Strengthening Competition Laws in India: A Comprehensive Look at the Competition (Amendment) Bill, 2022

 

Introduction

The Competition (Amendment) Bill 2022 was recently passed by the Lok Sabha with the aim of promoting fair competition in the market and preventing anti-competitive practices. The bill was originally introduced in the lower house on August 5, 2022, and was referred to the Parliamentary Standing Committee on Finance, which was headed by Jayant Sinha. The panel made several recommendations that have been incorporated into the amended law passed by the lower house.

The Bill aims to amend the Competition Act, 2002 and bring about significant changes to the competition law framework in India. The Bill proposes to increase the powers of the Competition Commission of India (CCI) and introduces several new provisions to strengthen the competition law regime in the country. In this article, we will discuss the key features of the Competition (Amendment) Bill, 2022 and its potential impact on the Indian economy.

 

Key Features & Comparison

 

Definition of "dominant position": The Competition Act, 2002 defines "dominant position" as a position of strength that enables a company to operate independently of the competitive forces in the market. The Competition (Amendment) Bill, 2022 proposes to expand this definition to include any entity that enjoys a position of strength in a relevant market, regardless of whether it is a monopoly.

Analysis Suppose there is a mobile phone manufacturer that holds a 60% market share in India. Under the Competition Act, 2002, this manufacturer would be considered to have a dominant position only if it operates independently of competitive forces in the market. However, under the Competition (Amendment) Bill, 2022, this manufacturer would be considered to have a dominant position simply because it holds a position of strength in the relevant market

 

Cross-border mergers: The Competition Act, 2002 does not have specific provisions for regulating cross-border mergers. The Competition (Amendment) Bill, 2022 proposes to introduce a new provision to regulate such mergers that have a significant impact on the Indian market.

Analysis Imagine a situation where a foreign company wants to merge with an Indian company that operates in the same market. Under the Competition Act, 2002, the Competition Commission of India (CCI) may not have the authority to investigate and regulate such a merger, unless it has a significant impact on the Indian market. However, under the Competition (Amendment) Bill, 2022, the CCI would have explicit authority to regulate cross-border mergers that have a significant impact on the Indian market.

 

Penalties: The maximum penalty for anti-competitive practices under the Competition Act, 2002 is 10% of the average turnover of the last three financial years. The Competition (Amendment) Bill, 2022 proposes to increase this penalty to three times the profit made or 10% of the total turnover, whichever is higher.

Analysis Let's say a company is found to have engaged in anti-competitive practices and its average turnover for the last three financial years is Rs. 100 crores. Under the Competition Act, 2002, the maximum penalty that can be imposed on this company would be Rs. 10 crores (10% of Rs. 100 crores). However, under the Competition (Amendment) Bill, 2022, the penalty for such practices could be three times the profit made by the company or 10% of its total turnover, whichever is higher. So, if the company made a profit of Rs. 30 crores, the penalty could be as high as Rs. 30 crores.

 

E-commerce regulation: The Competition Act, 2002 does not have specific provisions for regulating e-commerce entities. The Competition (Amendment) Bill, 2022 proposes to introduce a new provision to regulate such entities that engage in anti-competitive practices.

Analysis Suppose there is an e-commerce platform that engages in exclusive tie-ups with certain sellers, thereby limiting competition in the market. Under the Competition Act, 2002, the CCI may not have the specific authority to investigate and regulate such practices. However, under the Competition (Amendment) Bill, 2022, the CCI would have explicit authority to regulate anti-competitive practices by e-commerce entities.

 

Leniency program: The Competition Act, 2002 does not have a leniency program to incentivize companies to come forward and disclose information about anti-competitive practices. The Competition (Amendment) Bill, 2022 proposes to introduce such a program to encourage companies to cooperate with the Competition Commission of India (CCI) in its investigations.

Analysis Imagine a situation where a company has engaged in anti-competitive practices but wants to avoid penalties and fines. Under the Competition Act, 2002, the company may not have any incentive to come forward and disclose its practices to the CCI. However, under the Competition (Amendment) Bill, 2022, the company could benefit from a leniency program that provides immunity or reduced penalties for companies that cooperate with the CCI in its investigations.

 

Chief Commissioner: The Competition Act, 2002 does not have a provision for appointing a Chief Commissioner to oversee the functioning of the CCI. The Competition (Amendment) Bill, 2022 proposes to introduce this provision to ensure greater accountability and transparency in the functioning of the CCI.

Analysis Let's say there is a lack of accountability and transparency in the functioning of the CCI, and there is no clear authority overseeing its operations. Under the Competition Act, 2002, there may be no specific provision for appointing a Chief Commissioner to oversee the functioning of the CCI. However, under the Competition (Amendment) Bill, 2022, a Chief Commissioner could be appointed to ensure greater accountability and transparency in the functioning of the CCI.

 

Timelines for Approving Combinations

The Bill reduces the time limit for the CCI to form a prima facie opinion on a combination from 30 working days to 30 days. This change is expected to reduce the time taken for the CCI to approve mergers and acquisitions and make the process more efficient.

Regulation of mergers and acquisitions based on transaction value

The Bill also seeks to regulate mergers and acquisitions based on the value of transactions. Deals with a transaction value of more than Rs 2,000 crore will require CCI's approval. The Bill proposes to reduce the timeline for the CCI to pass an order on such transactions from 210 days to 150 days. This change is likely to speed up the process of approving large transactions and encourage more investment in the Indian market.

Decriminalization of Offences

The Bill also decriminalizes certain offences under the Competition Act, 2002, by changing the nature of punishment from imposition of fine to civil penalties. These offences include failure to comply with orders of the CCI and directions of the Director General related to anti-competitive agreements and abuse of dominant position. This change is aimed at reducing the burden on courts and improving the efficiency of the competition law regime.

Potential Impact

The Competition (Amendment) Bill, 2022 has the potential to significantly impact the Indian economy. The Bill is aimed at strengthening the competition law regime in the country and deterring anti-competitive behavior by companies. Some of the potential impacts of the Bill are:

1. Increased competition: The Bill is expected to promote healthy competition in the Indian market by regulating dominant entities and preventing anti-competitive practices.
2. Protection of consumers: The Bill is expected to protect the interests of consumers by ensuring that companies do not engage in anti-competitive practices that lead to higher prices and lower quality of goods and services.
3. Attracting foreign investment: The Bill's provision to regulate cross-border mergers is expected to attract foreign investment into India by assuring investors of the country's strong competition law regime.
4. Leniency program: The leniency program proposed in the Bill is expected to encourage companies to come forward and disclose information about anti-competitive practices. This will help the CCI to prosecute companies engaged in such practices and deter other companies from engaging in similar behavior.

Conclusion

The Competition (Amendment) Bill, 2022 is a significant step towards strengthening the competition law regime in India. The Bill's proposed provisions to regulate dominant entities, cross-border mergers, and e-commerce entities are aimed at promoting healthy competition in the Indian market and protecting the interests of consumers. The leniency program proposed in the Bill provides an incentive for companies to come forward and disclose anti-competitive practices, which can help in the investigation and prosecution of such practices.

The Bill addresses some of the shortcomings of the current competition law regime and introduces several significant changes. These changes are expected to enhance the CCI's ability to regulate anti-competitive practices, particularly by dominant entities and e-commerce entities. The increase in penalties for anti-competitive practices is also expected to act as a deterrent for companies engaging in such practices.

Overall, the Competition (Amendment) Bill, 2022 has the potential to promote healthy competition in the Indian market and protect the interests of consumers. However, the effectiveness of the Bill will depend on its implementation and enforcement. It will be crucial for the CCI to have the necessary resources and expertise to effectively regulate anti-competitive practices and ensure that the market remains competitive and fair for all players.

 

Article Compiled by:-

Mayank Garg

(LegalMantra.net Team)

+91 9582627751

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Material. Charted Secretary etc.

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