Leniency Programme to break cartels, promote competition

Lyna Mohamad

When businesses collude or engage in cartels, consumers have less choice, high prices are maintained and there is no incentive for businesses to innovate in providing products or services at their best quality to compete for customers.

This was highlighted by the Executive Secretariat to the Competition Commission Brunei Darussalam (CCBD), Department of Competition and Consumer Affairs (DCCA).

As the government is a big consumer through public procurement activities, harm surfacing from a cartel – which is an illegal agreement formally or informally made between two or more businesses not to compete with each other – may also affect government resources or public budget.

This not only affects consumers, but it is also detrimental to SMEs, due to unequal business opportunities resulting from market entry barriers. Consequently, it creates inefficiency in the sector and hampers business growth harming the economy as a whole.

The illegal agreement of a cartel may include price-fixing, supply control, market sharing and bid-rigging (collusive tendering), where businesses involved in a cartel typically agree on one or more of the list namely prices, profit margins, output levels, discounts, credit terms, which customers they will supply and who should win tender.

Starting on January 1, colluding or engaging in cartels is a violation of the Competition Order, which is an offence under Section 11 of the Anti-Competitive Agreements of the Competition Order, where businesses found engaged in cartels will be subjected to fines of up to 10 per cent of their business turnover for each year of infringement, up to a maximum of three years.

Meanwhile, Section 44 of the Competition Order offers a specific provision to incentivise cartel members to get leniency or immunity from penalty, by coming forward with insider information or evidence in exchange for the leniency or immunity.

This also means that with a Leniency Programme in place, engaging in such conduct is riskier, as any member may reveal the cartel to avoid the legal consequences. Therefore, this programme has proven to be an effective tool in uncovering cartel conducts.

Cartel members revealing the cartel they are involved in, with direct evidence and full cooperation, will be granted up to full immunity through the Leniency Programme. However, the extent to which the cartel member is given immunity depends on several criteria.

This includes whether the member was the first to come forward, the value of the information and/or evidence handed over to CCBD, providing unfaltering cooperation to CCBD, and the investigation stage at which the member is revealing the cartel.

Section 70 of the Competition Order gives protection to the identity of the cartel member applying for and granted leniency, where it will be kept confidential.

A cartel member wishing to come forward and reveal the cartel would need to make an application by completing an online form available on the CCBD website or by sending the completed downloadable form, available on the site, to the CCBD Executive Secretariat’s email.

More details and information on the CCBD’s Leniency Programme are available by visiting their ‘Guideline on Leniency’ in the CCBD website.