Follow Us :

The Competition (Amendment) Bill, 2022 was introduced in the Lok Sabha on August 5, 2022, to amend the Competition Act, 2002.  The Bill strives to carry out certain essential structural changes in the governing structure of the Competition Commission of India and changes to substantive provisions to address the needs of new age markets. The Competition Law Review Committee in 2019 and public stakeholders’ comments on the draft Competition Amendment Bill, 2020, suggested changes to the Competition Act’s merger control and antitrust laws. These changes are embodied in the Competition Law Review Committee’s recommendation to update the Competition Law.

The key features of the bill are as follows:

1. Introduction of Deal Value Thresholds for Combinations: A new transaction value threshold is suggested to be added in addition to the current value of assets and turnover-based criteria stipulated by the Competition Act. Deal value thresholds have now been added as a new test in the Bill to evaluate whether a transaction would be considered a combination for the purposes of the Act. The Bill broadens the definition of combinations to encompass deals having a value of more than Rs 2,000 crore. The test to determine whether a party has “substantial business operations in India” will be laid down in the regulations to be issued under the Competition Act. Through this inclusion, India seems to be joining the ranks of nations like Germany and Austria, which have already had this for a few years with mixed impacts and consequences.

2. Amendment in the meaning of  “control” and “group”: In order to determine whether a transaction meets the requirements for a combination under the Act, the Bill also adds new definitions for “control” and “group.” “Control” means the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decision. A “group” is now defined as two or more enterprises, wherein one enterprise is in a position (directly or indirectly) to (i) exercise 26% (or such prescribed higher percentage) of the voting rights in the other enterprise; (ii) appoint more than 50% of the members of the board of directors of the other enterprise, or (iii) control the affairs or management of the other enterprise.

3. Timeframe for combination approval: The Bill proposes lowering the time required for combination approval from 210 days to 150 days, with the possibility of an extra 30 days if a party to the combination asks the CCI for more time to disclose any relevant information or fix any apparent errors in the notice.

4. Settlement and commitment mechanism: The bill advances such a mechanism for cases concerning vertical restraints and abuse of dominance, but excludes cartel cases. The CCI will now be competent to accept agreements and promises from parties and swiftly wrap up investigations as an outcome. Besides, by lessening waiting times, this new move will advance predictability and lower the parties’ and CCI’s litigation expenditures.

5. Widened scope of Relevant product market: The bill brings forward the widened meaning of “relevant product market,” which now means the production or supply of, which are regarded as interchangeable or substitutable by the supplier, by reason of the ease of switching production between such products and services and marketing them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices. 

6. Appointment and Powers of the Director General: With the Central Government’s prior consent, the CCI would be given the authority to name the DG under this proposed legislation. This means that, because there is a checks and balances process in place, the CCI will not have unrestricted authority to name the DG. In addition, the Bill gives the DG the authority to compel any officials, other agents, or employees of the party under investigation, as well as any other individual, to answer questions under oath, with the Commission’s prior consent. Although it is debatable if giving the DG the authority to question advisers and auditors is a necessary step, the DG may utilise this to obtain more evidence.

7. Penalties: The Bill also raises the penalties for providing incorrect or incomplete information in merger control instances from INR 10 million to INR 50 million. This would ensure transparency for the stakeholders on the calculation of penalties and ensure that the CCI’s fines are appropriate to the seriousness of the violation.

8. Establishment of a statute of limitations: This bill provides for a  limitation period of three years for filing information on anti-competitive agreements and abuses of dominant positions before the Commission. This will urge the parties to address anti-competitive problems as soon as possible instead of putting them off.

A Revision of Indian Competition Law Regime

9. Anti-competitive agreements: Any agreement relating to the production, delivery, storage, or control of products or services that have the potential to significantly harm competition in India is considered an anti-competitive arrangement under the Act. Any agreement between organisations or individuals operating in the same or related industries will have a negative impact on competition if it fits specific requirements. The scope of anti-competitive agreements is extended in this bill to include, in such agreements, a party assisting an anti-competitive horizontal agreement.

10. Deposit of a partial penalty amount is required: The National Corporation Law Appellate Tribunals (“NCLAT”), the appeals courts for issues relating to competition law, are required under the Bill to only consider an appeal from a violating company upon the payment of 25% of the fine amount. This will expostulate against companies from requesting pointless adjournments before the Appellate Tribunal. 

11. Introduction of technology as an area of expertise: The Act stipulates that the CCI’s chairperson and members must have a minimum of 15 years of professional experience in subjects like (i)  economics, (ii) competition law, (iii) management, or (iv) business. The Bill provides a broader criterion by incorporating experience in the field of technology as a new qualification for the selection committee members.

12. Hub and Spoke Cartel: Market participants at the horizontal level who agree, either explicitly or implicitly, to communicate sensitive information through a vertical common player known as the “hub” are said to be participating in a hub and spoke cartel. The hub serves as a conduit for the cartel. According to the Bill, it will be both legal and punishable to facilitate cartels through the use of third parties in order to maintain cartels. This will give India’s anti-trust regime additional clout.

13. Leniency: The leniency or lighter punishment programme would undergo major modifications as a result of the proposed legislation. The inclusion of leniency plus, which enables the CCI to offer additional leniency in penalties when a party under investigation for engaging in collusive behaviour provides a true and crucial disclosure of another undeclared cartel, is the first consequential reform that is being suggested. This will facilitate companies to make paramount disclosures. 

The changes that this Bill seeks to make to the principal Act will get a favourable reception, and these changes will keep the legal provisions modernised with the existing market scenario. The amendments are not some afterthoughts but are well-calculated changes which are sought to be made after thorough research on the same. This will have a tremendous impact on the Indian merger-control system and enables deals which were previously legally prevented from the act even though they did not meet the required limits, as has been regularly observed in technology-related mergers. The amendment that the bill seeks to bring forth will be beneficial only when the Competition Commission brings forward its regulations to coordinate the changes and make them more detailed for the smooth enactment of the amendment. The Parliamentary asset is what keeps us awaiting the future of this Amendment Bill.

Author Bio

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
April 2024