This article is written by Sayan Kumar Panda who is pursuing a Certificate Course in Competition Law, Practice And Enforcement from LawSikho.
Table of Contents
Introduction
The Competition Act, 2002 (“Act”) was enacted to prevent practices having adverse effects on the competition and to promote and sustain competition in India. The Act replaces the Monopolies and Restrictive Trade Practices Act, 1969 as it was obsolete and remain ineffective in dealing with the progressive anti-competitive practices.
With the advent of time, India witnessed a subsequent change in the market trends, like emergence of e-commerce companies. However, this in turn resulted into anti-competitive practices happening in virtual space. The need was long felt to bring out a legislation that would cater to these trying times. The Competition Law Review Committee was constituted in 2018 to address these concerns.
The key changes that have been set out in the New Competition (Amendment) Bill, 2020 (“Bill”) have been set out below under three categories, namely, organisational changes, enforcement mechanisms and merger control.
Organizational changes
- Establishment of a Governing Board: The Bill provides for setting up of governing Board under Section 8(1A) of the Bill which shall constitute parttime members, Secretary of Department of Economic Affairs and ex officio members. The primary role of the Board will be to make regulations with regards to competition law to ease the burden of the Commission. However, the role would be strictly limited to legislative functions and shall not interfere with the adjudicatory function of the Commission.
- Integration of Director General Office: The Director-General being the investigative wing of the Commission, whose primary job was to assist the commission to look into the anti-competitive conduct of the players in the market. The DG was appointed by the Central Government at the same time the manner of appointment including the salary, allowances were prescribed in the CCI (DG) Recruitment Rules, 2009 in lieu of Section 16 of the Act. The Bill provided the Commission with the power for appointment of the DG. The proposed change was set forth in the light of the practises followed in the European Commission(“EC”) and the ruling of the Supreme Court in the SAIL whereby, “The Director-General appointed under Section 16(1) of the Act is a specialized investigating wing of the Commission.
Enforcement Mechanism
- Settlement and Commitments: This being one of the instrumental provisions into the new Bill, the parties who are under the radar for anti-competitive conduct will now have an option to opt for a settlement mechanism in lieu of Section 48A of the Bill. This will allow for quicker disposal of cases and remedy the anti-competitive practice in the market. However, the Commission shall adjudicate such settlement as its own discretion. The Madras High Court in Tamil Nadu Film Exhibitors Association vs. CCI, held that the settlement mechanism shall be allowed as long as such practice doesn’t impair competition, free trade and is the interest of the consumer.
- Powers of the Director-General: The New Bill confers additional powers to the DG with regards to investigation into documents, information and evidence from the parties for anti-competitive conduct. The bill empowers the DG with powers to call for books, record parties under oath. Non- adhering to the instructions of the DG shall make defaulting party liable for a term which may extend to six months or fine up to one crore.
- Scope of Cartels: The provision with regards to Cartels have witnessed a change specially with the advent of the digital markets. The Bill proposed the inclusion of the Hub and Spoke arrangements in which there is tendency to fix the price by way of collusion between the parties through a third party platform. Though the Commission has addressed the existence of such arrangements in the case concerning Hyundai Motors and further clarified the same in the case concerning Samir Agrawal. Secondly, the term Buyers Cartel was introduced in the definition of Cartels. This provision with regards to Buyers Cartel have existed in other jurisdiction whereby the group of buyers collude among themselves to fix the purchase price and thereby eliminate competition in the market. The CCI in the case of XYZ vs Indian Oil Corporation, have denied the existence of this form of cartel in Indian law.
- Lesser Penalty Regulation/ Leniency: The provision with regards to leniency was to bring out necessary disclosures from the parties with regards to Cartels and thereby Commission awarding necessary reduction in penalty as a reward for such disclosures. The Bill proposed to allow the leniency applicant withdrew the application.
- Insertion of term income: The term income has been inserted in section 27 of the Act. Such an inclusion has been made to widen the scope penalty to include individuals. The Bill proposes to impose penalty on individual up to 10% of individual’s average income in the last preceding years.
Merger Control
- Green Channel: The Bill brings out statutory identification to the concept of Green Channel process. The underline rationale is to provide for a faster approval for a transaction where there are no overlapping in the businesses of the parties.
- Definition of Control: The Bill sort to resolve the anomaly regarding the definition of term ‘Control’ to include ‘material influence’ of any sort by an enterprise over the decisions of another entity in lieu with section 31(3) of the Act. The CCI through its practise had earlier devised the term control to mean potential to exert ‘decisive influence’ and ‘material influence’ over another entity.
- Reduction of time for merger Review: The Bill seeks to reduce the time taken by the Commission for review of a proposed merger as given in section 29(1A) of the Act from two hundred and ten days to one hundred and fifty days. This was extremely necessary as it will lead to saving of time and cost by the parties.
- Jurisdictional thresholds: The Bill empowers the Central government to prescribe criteria to the Commission from time to time for a transaction being filled for pre-merger notification under Section 5 of the Act. This much-needed move as the determination for thresholds for pre-merger notification to the Commission is based on assets and turnovers, which makes some of the transactions to escape the existing jurisdictional thresholds.
Conclusion
The Bill has dwelled into some of the much-needed changes whose inclusions was long felt. It brings forward institutional changes considering the growing market of India and the advent of the digital markets. However, there are a few grey areas which require further clarification. Given the bill is open for more discussion and suggestions from the stakeholders. It can be said that it is indeed a step in the right direction.
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