On August 5, 2022, the Competition (Amendment) Bill, 2022, was introduced in the Lok Sabha, which seeks to overhaul the extant competition regime in India. The Bill is a culmination of the recommendations of the Competition Law Review Committee (CLRC) and the extensive public and stakeholder consultations carried out by the Ministry of Corporate Affairs (MCA).
The Competition Commission primarily pursues three issues of anti-competitive practices in the market:
- Anti-competitive Agreements
- Abuse of Dominance
- Combinations (Combinations imply mergers, acquisitions, or amalgamation of enterprises)
Technology advancement make amendments became necessary to sustain and promote market competition.
This Bill proposes certain changes to the Competition Act, 2002. It has been referred to the Standing Committee of Finance for further review. This Bill has been introduced at a time when the Competition Commission of India (CCI) is tightening scrutiny over anti-competitive activities by e-commerce firms.
HIGHLIGHTS OF THE BILL
- It seeks to amend the Competition Act, 2002, to regulate mergers and acquisitions (Section 5) based on the value of transactions.
- Deals with transaction value of more than INR 2,000 Cr. will require CCI’s approval.
- It proposes to reduce the timeline for the CCI to pass an order on such transactions from 210 days to 150 days. The proposed amendment seeks to bring Indian merger review at par with global standards and promote ease of doing business.
- It expands the scope of entities that can be adjudged to be a part of anti-competitive agreements.
- Currently, enterprises or persons engaged in similar businesses can be held to be a part of anti-competitive agreements, which will be expanded to include enterprises or persons who are not engaged in similar businesses.
- It provides a framework for settlement and commitment for faster resolution of investigations of anti-competitive agreements and abuse of dominant position.
- It decriminalizes certain offences under the Act by changing the nature of punishment from imposition of fine to civil penalties.
- It seeks to transfer the appointment of the Director General from the Central Government to the CCI, for greater administrative efficiency.
- Amendment proposed for Section 48 of the Competition Act in terms of penalties in case the enterprises engage in cartelization.
HOW IS THE BILL DIFFERENT FROM THE EXISTING ACT?
|1||Regulation of combinations||Prohibits from entering into a combination which may cause an adverse effect on competition. It applies to transactions where – |
• Cumulative assets of more than INR 1,000 Cr. or
• Cumulative turnover of more than INR 3,000 Cr.
|Expands the definition of combinations to include transactions with a value above INR 2,000 Cr.|
|2||Timeline for approval of combinations||The Commission has 210 days to approve the combination, after which it is automatically approved.||Accelerates the timeline to 150 working days with a conservatory period of 30 days for extensions.|
|3||Anti-competitive agreements||Criteria for causing adverse effect on competition|
• Directly or indirectly determining purchase or sale prices
• Controlling production, supply, markets, or provision of services
• Directly or indirectly leading to collusive bidding
|Enterprises/ persons not engaged in identical or similar businesses shall be presumed to be part of such agreements, if they actively participate in furtherance of such agreements.|
|4||Anti-competitive proceedings||CCI may initiate proceedings against enterprises for: |
• Entering into anti-competitive agreements
• Abuse of dominant position
|Permits CCI to close inquiry proceedings if the enterprise offers Settlement (may involve payment)Commitments (may be structural or behavioural)|
|5||Relevant product market||Defines relevant product market as – products and services which are considered substitutable by the consumer.||Includes production or supply of products and services substitutable by the suppliers.|
|6||Appointment of Director General||Empowers the central government to appoint a Director General to CCI.||Empowers CCI to appoint Director General with prior approval of government.|
|7||Qualification of chairperson and members of CCI||They should have professional experience of at least 15 years in |
• Competition matters
|Extends this, to include experience in the field of technology.|
|8||Gun-jumping||The penalty for gun-jumping was a total of 1% of the asset or turnover.||This is now proposed to be 1% of the deal value.|
WHAT IS THE SIGNIFICANCE OF THE AMENDMENT?
- Regulation of combinations will strengthen the Commission’s review mechanism. Particularly in the digital and infrastructure space.
- This amendment broadens the scope of ‘anti-competitive agreements’ to catch entities that facilitate cartelization even if they are not engaged in identical trade practices.
- Accelerating the approval time will speed up the clearance of combinations and increase the importance of pre-filing consultations with the Commission.
- Notifying in advance is similar to the EU merger regulations. It proposes to exempt open market purchases and stock market transactions from the requirement to notify them to the Commission in advance.
- By implementing these amendments, the Commission will be better equipped to handle certain aspects of the new-age market and transform its functioning to be more robust.
With these new changes, the Commission should be able to manage certain aspects of the New Age market in a better way and make its operation more robust. These amendments are going to promote ease of doing business. The CCI believes in a very simple mantra - “Customers reign supreme”, and it’s the commission’s job to make sure everyone in the market abides by this little maxim.
CCI on October 19, 2022 fined online hotel booking sites MakeMyTrip and Goibibo, and hotel chain OYO for a total of over INR 392 crore for anti-competitive conduct in hotel room listing.
Later in the same month, CCI fined Google INR 1,338 crores for its shenanigans in the Android ecosystem and then again imposed another penalty worth INR 936 crores for abusing its Play Store Policies. CCI is clearly taking drastic measures and slapping hefty fines against any action that it believes – inhibits competition and affects user experience.
This is only for informational purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein. Endeavoured to accurately reflect the subject matter of this alert, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this. This isn’t an attempt to solicit business in any manner. Sources: https://prsindia.org, https://vidhilegalpolicy.in, https://www.outlookindia.com, https://www.iasparliament.com