This article is written by Sandhya Narayanan who is pursuing a Certificate course in Competition Law, Practice and Enforcement from Lawsikho.
The Competition Act, 2002 (“Act”) aims at setting down regulations to deal with abuse of dominance, merger controls, anti-competition agreements and regulation of combinations. This Act seeks to provide a legal framework to make sure that competition policies are met as well as to prevent anti-competitive agreements from forming, which can have adverse effects on trade in the country. It seeks to prevent monopolies and unnecessary intervention by the government while protecting free and fair competition. While the Act aims at protecting freedom of trade, it, in turn, protects the final consumers as well. In 2018, a Competition Law Review Committee (“CLRC”) was established on 1st October 2018 to study the current trends in the mark and determine whether or not the Act was in tandem with market systems. It was CLRC’s directive to suggest changes in the Act, taking into consideration the present tendencies, international methods, government policies and any other related issue. With the need for a robust framework in mind, the CLRC released its report in July of 2019. In February 2020, the Competition (Amendment) Bill, 2020 (“Amendment Bill”), thus, came to be based on the suggestions of the CLRC, bringing about key adjustments that will go on to affect market practices and inviting public comments.
Amendment Bill & Tech firms
The Amendment Bill makes a variety of changes to the regulation of combinations. For example, reducing the time-limit for deemed approval from two-hundred-and-ten days to one-hundred-and-fifty-days, requiring the Competition Commission of India (“CCI”) to issue penalty guidelines as well as protecting the rights of Intellectual Property rights holders. Notwithstanding, a brief reading of the Amendment Bill is more than enough for one to understand that it brings with it the much-required clarity and several provisions that aim at increasing transparency, while improving the efficiency of the system.
While one key highlight of the Amendment Bill was to provide for changes to increase regulation over the technology sector, it included various other changes. Significantly, this Amendment Bill embraces almost forty-five out of the fifty recommendations given by the CLRC in August of 2019. These include but are not limited to changes in the regulatory structure for of the CCI restructuring procedure for regulation of combinations, provisions for issuing of penalties and guidance on the issuance of a penalty, new thresholds for merger control and the expanded definition of the term ‘cartel’ to acknowledge the gap in the current definition, margining.
The office of Director General (“DG”) as an investigative branch of the CCI, and establishes the power of the central government in consultation with CCI to ascertain any other ground which would constitute combination. Having said that, this Amendment Bill has also brought about changes that quite directly affect the technology industry.
With the above in mind, the Amendment Bill further intends to expand the scope of the Act to include within its scope the digital markets. In order to accomplish the abovementioned goal, the Amendment Bill makes various changes to the prevailing system. Some of these changes include a hub and spoke arrangement and buyer’s cartel. A growing amount of literature hypothesises that buyers’ cartel has an equal potential to harm the economic efficiency in a manner similar to the effects of seller-power and is a mirror image of it. To that end, the treatment enjoyed by both must be symmetric. Despite there being power on both sides, buyer power has not received the requisite attention in the tradition antitrust framework of India as opposed to the practice of the European Union (“EU”) or the United States of America (“US”). Following Section 1 of the Sherman Antitrust Act, 1890 which broadly declares those agreements to be illegal, that unreasonably restrain trade, the courts in the US entertain the possibility of buyers’ cartel. Hence, they are subject to and assessed in accordance with the ‘per se’ approach under the ‘rule of reason’. Under the EU, an ‘objects versus effects’ approach is followed. This approach dictates, if the object or effects of any agreement leads to AAEC, then they are deemed to be illegal.
Impact of Covid
Another key point to keep in mind is that due to the ongoing COVID-19 global pandemic, most people are adjusting to the new reality of work from home. In unprecedented times such as these ones, innumerable important professional, education and personal connections are being facilitated over the internet. Most of the integral interactions are facilitated by platforms typically provided by a few firms. There are certain risks that arise from these forms of essential services being provided by only a handful of industries. That is why the broadened definition of ‘cartel’ introduced in the Amendment Bill is significant in view of the technology industry. In addition, the Amendment Bill endeavours to expand the CCI’s ability to scrutinise anti-competitive agreements/arrangements. This is important since digital economies are multi-sided markets that are prone to rapid “network effects”. They are also prone to challenges such as user lock-in, or stickiness.
These may prove to be barriers for entry to other players looking to enter the technology industry and compete, since this necessitates services providers to acquire a degree of scale to survive in this industry. The CCI realised the strategies used by companies to escape scrutiny under and the Act, and sought to include that the element of ‘knowledge’ or ‘intention’ should not be considered under such agreements. Taking into account the decision in Ramakant Kini v. Dr. L.H. Hiranandani Hospital, the CCI pursued the expansion of the scope of the provision of Section 3 of the Act, that deals with horizontal or vertical markets, to include agreements entered in the digital market. Notably, the Amendment Bill explicitly takes into account the ‘control over data’ and ‘specialised assets’ under the list of requisites that comprise of the dominance of a company in the market.
he Amendment Bill has aimed at filing the loopholes that existed in the previous Act in order to establish a more secure framework of rules. Then again, on one hand, certain increased regulation, particularly in the technology sector, can prove to reduce the ease of doing business and increase scrutiny of transactions in this sector. To give an illustration: the Amendment Bill has authorised the CCI to determine new thresholds for merger control. The nature of this suggests that the Amendment Bill has incorporated this to scrutinise transactions carried out in the technology industry owing to the dynamic nature of the digital market, the Amendment Bill is likely to lead to an increase in compliance expenses for such businesses.
This will, therefore, affect the ease of doing business for such businesses in the technology industry. On the other hand, the increased scrutiny may allow for lessened barriers to entry in this industry, thereby reducing the risk of having too much control of essential services in a few hands. It seems exceedingly clear that the Amendment Bill is likely to benefit the public at large, new start-ups trying to enter the industry would benefit as well. As a whole, the digital economy is likely to see a boost as well. All things considered, it appears that this Amendment Bill is a step forward in the direction of an efficient and robust Competition Commission of India, with the power adequate to protect the entities of the market from unfair and restrictive trade practices.
Chakraborty, S. (2020, March 2). Competition Amendment Bill, 2020, Brings in a Change in the Life of Tech Firms. Law Times Journal. Retrieved October 5, 2002, from www.lawtimesjournal.in
ClearTax. (2019, November 27). Competition Act 2002. Retrieved October 13, 2020, from https://cleartax.in/s/competition-act-2002
Deb, S. (2020, March 22). Read IFF’s Response to the Draft Competition (Amendment) Bill, 2020. Retrieved October 8, 2020, from https://internetfreedom.in/read-iffs-response-to-the-draft-competition-amendment-bill-2020-our-ask-hold-big-tech-accountable/
Girish, E. (2020, September 19). Competition (Amendment Bill 2020). Reader’s Blog by Times of India. Retrieved October 9, 2020, from https://timesofindia.indiatimes.com
Perween, N., & Kumar, H. (2020, July 14). Introduction of Competition (Amendment) Bill, 2020: A step towards revamping Indian Market. Retrieved October 10, 2020, from https://www.scconline.com/blog/post/2020/05/06/introduction-of-competition-amendment-bill-2020-a-step-towards-revamping-indian-market/
Shaikh, M., & Naskar, S. (2020). Cartels – Analysis of Draft Competition (Amendment) Bill 2020. RGNUL Financial and Mercantile Law Review. Retrieved October 7, 2020, from www.rfmlr.com
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: