Panasonic receives first ever 100-percent leniency reduction from battery-cartel fine in India

24 April 2018 11:54am
Flag of India

20 April 2018. By Phoebe Seers.

Japan's Panasonic has escaped all of a 740 million rupee ($11 million) antitrust fine in India, making it the country’s first ever beneficiary of a 100 percent penalty reduction in a cartel case involving battery makers.

Competitors Eveready and Indo National, which sells the Nippo brand, also received discounts of 30 percent and 20 percent, respectively, for their cooperation in the case, which is only the second to have been decided by the Competition Commission of India in which companies have benefitted from leniency regulations.

After discounts were applied, Eveready and Nippo were fined 1.72 billion rupees and 420 million rupees, respectively. In addition, six officials from Eveready and eight from Nippo were hit with fines ranging from 64,000 rupees to 1.9 million rupees. Six Panasonic officials had their fines reduced to zero.

The officials named are the first individuals to benefit from the leniency program. Only last year, the law was amended in India to allow individuals to make an application for leniency under its rules.

Panasonic said its competition compliance program had made it aware of the cartel and prompted the leniency application, according to the CCI’s order.

Panasonic Energy India filed for leniency under the lesser penalty regulations on May 25, 2016. That information prompted the director general for competition to carry out “search and seizure operations,” otherwise known as raids, on all three companies simultaneously on Aug. 23, 2016.

MLex first reported the raids on Aug. 25, 2016, which was only the second ever raid conducted by the competition authority.

Eveready Industries India filed for a penalty reduction on Aug. 26, 2016, three days after the raids took place, and Indo National, which sells the Nippo brand, followed suit on Sept. 13.

The three companies are engaged in the manufacture and supply of zinc-carbon dry-cell batteries. Those batteries account for about 97 percent of the total dry-cell battery market in India, with high-priced alkaline batteries accounting for the remainder of the market, the CCI said.

According to the CCI, not only did the companies fix price increases for the batteries, they also agreed not to push sales through their distribution partners aggressively to avoid price wars among themselves.

The price coordination among them excluded price competition at all levels in the distribution chain to ensure implementation of the agreement to increase prices, the CCI said.

Emails exchanged among the parties also revealed an understanding to allocate the market based on geographical area and types of batteries. The would often request each other to withdraw products from a particular geographical area such as a state or town or city.

The CCI's director general found active involvement from the top management of all the parties, including their managing directors, joint managing directors, heads of marketing and sales as well as other officials.

The CCI said the evidence provided by Panasonic was crucial in assessing the nature and extent of information exchanges and the names, locations and email accounts of key persons involved in the cartel. It also enabled the director general to conduct search and seizure operations and receive valuable evidence in the form of emails, handwritten notes and other documents.

“Thus, full and true disclosure of information and evidence and continuous cooperation provided by [Panasonic] not only enabled the commission to order investigation into the matter, but it also helped in establishing the contravention [of the law],” the CCI said. 

The CCI fixed the penalty for all three companies at 1.25 times their profits for each year of the cartel — which lasted longer than six years. The maximum fine available to the commission is the higher of 3 times profit or 10 percent of turnover. It then deducted 100 percent of the penalty for Panasonic and 30 percent and 20 percent, respectively, for Eveready and Nippo.

The industry trade association, whose receipts are “not significant,” was levied with a penalty fixed at 10 percent of its average gross receipts over the preceding three years — the maximum available under the law.

Eveready tried to argue it met the threshold of “significant value addition” to benefit from a higher reduction, but the CCI found that almost all the disclosures it made were available either from information disclosed by Panasonic or obtained through the raids, and was granted 30 percent for its cooperation and status as the second leniency applicant.

It benefited from a greater reduction than Nippo because it filed its application earlier.

It is not yet clear if the parties that were penalized will appeal the decision — something that has become standard practice in India. In a statement to the stock exchange, Eveready said it would take appropriate action after fully examining the CCI’s order.

The CCI awarded its first penalty reduction arising out of a leniency application only last year. In January 2017, the CCI awarded Pyramid Electronics a 75 percent reduction in penalty for a case involving the cartelization of tenders submitted to Indian Railways for brushless fans and other electrical items.

Joh Sung-Wook Interview