The Lok Sabha and Rajya Sabha have approved the Competition (Amendment) Bill, 2023 (the Bill). The Bill, which has been somewhat modified in light of the recommendations of the Parliamentary Standing Committee on Finance (the Committee), deserves more scrutiny and discussion. The Bill was sent to the Committee, which was made up of 31 knowledgeable lawmakers, in August 2022.
The Bill was referred to the 31-member, highly qualified Parliamentary Standing Committee on Finance (the Committee) in August 2022. The Committee’s suggestions on important topics including abuse of dominant position, settlements and commitments procedure (S&C), and anti-competitive agreements are not fully taken into consideration in the amended Bill. Moreover, it inserted a surprise clause regarding worldwide turnover being taken into account for the implementation of sanctions, a clause that had not been the subject of input from or analysis by stakeholder groups.
In order to include the concerns of as many stakeholder groups as possible, the Committee held extensive discussions in the form of meetings and written stakeholder submissions with a diverse group of stakeholders, including the MCA, Department of Consumer Affairs, Competition Commission of India (CCI/the Commission), industry bodies, civil society organisations, and the legal community. The committee examined these contributions as well as earlier works, such as the Competition Law Review Committee (CLRC) report, and produced a number of important recommendations.
Abuse of Dominance
The Committee’s recommendation to alter the present rule on abuse of authority in two significant ways is praiseworthy. Secondly, the Committee advocated adding an effects-based test, which would require the Commission to determine the precise impacts of the company’s actions on the market and consumers. The Bill rejects this suggestion, which might result in an erroneous reliance on this criterion. Although allowing for quicker investigation times, a per se approach may lead to excessive enforcement by assuming anti-competitive consequences. This can be particularly problematic in digital marketplaces that have not previously received enough antitrust attention.
Second, the Committee suggested expanding the IPR exemption to abuse of dominance instances in accordance with the CLRC report and the 2020 Bill. The exception recognises the incentive for innovation across companies and works towards harmonising Sections 3 and 4 of the Act. This suggestion was also not included in the Bill.
Merger Control
Deal Value Threshold: On the premise that the target has “significant business activities” in India, the Bill mandates disclosure of deals that exceed a worldwide deal value of INR 2000 crores (about USD 251.74 million). Here are a few important details: The goal or de minimis exemption will have no bearing on the application of this new threshold, which was added to the list of jurisdictional criteria already in place. If the deal value criteria are satisfied, a transaction may be subject to notification to the Competition Commission of India (the “CCI”) even if the de minimis exemption is available; The CCI will publish regulations to define the parameters of “substantial commercial activities.” The transaction value will incorporate all desirable considerations, whether they are immediate, future, or postponed. This threshold will apply to all industries and not only digital marketplaces.
Reduced Merger Review Timelines: The Bill seeks to reduce the existing review period from 210 (two hundred and ten) days to 150 (one hundred and fifty) days (from the date of notice); In contrast to the present requirement of 30 (thirty) working days, the Bill requires the CCI to develop its preliminary view on a transaction within 30 (thirty) calendar days. If the CCI does not issue an order within these timeframes, the combination will be declared authorised.
Penalisation of ‘hub and spoke’ cartels
The Amendment Bill expressly acknowledges “hub and spoke” cartels and anti-competitive agreements. If it appears that such parties have participated in or intended to participate in furthering the goals of such anti-competitive agreements, such parties shall be presumed to be parties to such agreements, even though they may not be engaged in the same or similar trade, such as a facilitator, a platform, an intermediary, or an agent. Presently, a broad reading of Section 3(1)‘s restrictions on anti-competitive agreements covers situations like these. It’s not instantly evident if the “hub” will qualify for leniency. Moreover, “hub and spoke” arrangements will not be covered by the settlement or commitment requirements. The preponderance of the evidence is the standard of proof for proving cartel agreements. The substantial possibility of an unfavourable assumption in situations when communication context is ambiguous is highlighted by the CCI’s own precedents on this subject. Trade organisations and middlemen must maintain alertness and guarantee clear communication.
Penalty on the global turnover of the entities
The Amendment Bill has broadened the definition of turnover under Section 27 of the Act, which imposes fines for anti-competitive agreements and abuse of dominance, to include all goods and services produced by an individual or an organisation (as opposed to its approach on penalising parties basis Indian turnover). This action invalidates the body of law that had been developed over several years and culminated in the Supreme Court’s ruling in the Excel Crop Care case, which held that the CCI must be guided by the proportionality principle when imposing a penalty. After Excel Crop Care, the CCI has often (though not always) issued fines based on “relevant turnover.”
This change has two significant ramifications: (a) the CCI may theoretically fine the infringing party’s income or turnover from goods and services not covered by its anti-competitive behaviour; and (b) businesses with a global presence may face harsher penalties than those with India-only revenues, a possible sign of protectionism. This clause directly contradicts the Supreme Court’s affirmed proportionality principle, and it will probably come under legal review in the future. There is yet some chance if the statutorily required punishment guidelines that the CCI will produce take this problem into account.
Way Forward
The Bill aims to give CCI more authority so that it may effectively control the Indian markets. These changes would broaden the application of the penalty provisions to cover worldwide turnover and increase the number of transactions that fall under the CCI’s merger control jurisdiction through I the adoption of the deal value threshold and (ii) the lowering of the control threshold.
Broadening the range of infractions for which a person is subject to punishment and raising the maximum fine for making false claims; Increasing the quantity of information requests made by the CCI while analysing a transaction may result in shorter merger review timelines, which, at most, might lead to potential invalidations.
