India: The Competition (Amendment) Bill, 2022: Key Inclusions And Omissions

By Rohan Arora¹ and Shivek Sahai Endlaw²

On 5 August 2022, the Competition (Amendment) Bill, 2022 (Bill) was introduced before the lower house of the Parliament, which proposed significant changes to India's competition law regime. The Bill (which is expected to be further deliberated upon by the Standing Committee on Finance and during the Parliament's winter session) aims to equip India's competition regulator, the Competition Commission of India (CCI), with the necessary tools to address new age markets, combinations and cartels. Though a number of the proposed amendments find their roots in the 2019 Report of the Competition Law Review Committee (CLRC), and the draft Competition (Amendment) Bill 2020 (which was published inviting comments), the Bill omits certain key recommendations that would have facilitated a more comprehensive and robust competition regime in India. This piece sets out a summary of some of the Bill's key inclusions and omissions.

I. Key Inclusions

Deal Value Thresholds: In a long-anticipated move, the Bill proposes to introduce a deal-value threshold, in addition to the existing asset and turnover thresholds provided in the Competition Act, 2002 (Competition Act), for notifying combinations. Once implemented, parties which have "substantial business operations in India" will be required to notify transactions with a deal value in excess of INR 2,000 crores, even if they do not otherwise meet the asset and turnover thresholds prescribed under the Competition Act. While this amendment was specifically proposed to capture combinations in the digital and technology sector (where targets usually do not have a substantial asset base or turnover), the Bill does not expressly limit its application to this sector, and therefore the amendment in its current form will be applicable to all parties in all markets. The CCI is expected to publish regulations which will further shed light on the local nexus criteria, to ensure that parties (and the CCI) are not burdened with unnecessary notifications.

Regulation of open market purchases: In the current regime, parties often faced difficulties to notify open-market stock acquisitions, risking public disclosure and price increases. In a welcome move, the Bill relaxes the timeline to notify open-market purchases and allows parties to notify a transaction after completing the purchase (the CCI is yet to notify the timelines for the notification through regulations). However, the acquirer will not be allowed to exercise any ownership or beneficial rights or interest in such securities, including voting rights and receipt of dividend or any other distributions, till the CCI approves the acquisition. This amendment will enable parties to complete open-market purchases, along with a timely notification to the CCI and alleviate gun-jumping risks.

Facilitators and Hub-and-Spoke Cartels: The earlier regime focused on parties directly involved in horizontal collusion, and left room for third-party organisers and facilitators who could technically escape liability. The Bill proposes to expressly allow the CCI to examine the role of facilitators of cartels (such as consultants who are involved in complex cartel schemes) as well as inquire into 'hub and spoke' cartels.

Expansion of the Director General's (DG) powers: The Bill significantly expands the scope of powers of the DG, the investigative officer of the CCI. In the new regime, the DG, along with enhanced search and seizure powers, will also have the power to summon and examine 'agents' of the company, i.e., any person acting or purporting to act for, or on behalf of the company, potentially including its bankers, legal advisers, and auditors, in addition to the company's employees and officers.

Settlements and Commitments Scheme: The Bill proposes to introduce a 'settlements' and 'commitments' scheme to increase the efficiency of the CCI's enforcement actions concerning anticompetitive vertical agreements and abuse of dominance cases. Commitments can be offered only prior to the DG completing his investigation, whereas settlements can be offered only after the DG has completed his investigation, and before the CCI has passed a final order in the matter. A 'settlement' will include a party depositing a monetary penalty, whereas a 'commitment' will likely include a party to voluntarily offer certain behavioural remedies to the CCI, in exchange for termination of proceedings. The CCI will be guided by the nature, gravity and impact of the alleged contraventions while considering settlement and commitment applications. The DG and the complainant will be heard in these proceedings. This scheme will go a long way in reducing the enforcement caseload before the CCI as well as bring immediate changes to alleviate concerns. Parties will also be able to avoid long-drawn litigation.

Limiting the scope of repetitive information's / references: In the current regime, the CCI, upon receipt of an information or reference, is necessarily required to apply its mind to the allegations and pass a reasoned order either calling for an investigation or closing the matter at the threshold stage. The Bill proposes to equip the CCI with the power to decline cases if it has previously considered the same or substantially similar facts in a previous information / reference. This change will significantly streamline the CCI's consideration of cases involving errant and rival parties who file repetitive cases. Additionally, the CCI also has the power to refuse cases filed after three years from the date on which the cause of action first arose.

II. Key Omissions

Protection of Intellectual Property in Abuse of Dominance (AOD) Cases: Intellectual property rights often create an exclusive monopoly, axiomatically bestowing upon their owner a degree of market power. The legitimate and permitted (by relevant statute) exercise of these rights may sometimes appear to be abusive conduct, but that does not hold true in all cases. While the Competition Act currently affords protection to IP holders while inquiring into vertical agreements, the same protection is not available to IP holders while defending abuse of dominance allegations. Recognising this lacuna in the law, the CLRC sought to incorporate an IP defence for AOD cases in the primary legislation. However, this addition is conspicuously missing from the Bill, leaving IP holders exposed in the mix.

Effects based analysis in AOD cases: The competition regime in India does not require that the CCI to conduct an "effects based" analysis (i.e., an analysis of the anticompetitive effects of the impugned conduct) while considering AOD cases. While the CLRC rejected the addition of this threshold in AOD cases, (reasoning that the CCI has assessed the effects of an alleged abusive conduct wherever necessary), the addition of a mandatory effects-based analysis would have facilitated more responsible, comprehensive, and reasoned decisions from the CCI. Moreover, a necessary effects-based analysis would have eliminated the possibility of over-enforcement in new-age markets and allowed parties to legally defend their actions based on pro-competitive effects and efficiencies arising from their conduct.

Necessary inclusion of a 'judicial' member: Despite much discourse and an affirmative decision of the Delhi High Court in Mahindra Electric Mobility Limited & Anr v. CCI & Anr (where the Court held that the presence of a judicial member is necessary when the CCI passes an adjudicatory order), the Bill omits the necessary inclusion and presence of a judicial member at the CCI while passing adjudicatory orders. The inclusion of a judicial member, by virtue of their specialised knowledge and training, would have further equipped the CCI to dispense speedy and efficient justice and boost the growth of competition law in India. Several decisions of the CCI have been overturned on basic issues of natural justice. The presence of a judicial member would bring a sense of greater fairness to these proceedings.

Designated Appellate Authority: Previously, the Competition Appellate Tribunal served as a special appellate authority for cases arising under the Competition Act. In 2017, the appellate functions under the Competition Act were transferred to the National Company Law Appellate Tribunal (NCLAT), which also entertains appeals arising from the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013. The NCLAT's extensive mandate has substantially impacted the appellate authorities' efficiency in timely disposing of appeals arising from the CCI. To cure this issue, the CLRC had recommended to introduce a designated bench of the NCLAT to hear appeals under the Competition Act. However, this proposal does not reflect in the Bill, and has not been implemented by the NCLAT since the original recommendation made back in 2019. As a result, there continues to be an increasing backlog of competition appeals before the NCLAT, hindering the development of competition jurisprudence in India.

III. Conclusion

The Bill presents a good opportunity to bring the existing competition regime at par with the advancements of other jurisdictions. However, it remains silent on many aspects and raises questions how these proposals will be implemented in regulations and guidance. It is hoped that the that Bill will still be subject to substantial debate and discussion in committee and then Parliament, where recommendations of stakeholders will be appropriately addressed and included in this modernised competition legislation.

(The views expressed in this article are personal. They do not purport or reflect the opinions or views of SAM & Co or its members)

Footnotes

1. Rohan Arora is a Partner in the Competition Law Practice at Shardul Amarchand Mangaldas & Co., New Delhi.

2. Shivek Sahai Endlaw is an Associate in the Competition Law Practice at Shardul Amarchand Mangaldas & Co., New Delhi.

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