The Union Cabinet has approved the Competition (Amendment) Bill, 2022, which will be introduced in the Indian Parliament for the monsoon session.
The Competition Commission of India (CCI), India's antitrust watchdog agency, will have greater freedom, and accountability as per the amended provisions of the Bill. The new Bill seeks to streamline merger and acquisition (M&A) approvals, extend the definition of anti-competitive agreements, and aims to reduce litigation in this field. Additionally, it aims to toughen up the penalties for violations of the competition legislation.
Proposed changes introduced by Competition (Amendment) Bill, 2022:
- Expansion of the definition of “Relevant Product Market”
The term “relevant product market” is defined under section 2(t) of the Act, as a market comprising all those products or services which are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use. The Bill expands the definition to include the production or supply of goods and services that are considered substitutable by the suppliers.
- Widened scope of anti-competitive agreements
According to section 3 of the Act, any arrangement between enterprises, individuals regarding the production, supply, storage, or control of goods or provision of services that has the potential of adversely affecting the competition in Indian market, are regarded as “anti-competitive agreement”.
Any agreement between enterprises or individuals operating in the same or similar industries will be regarded as anti-competitive if it, inter alia, results in the following:
- Establishing sale or purchase prices directly or indirectly
- Controlling markets, supply, manufacturing, or service delivery
- Leading either directly or indirectly to collusive bidding
The Bill broadens the definition of “anti-competitive agreements” by providing that individuals or enterprises not engaged in identical or similar businesses shall be presumed to be part of such agreements, if they actively participate in the furtherance of such agreements.
- Combinations to be governed by transaction value.
Section 5 of the Act, defines a “combination” as including the following:
- Acquisition of ownership interests in, or voting power over, a company;
- Gaining control of a business when the acquiring party already has direct or indirect control over another business doing the same thing; or
- Merger or combination of firms that exceeds one of the following financial thresholds:
- Assets totalling more than INR 10 billion or
- Subject to further requirements, turnover totalling more than INR 30 billion.
The current competition legislation mandates that combinations that cross the aforementioned threshold must be reviewed and approved by the CCI.
The definition of combinations is expanded by the new Competition (Amendment) Bill to include transactions worth more than INR 20 billion. Accordingly, businesses wanting to acquire control, shares, voting rights, etc. must request CCI's clearance if the transaction's value exceeds INR 20 billion.
- Changes to the deadline for approving mergers and other filings
According to the current law, a combination cannot be put into effect until 210 days have passed after the CCI received notice of it, or until the CCI has issued an order allowing it. This approval time restriction will be shortened by the new Bill to 150 days.
Similar to this, the CCI has established a three-year deadline for reporting anti-competitive agreements and abuse of dominant position, with the CCI permitting exceptional situations based on sufficient justification and after documenting its justifications for tolerating delays.
- Initiative to reduce litigation
As per the provisions of the Competition Act, the CCI may initiate legal action for the following reasons:
- Agreements that are anti-competitive
- Abuse of a position of dominance, which includes:
- Discriminatory terms when buying or selling goods or services
- Limiting the output of goods or services
- Engaging in actions that prevents access to the market
The Bill has broadened the role of CCI to include power to not just initiate legal action but to conclude inquiry procedures in such situations if the complaining party presents a resolution in the form of a payment or a pledge.
- Decriminalization of crimes and stringent punishments
The Bill converts the punishment for some offences from the imposition of a fine to a penalty.
The Bill has introduced a leniency mechanism whereby parties who provide information beneficial to the investigation are offered with reduced penalties. The Bill has also enhanced the penalty for anti-competitive and anti-consumer practises from INR 10 million to INR 50 million.
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