The Competition (Amendment) Bill, 2022

Technological advancements and artificial intelligence have changed the dynamics of the market at a rapid pace. It has become important to include factors other than price. In this context Competition (Amendment) Bill, 2022 was tabled in the Lok Sabha.

• The Indian Competition Act was passed in 2002, but it came into effect only seven years later. The Competition Commission primarily pursues three issues of anti-competitive practices in the market:
• Anti-competitive agreements
• Abuse of dominance
• Combinations
• More than a decade later, due to the changed scenario, a review committee was established in 2019 which proposed several major amendments. The long-awaited Bill to amend the Competition Act, 2002, was finally tabled in the Lok Sabha recently.

A combination here may be defined as any acquisition, merger, or amalgamation. The new Bill proposes to add a ‘deal value’ threshold.

• Deal Value Threshold: The said Bill will make it mandatory to notify the commission of any transaction with a deal value in excess of ?2,000 crores and if either of the parties has ‘substantial business operations in India’.
  • It is going to strengthen the Commission’s review mechanism, particularly in the digital and infrastructure space, a majority of which were not reported earlier, as the asset or turnover values did not meet the jurisdictional thresholds.
  • Frame regulations to prescribe the requirements for assessing (an enterprise having ‘substantial business operations in India): This change will strengthen the Commission’s review mechanism, particularly in the digital and infrastructure space.
• Prior Intimation: When business entities are willing to execute a combination, they must inform the Commission.
• Time limit for approval of combinations: The Act specifies that any combination shall not come into effect until the CCI has passed an order or 210 days have passed from the day when an application for approval was filed, whichever is earlier. The Bill reduces the time limit in the latter case to 150 days.
• Leniency Plus: It allows the commission to give an additional waiver of penalties to an applicant who discloses the existence of another cartel in an unrelated market.
• Framework for settlements and commitments: For cases relating to vertical agreements and abuse of dominance, the parties may apply for a ‘commitment’ before the Director General (DG) submits the report.
  • Settlement’ will be considered after the report is submitted and before the Commission decides.
• Appointment of the DG: The appointment of the DG by the Commission rather than the Central government, will give the Commission greater control.
  • The Commission will only consider information filed within three years of the occurrence of the cause of action.
• Penalty and Fee: For any false information filed, a penalty of five crores will be imposed, and for failure to comply with the Commission directions, a penalty of ?10 crores will be imposed.
  • For an appeal to be heard by the National Company Law Tribunal (NCLT) against the Commission’s order, the party will have to deposit 25% of the penalty amount.
• Qualification of members of CCI: The act has now included experience in the field of technology in addition to fields such as (i) economics, (ii) competition matters, (iii) law, (iv) management, or (v) business.
  • As per the Act, the chairperson and members of CCI should have professional experience of at least 15 years in any of the fields mentioned above.

• Gun-Jumping: When the combining parties close a notified transaction before the approval or have consummated a reportable transaction without bringing it to the Commission’s knowledge, it is seen as gun-jumping.
  • Unaffordable Transaction: If parties wait for the Commission’s clearance, the transaction may become unaffordable because acquisitions involving the open market purchase of target shares must be completed quickly, because the stock value may undergo a change.
    
    

    Gun-Jumping: When merging parties fail to notify a merger to the competition authority, implement all or parts of the merger during mandatory waiting periods or coordinate their competitive behavior before closing, this is commonly called “gun jumping”.

• Exempt open market purchases: The amendment proposes to exempt open market purchases and stock market transactions instead of notifying the Commission in advance (Similar to the European Union merger regulations).
  • This is subject to the condition that the acquirer does not exercise voting or ownership rights until the transaction is approved and the same is notified to the Commission subsequently.

• A Hub-and-Spoke arrangement is a kind of cartelization in which vertically related players act as a hub and place horizontal restrictions on suppliers or retailers (spokes).
• Currently, the prohibition on anti-competitive agreements only covers entities with similar trades that engage in anti-competitive practices. This ignores hub-and-spoke cartels operated at different levels of the vertical chain by distributors and suppliers.
• To combat this, the amendment broadens the scope of ‘anti-competitive agreements’ to catch entities that facilitate cartelization even if they are not engaged in identical trade practices.

By implementing these amendments, the Commission should be better equipped to handle certain aspects of the new-age market and transform its functioning to be more robust. The effectiveness of many of the new provisions and the “new age” Act will depend on CCI regulations, taking account of stakeholder concerns in the forthcoming consultation process.