investigation of the case.[x] Despite such rewards for the people disclosing cartelization, surprisingly enough, this provision has not yet been taken use of till date.[xi] Consequently, it has not been possible to analyze the after effects of such disclosure in the Indian context.

Thus the companies are still not aware of the consequences which might follow for them after they disclose information. This might be one of the reasons why the provision has not been utilized in India as it has effectively been done in the European countries. However, with Phoenix Conveyor Belt, India (a subsidiary of German tyre-maker Continental) disclosing a possibility of a cartel in the conveyor belt segment, there is inkling of CCI using the 2009 regulations.[xii]

Firms like Sempertrans Nirlon (P) have been alleged to form a cartel for procurement of conveyor belt via tenders which were floated by the private and public companies.[xiii] It is being estimated that before submitting the bid, the cartel members used to decide among themselves the winner and the winning price of the bid, the members jointly deciding the bid price for everyone else. This if true, would have caused huge losses to the companies or corporations opening the bids, since they accepted the bids which were virtually the highest and not in reality. If this is proven, the CCI will use the regulations of 2009, which will establish a precedent for other companies.

There is a possibility that the disclosure was made only after the company had already gained the optimum return from the cartel; however the same needs to be proven. Moreover, though the disclosing company will be safe from penalties imposed by the CCI, there can be no immunity against the consumer claims, which might just be vast in most of the circumstances.[xiv]

However, once the precedent is set, it might encourage others to make similar disclosures. This might make the leniency program which had been ineffective till now, functional. As is the case in EU, where most of the investigations have been done based on the evidence provided by the whistle-blowers.[xv] It might also bring out the drawbacks of the leniency program, if any. The judgment is, thus, being awaited by the business world.

Though there are countries which have set such lesser penalty regimes to reveal such anti competitive practices, there are many which still haven’t. The writer feels that there is a need of making an internationally uniform set of leniency rules, so that the cartels which have been formed amongst multinational companies can be motivated to give a complete disclosure.

Otherwise such companies will be forbidden to disclose because of a fear of execution in the countries which do not have such a facility. Moreover, there should also be a provision via which only the officials responsible in the formation of the cartel get punished unlike the present guidelines, where it is the pocket of the shareholder which ultimately gets loosened. These share holders, who don’t even know of the cartelization ultimately end up losing their money.

Regardless, in the present state of facts, it is better for the companies to disclose if they have formed such cartels, before their co-conspirators plan to do the same, in order to get 100% waiver of penalty. The waiver keeps on decreasing for each lapse in the position of disclosure maker among other participants of the cartel.

Formatted on February 20th, 2019.


[i] Hereinafter, “CCI”.

[ii] Princeton Wordnet Search, available at http://wordnetweb.princeton.edu/perl/webwn?s=cartel&sub=Search+WordNet&o2=&o0=1&o8=1&o1=1&o7=&o5=&o9=&o6=&o3=&o4=&h, last seen on 13/03/2014.

[iii] XXXII EU Report on Competition Policy, available at

http://ec.europa.eu/competition/publications/annual_report/2002/en.pdf, last seen on 15/03/2014.

[iv] Guide for investment in India 23, available at http://www.ficci.com/spdocument/20302/Guide_For_Investment_in_India.pdf, last seen on 17/03/2014.

[v] Akash Choubey and Saurabh Mishra, Competition Law: Glancing Back, Looking Ahead, Penn Library Web Journal 17 (2004).

[vi]  S. 46, The Competition Act, 2002.

[vii]  S. 64, The Competition Act, 2002.

[viii] Steffen Brenner, An empirical study of the European corporate leniency program, 27 (6) International Journal of Industrial Organization 639–645 (2009), available at http://www.sciencedirect.com/science/article/pii/S0167718709000290, last seen on 11/03/2014.

[ix]  S.4(a), The Lesser (Penalty) Regulations, 2009.

[x] S.4, The Lesser (Penalty) Regulations, 2009.

[xi] Cyril Shroff Et al., Cartel Enforcement in India: Standard and Burden of Proof, CPI Antitrust Chronicle 1 (2013), available at http://awards.concurrences.com/IMG/pdf/india.pdf, last seen on 13/03/2014.

[xii] Maulik Vyas, ET Bureau, Antitrust regulator CCI may be lenient on cartel whistleblowers, available at http://articles.economictimes.indiatimes.com/2014-02-27/news/47739680_1_alleged-cartel-competition-commission-regulator, last seen on 11/03/2014.

[xiii] Id.

[xiv] The Lesser Penalty regulations pertain only to the penalties imposed by the CCI.

[xv] Kala Anandarajah Et al., Lenient Treatment for Cartel Whistleblowers under Singapore Competition Law, available at http://www.lawgazette.com.sg/2006-8/Aug06-feature2.htm, last seen on 11/03/2014.

See also, Rajah & Tann Client Update, Recent Cartel Findings in the European Union, available at: http://eoasis.rajahtann.com/eOASIS/gn/at.asp?pdf=../lu/pdf/06-May-Recent-Cartels.pdf&module=LU&topic=LU000313&sec=a, last seen on 11/03/2014.

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