The Indian Parliament passed the Competition (Amendment) Act 2023 on 03rd April 2023. The corresponding bill leading to the Amendment Act was introduced in the lower house of the Indian Parliament on 5th August 2022 and had been referred to the Parliamentary Standing Committee on Finance, which finally culminated in the bill being passed in the lower house on 29th March 2023 and then by the upper house on 03rd April 2023.
The 2023 Amendment is aimed to create a new ecosystem to bring the Indian competition legal regime up to speed with combinations and acquisitions of businesses operating in the digital markets and the key amendments are highlighted below.
Key amendments to the Competition Act, 2002
- Increased focus on combinations in Indian Digital Markets- Clause 6 of the Amendment amends Section 5 of 2002 Act, which aims to address the competition concerns arising from increasing digitization, data-driven networks, and the growing significance of online platforms. The new 'Deal Value' threshold of INR 2000 Crores (roughly a little over USD 300 million) has been introduced to mandate transactions above the said value to derive approval from the Competition Commission of India ("CCI") if parties that are involved have substantial business operations in India. Importantly, the Amendment focuses on the target entity, and not acquirer. To clarify, the target in question shall need to have substantial business operations in India, regardless of the acquirer's Indian presence.
- Higher Penalties for Anticompetitive Activities - The Amendment prescribes higher penalties for anticompetitive activities like price-fixing, cartels, bid-rigging, and abuse of dominant positions. The penalty has been made to be 10 percent of the global turnover of the entity or three times the company profits for the last three preceding years, whereas earlier it depended only on domestic turnover. The Amendment empowers the CCI to impose rigid penalties based on the global turnover of an entity whoever engages in anti-competitive practices. This was neither a part of the bill, nor was it recommended by the parliamentary committee, and its vires are likely to be challenged before Indian courts.
- Decriminalization: The Amendment also decriminalizes certain offenses by changing the nature of offenses from the imposition of fines to civil penalties. These offences include failure to follow the orders of CCI and directions of Director General related to anti-competitive agreements and abuse of any dominant position.
- Revised Timelines: The bill proposed to reduce the timeline for the CCI to form a prima facie opinion on a combination's effect on competition (i.e the Phase I review) from 30 working days to 20 calendar days. The Amendment revises the timeline to 30 calendar days instead of the current working day timeline which means a reduction from the present timeline. It is defined as a positive step, which will reduce the burden on the understaffed CCI. The outer timeline is 150 days for an overall review, which includes Phase II as well.
- 'Settlement framework': Under Section 53N of the Competition (Amendment) Act, 2023 the settlement and commitment framework mechanism has been introduced to complete the investigation process as early as possible for the violations related to vertical agreements and abuse of dominance. Similarly, compensation claims will be allowed after the settlement orders only. This step will encourage the parties to resolve the court proceedings quickly and allow for market improvement. All the pending cases before the CCI, where final orders are not issued, may avail the settlement mechanism.
With a slew of key changes and rather bold ones it can be anticipated that the Indian competition regulators are expecting rounds of litigation challenging certain aspects of the latest Amendment and would have hopefully thought through the reasoning for the same as it is likely that certain bits introduced vide the Amendment may see enforcement challenges due to legal challenges before the dust settles on the subject.
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