Evaluating the efficacy of Competition Commission Amendment Act, 2023

Introduction

Incorporating a novel focus on the digital market environment, the Competition Amendment Act, 2023 stands out as one of the most momentous changes made to the Competition Act of 2002 in the last two decades. The act makeseffort to modernize the competition framework centre around the evolving nature of contemporary corporate practices. Since 2018, some alterations were put into place which was overseen by the Ministry of Corporate Affairs’ Competition Law Review Committee. The modifications intend to modify the 2002 Competition Act. The Central Government delegates the principal authority to the Competition Commission of India (CCI) and is responsible for managing practices that could jeopardize fair competition and consumer welfare.

Background

In India, the Competition Act 2002 holds substantial weight since it aims to deter anti-competitive conduct and uphold consumers’ welfare. This Act came into existence to take over and replace the Monopolies and Restrictive Trade Practises Act, 1969. The Competition Commission of India, as a consequence of the Act’s enforcement, materialised to become the organization responsible for enforcing antitrust laws and executing competition protocols in India.

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The CCI holds authority over many measures outlined by The Act, including combinations, mergers, acquisitions, abuse of dominance, and regulation of anticompetitive agreements. Furthermore, to protect consumer interests and competition, legal action may be taken against anticompetitive behaviour by the CCI. With time, the Competition Act, 2002, has undergone various amendments and updates to match up with the pace of changing market dynamics and international best practises in competition regulation. Enterprises demand a level playing field in the Indian market, which makes the Act a crucial necessity to protect consumers.

Changes brought through Competition Commission Amendment Act, 2023

India’s Competition (Amendment) Act 2023 brings significant changes in antitrust enforcement and procedures. These changes affect all aspects of competition law and are intended to make enforcement more effective and efficient. The law aims to expand the scope of the Competition Act by including digital markets. To achieve this, several changes were introduced, such as the explicit inclusion of hub-and-spoke agreements and buyer cartels.

Deal value threshold: The new amendment to the Act sets a deal value threshold, which requires that transactions such as acquisitions, mergers, or amalgamations involving entities with significant and substantial business operations in India and exceed INR 2,000 Crore has to obtain the necessary approval from the Competition Commission of India (CCI).

Redefining Control:“Control” is redefined in the amendment to encompass the idea of “material influence.” This acknowledges that a key component of control is the capacity to exercise substantial influence over the operations, affairs, or strategic business choices of an organisation or group. The CCI has the authority to create regulations that define further standards for what constitutes “material influence.”

Limitation Period: The amendment establishes a three-year statute of limitations for receiving information or referrals about purported Act violations. When proper and valid reason is given, the CCI may excuse late submission of this kind of data. It guarantees the prompt implementation of competition law enforcement and sets up a precise timetable for parties to bring complaints.

Increased Penalties Based on Global Turnover: The change reinstates the Competition Commission’s (CCI) right to levy fines in proportion to a party’s worldwide turnover. This is a big change that shows how serious the government is about punishing people who break the competition laws.

Timeline Reduction:The change shortens a combination’s implementation period from 210 to 150 days. As of right present, the CCI has 30 days to make a prima facie judgement on a combination. If it doesn’t, the combination is taken to be acceptable. By reducing waiting times and streamlining the review procedure, these changes improve business certainty and enable timely transaction execution.

Introduction of Settlement and Commitments Mechanism: The addition of a framework for agreements and commitments within the CCI’s enforcement is one of the most significant changes. Under this system, parties who are being investigated for abuse of dominance and anti-competitive vertical constraints may settle a case after the investigation has been completed or seek settlement through mutually agreed-upon remedies.

Leniency Regime: By adding a “leniency plus” mechanism, the amendment aims to update India’s leniency policy. According to this clause, a party under investigation may gain concessions in both ongoing and future cartel investigations if they provide information regarding a brand-new cartel. This promotes transparency and teamwork. The CCI also has the authority to revoke applicants’ market statuses if they don’t cooperate.

Exemption of Stand-Still Obligations for Stock Market Purchases: One notable change is the exemption of stand-still obligations for open market purchases. Recognizing the time-sensitive nature of such transactions, the amendment allows parties to proceed without adhering to stand-still obligations, provided they make timely notifications and refrain from exercising specific rights.

Wider Powers to Directorate General: The act provides and has broadened the powers to DG, giving the Directorate General (DG) Office more authority, including the capacity to retain records for up to 360 days, question witnesses and agents on oath, and request police help while conducting investigations.

Inclusion of Hub and Spoke Cartels and Intent to Cartelize: Even though they are not direct competitors, this amendment expands culpability to businesses who support or plan to support cartels. By tackling both direct competitors and those indirectly involved in anti-competitive practises, this action improves the regulatory environment.

Challenges

1. The Committee’s recommendation is that the governing body should exclusively handle quasi-legislative functions and policy decisions, leaving adjudicatory functions out of its scope. However, the Bill lacks a clear distinction of these powers.
2. Additionally, it doesn’t specify the election procedure for part-time and ex officio members, raising significant concerns about their independence.
3. Gun Jumping Cases: Combining parties may inadvertently commit a gun-jumping violation. This occurs when they fail to defer the consummation of open market purchases and prematurely assume control before obtaining regulatory clearance. Gun-jumping cases can lead to legal consequences, including fines and regulatory sanctions
4. Unaffordable Transaction: Waiting for the Competition Commission’s clearance can significantly prolong the transaction process. During this period, market conditions may change, affecting the deal’s financial viability. If parties delay their transaction until approval is granted, the deal may become economically unfeasible.
5. Exempt Open Market Purchases: The amendment introduces a provision to exempt open market purchases and stock market transactions from the requirement of advance notification to the Commission. However, the exemption is conditional upon the acquirer refraining from exercising voting or ownership rights until the transaction is officially approved and subsequently notified to the Commission.
6. The Bill lacks clarity on several aspects related to settlement or commitment orders. It does not specify whether such orders would set a precedent, meaning if they should be considered when deciding similar pending cases, and it does not address whether the right to compensation would still be applicable after such an order is issued.
7. Additionally, the Committee recommended the establishment of a dedicated NCLAT Bench to handle appeals under the Act. However, this recommendation was not incorporated into the Act, which could potentially hinder the effective implementation of the legislation.

Conclusion

The Competition (Amendment) Act 2023 introduces a range of changes in India’s antitrust enforcement and procedures. These amendments aim to enhance efficiency, transparency, and deterrence in competition law, aligning India’s regulatory framework with international best practices. While some provisions are already in effect, others await supporting regulations to provide more detailed guidance on their implementation. These changes are expected to have a significant impact on how competition law is enforced in India and how businesses engage with the regulatory authorities.

Author:  Vagisha Anand, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing

References

1. Girish Chandra (23 April, 2023):“Reforms in competition law await key CCI appointments”, Mint https://www.livemint.com/news/india/competition-law-reforms-in-india-stalled-as-cci-remains-without-chairman-and-members-ccinews-competitionlaw-india-11682268015778.html
2. Shivam Tripathi (6 May, 2020): “Introduction of Competition (Amendment) Bill, 2020: A step towards revamping Indian Market”,

https://www.scconline.com/blog/post/2020/05/06/introduction-of-competition-amendment-bill-2020-a-step-towards-revamping-indian-market/

3. Narula, A. Mathur, N. Absalom (09 August,2023): “The Competition (Amendment) Act, 2023: Significance and Implications for Competition Regulation in India”, Invest India

https://www.investindia.gov.in/team-india-blogs/competition-amendment-act-2023-significance-and-implications-competition

4. Khaitan& Co (15 February, 2023): “India: Competition Amendment Bill, 2023: More Than Just A Facelift Of The 2022 Bill” Khaitan & Co LLP
5. Sarvesh Mathi (04 April, 2023):“Key Features: Indian Parliament Passes Competition (Amendment) Bill, 2023”Medianama

https://www.medianama.com/2023/04/223-key-features-competition-amendment-bill-2023/

6. Vidhi Madan Chadda (May, 2023): “The Competition (Amendment) Act, 2023: Power, Penalties, Perplexity and Proposal” ICSI