Introduction
India is the world’s eighth-biggest advertisement market, and the revenues for the year 2024 stand at $18.5 billion, as per the estimates of GroupM. The Competition Commission of India (“CCI”) recently launched a raid to uncover cartelization in the global ad industry after receiving an intel. The leniency regime of the CCI, which allows penalty reductions for the informant, played a key role in aiding the disclosure of the cartel.
In this article, the efficiency of the leniency program is examined and a distinction between its necessity and sufficiency is carved out. The structure aims to establish the factual background that prompted the discussion and places emphasis on the role played by the informant. It then proceeds to analyze the challenges that plague the current leniency regime and concludes by presenting solutions that would help in covering the gap and ensuring a smoother and more successful leniency program.
The case of the advertisement cartel
In March 2025, Reuters reported that the CCI was informed of allegations relating to collusion between media buying agencies and broadcasters. The case was triggered after Dentsu, a Japanese media enterprise and one of the members of the alleged cartel, made disclosures pertaining to the ongoing anti-competitive activity between the entities.
The investigation by the CCI commenced with a raid in the offices of two important industry organizations, the Advertising Agencies Association of India (“AAAI”) and the Indian Broadcasting and Digital Foundation (“IBDF”), as well as the offices of several large ad networks, including GroupM, Interpublic, Publicis, and Dentsu, which are owned by WPP. As the case progressed further, the internal CCI document, dated February 7, brought to light certain allegations of a separate cartel operating through the Indian Society of Advertisers (“ISA”). The CCI claimed that the “AAAI and its members are in contravention of competition laws” and further added that this alleged cartel also involved the fixing of formula-based fees. The findings further indicate that the agencies were exchanging sensitive information through WhatsApp Groups and agreed on the pre-determined commission structures.
Cartels in India
Cartelisation is defined under Section 2(c) of the Competition Commission of India Act (the “Act”) and refers to enterprises entering into agreements to manipulate the production, distribution, sale, or price of goods or services. Section 3(1) and Section 3(3) of the Act prohibit such anti-competitive agreements. Cartel agreements are presumed to have an appreciable adverse effect on competition (“AAEC”), invoking a “per se” rule, but this presumption can be rebutted if parties can show their actions do not harm competition or fall within exceptions under Section 19(3) of the Act.
CCI is empowered to inquire into cartel conduct, aided by the Director General (“DG”) for investigation. When a cartel is discovered, the CCI may direct the parties to discontinue and not re-enter such agreements, to modify the anti-competitive agreement, or to issue any other orders or directions as deemed fit, including payment of costs.
There are two ways to penalize cartel members under the Act. Each entity involved in the cartel may be subjected to a penalty from the Commission of up to three times its profit for each year the agreement is in effect, or ten percent of its turnover for each year the agreement is in effect, whichever is the bigger amount. This implies that the penalty can be determined as a percentage of turnover or based on the profits from the cartel activities, with a higher amount being applied.Section 48 of the Actactions.
While detailing the allegations of the advertisement cartel, the CCI document states that the advertisers “established a buyer’s cartel, while the broadcasters who provide channels separately engaged in collective action to refrain from giving discounts to clients”. It further added that another cartel is operating in the media segment with attempts to establish another cartel in the creative business segment.
The Indian leniency regime
The inherent challenges in detecting a cartel necessitated the creation of a leniency program as an incentive for the whistle-blower of the cartel. This program under Section 46 of the Act, serves as a crucial exception to the otherwise stringent penalties imposed on cartel participants. It is a form of whistle-blower protection mechanism, designed to incentivize cartel members to voluntarily disclose their involvement and provide vital information about the cartel’s operations to the CCI. In return for such cooperation, the CCI may grant immunity or a reduction in penalties that would otherwise be levied under the Act.
Section 46 of the Act and the Competition Commission of India (Lesser Penalty) Regulations, 2009, control the leniency program. As per these provisions, the applicant must provide a complete, accurate, and essential disclosure prior to the CCI receiving the investigation report in order to be eligible for leniency and, unless instructed otherwise, the applicant must stop participating in the cartel after revelation. The applicant is also required to provide all pertinent data, records, and supporting documentation and should showcase sincere, complete, and ongoing cooperation throughout the inquiry and processes. Most importantly, the applicant cannot hide, destroy, alter, or delete pertinent papers.
If these conditions are met, the CCI can reduce the penalty by up to 100% for the first applicant whose disclosure enables CCI to form a prima facie opinion about the existence of a cartel. Subsequent applicants may receive reductions of up to 50% and 30%, depending on the value of the additional evidence provided and their order of priority. The degree of leniency depends on factors such as the timing of the disclosure, the quality of information, and the applicant’s cooperation.
The challenges plaguing the leniency regime
The CCI is known for levying extremely high range of penalties on cases of cartelisation. When the cover from a cartel is blown by the whistleblower, discussions are generally centric to investigating the anti-competitive practices undertaken by the concerned entities, imposing penalties and leniency provisions for the whistleblower. The imposition of high penalties is uncontested since it acts as a strong deterrent for preventing companies from engaging in behaviors that would disrupt the markets. However, what is often left unheeded is if the impact of these leniency provisions is sufficient to act as a standalone incentive for entities to blow covers off their other trouble-making partners. for preventing companies from engaging in behaviors that would disrupt the markets. However, what is often left unheeded is if the impact of these leniency provisions is sufficient to act as a standalone incentive for entities to blow covers off their other trouble-making partners.
In the case of Dentsu, reports suggest that there were two significant losses that the company had incurred which eventually turned the trajectory of events and made it blow the whistle on the alleged cartel. This gives rise to a pressing question- if Dentsu’s losses had not been magnificent enough, how long would it have taken the CCI to uncover the truth on its own had there been no insider information? Furthermore, does the leniency program suffice on its own to incentivize heavy profit-making cartels to aid the CCI in return for penalty waiver? Reports suggest otherwise since a study published by the CCI concluded that only 7 leniency applications have been filed from the year 2009-2018. Additionally, it is also found that a reduction in penalty alone is not a strong enough push for entities to break up their alliance.
Solutions
Jurisdictions around the world follow a mix of carrots and sticks approach while detecting and investigating a cartel. For example, the US and the UK follow an aggressive yet structured approach by following a permutation of penalty, prosecution and reward. While India follows a mechanism for civil penalties for cartels, a shift towards criminal prosecution for flagrant offenders has the potential of acting as a stronger preventive instrument in securing the objectives of the Competition Act, 2002 since a criminal punishment assists discouragement and helps in establishing that the same mistake must not be repeated.
Additionally, the need of the hour is also for the CCI to take proactive measures for spreading awareness about the evils of cartels. The ICN Anti-Cartel Enforcement Manual stressed the role of public engagement and education for launching a cartel investigation. Measures like these can create a positive impact by securing the interest of stakeholders and increasing knowledge about cartels.
Another suggestion is to develop a stricter mechanism for protecting whistleblowers from blacklisting and retaliation. A dedicated anonymous portal can also help mitigate the fears of being exposed while reporting to the cartel and help in maintaining security and confidentiality. Such portals have already proved their efficacy in Ireland where the Competition and Consumer Protection Commission offer services by third party platforms to help report a cartel.
Conclusion
The menace of cartels is embedded in the history of mankind. Texts as old as the Arthashastra by Chanakya explored the potential risk that a cartel entails including consumer exploitation and market distortion. The advertisement cartel case necessitates a broader introspection since leniency programs, despite the success, fail to act as a strong enough impetus for uncovering cartels.
In today’s world, it is pertinent to have a shift from penalty dominated reactive enforcement to a more strategic approach that can help in successful detection of cartels. A structured mechanism including criminal prosecution and proactive measures for awareness will act as a strong preventive force for the future.
This blog is written by Sakshi Tiwari and Akarsh Anand, 4th Year student and 5th Year student respectively, Dr. Ram Manohar Lohiya National Law University
