COMPETITION AMENDMENT BILL, 2023 - POLITY

COMPETITION AMENDMENT BILL, 2023 - POLITY

News: Rajya Sabha clears Competition Amendment Bill, protests still on

What's in the news?

●       While the Lok Sabha did not transact any business, the Rajya Sabha quickly passed the Competition (Amendment) Bill 2023 amid continuing protests.

Changed Provisions in the Competition Act:

1. Penal powers to CCI:

●       It grants the CCI the authority to penalize entities found engaging in anti-competitive behavior based on their global turnover, rather than just their annual domestic turnover, which was the case previously.

2. Definition of turnover:

●       The definition of “turnover” has been a widely debated subject in the competition law landscape. The Supreme Court had previously fixed the criteria for determining turnover in competition law contraventions, holding that it should be the “relevant turnover,” i.e., turnover derived from the sales of goods or services.

3. Mergers and acquisition:

●       The CCI will have greater authority in mergers and acquisitions worth more than Rs 2,000 crore.

●       Additionally, the time limit for approval of mergers and acquisitions has been reduced from 210 days to 150 days.

4. Definition of control for classification of combination:

●       Bill modifies the definition of control as the ability to exercise material influence over management, affairs, or strategic commercial decisions.

5. Prohibition of anti-competitive agreements:

●       The bill prohibits any agreement or conduct that restricts or distorts competition in the market.

●       Transactions worth more than Rs 2,000 crore will need CCI approval.

6. Prohibition of abuse of dominant position:

●       The bill prohibits any abuse of dominant position by a company, which could include imposing unfair terms or conditions, predatory pricing, or denying access to essential facilities.

7. Establishment of a regulatory authority:

●       The bill establishes an independent regulatory authority to oversee competition in the market, investigate alleged violations of the law, and impose penalties on violators.

8. Leniency programs:

●       The bill provides leniency programs for companies that voluntarily disclose anti-competitive practices, providing incentives for such companies to come forward and cooperate with the regulatory authority.

9. Consumer protection:

●       The bill provides for the protection of consumer interests, including the prevention of false or misleading advertising and the promotion of fair and transparent pricing.

10. Advocacy and awareness:

●       The bill includes provisions for advocacy and awareness programs to promote understanding of the competition law and its implications among businesses, consumers, and other stakeholders.

Significance:

1. Regulation of combinations:

●       It will strengthen the Commission’s review mechanism, particularly in the digital and infrastructure space.

2. Accelerating the approval time:

●       This will speed up the clearance of combinations and increase the importance of pre-filing consultations with the Commission.

3. Notifying in advance:

●       Similar to the European Union merger regulations, the present Bill proposes to exempt open market purchases and stock market transactions from the requirement to notify them to the Commission in advance.

4. Issue of Hub-and-Spoke Cartels:

●       A Hub-and-Spoke arrangement is a kind of cartelization in which vertically related players act as a hub and place horizontal restrictions on suppliers/retailers (spokes).

●       The amendment broadens the scope of ‘anti-competitive agreements’ to catch entities that facilitate cartelization even if they are not engaged in identical trade practices.

5. Handling the new age market:

●       By implementing these amendments, the Commission should be better equipped to handle certain aspects of the new-age market and transform its functioning to be more robust.

6. Promoting Ease of Doing Business:

●       The amendments to the Competition Act aim to reduce regulatory hurdles and promote ease of doing business in India.

●       The amendments are expected to provide greater clarity to businesses operating in India and reduce the compliance burden for companies.

7. Enhancing transparency:

●       The inclusion of global turnover in the definition of "turnover" aims to enhance transparency and accountability in the Indian market.

●       The amendment ensures that companies cannot escape penalties for competition law violations by shifting their revenue to other countries.

Impacts on the tech companies:

●       While the provision on global turnover will not be exclusively applicable to tech companies, they are likely to be the most affected by it, given the nature of their business that operates across geographies.

●       Typically, the revenue earned from these company's India operations is much smaller than their income in other regions, such as the US and Europe.

●       Deviation from committee’s recommendations.

●       The expansion of the definition of anti-competitive agreements to include enterprises or persons who are not engaged in similar businesses has been criticized for its potential impact on the ease of doing business in India.

●       The provision mandating the deposit of 25% of any amount levied by CCI before filing an appeal before the NCLAT has also been criticized for its potential impact on the ability of businesses to challenge CCI orders.

Overall, the Competition (Amendment) Bill, 2023 represents an important step towards ensuring a level playing field for businesses and protecting the interests of consumers in India. The government must carefully consider the concerns raised by various stakeholders and ensure that the final version of the Bill strikes the right balance between promoting competition and ensuring ease of doing business in India.