Scrutinizing Competition (Amendment) Act, 2023

Dissecting the adopted changes that Competition Amendment Act and make the long awaited upgradation of the Anti-Trust Law.

Ankita Sharma
Ankita Sharma

Published on: Sep 9, 2022

Trishaljeet Singh
Trishaljeet Singh

Updated on: Apr 22, 2023

(17 Ratings)
1366

The Competition Act was first passed in 2002 in India, but it came into effect only 7 years later to regulate/promote competition and protect interest of consumers in the commodity and service market of India.

On August 6, 2022, the government introduced Competition Amendment Bill 2022 (“the Bill”), which proposes certain changes to the Competition Act, 2002 (“the Act”). In a significant development, the Competition (Amendment) Bill 2023, which was approved by the Lok Sabha (lower house of the Indian Parliament) on March 29, 2023, was later approved by the Rajya Sabha (upper house) on April 3, 2023, and after receiving presidential assent on April 11, 2023, it was promulgated and published as The Competition (Amendment) Act, 2023 (“the Amendment Act”) in the Indian Gazette on April 11.

Likely to make all required changes to keep up with the changing dynamics of market. Various perspectives can be visualised from interpretation of the amendment. Aims behind to promote Ease of Doing Business, enhance powers of Competition Commission of India, Widening the jurisdiction of the commission, removing ambiguity. The following is a summary and explanation of the significant changes that the Amendment Act, 2023, introduces:

Significant Changes Introduced under Amendment Act, 2023

Keeping in mind the aims and desires of Law Review Committee, following changes are projected in the text of Act

  • Third Party Facilitation under Anti-Competitive Horizontal Agreement – Amendment in Section 3 proposes that a person or association of persons not engaged in identical or similar trade but actively participate in furtherance of agreement will be considered party to agreement which is presumed to have an adverse effect on competition as per the Bill.
    This is adopted under Amendment Act, 2023, provides for increase in the ambit of Section 3 and therefore includes the active participants to have an effect on competition.
  • Definition of Party – Clause 2(ka) provides for definition of Party to include a consumer or an enterprise or a person or an information provider, or a consumer association or a trade association, or the Central Government or any State Government or any statutory authority, as the case may be, and shall include an enterprise or a person against whom any inquiry or proceeding is instituted; and any enterprise or person impleaded by the Commission to join the proceedings.
  • Expanded Coverage of Combination – Amendment in Section 5 states that apart from exiting thresholds for calling any agreement a combination, Bill inserts Value of transaction as a factor for classifying any agreement of merger/acquisition/amalgamation as Combination. The definition of combination is widened and will include transactions valued more than Rs. 2000 crore. The condition attached to this type of Combinations is that the enterprise which is a party to the transaction has substantial business operations in India.
    This adopted under Amendment Act which may have an impact that more deals will attract CCI scrutiny, specifically where the transactions are based on the valuations.
  • Definition of Value of Transaction – Bill proposes value of transaction to include every valuable consideration, whether direct or indirect, or deferred for any acquisition, merger or amalgamation.
  • Exemption to Open Offer– Insertion of Section 6A states exemption from regulation of combination. Accordingly, an Open Offer or acquisition of shares or convertible securities, made in alignment with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1992 will not require approval of such combination from Commission subject to fact that enterprise has served notice to commission and the acquirer does not exercise any ownership or beneficial rights or interest in such shares or convertible securities.
    This is adopted under Amendment Act which may empower parties to structure transactions.
  • Reduced time for approval from CCI – As an act of regulation of Combination, Act required notice of intention of forming such combination by enterprise and obtain approval from Commission on the same. Business entities has to inform the commission if they wanting to execute a combination. Earlier it had 210 days to approve the combination, after which it is automatically approved. The new amendment fast-tracked the process by changing timeline from 210 working days to only 150 working days with a conservatory period of 30 days for extensions.
    This is adopted under Amendment Act which may impact the increasing emphasis on the pre-filing consultation procedure, without which parties can anticipate additional information demands and/or run the risk of notification invalidation. higher expectation that transacting parties would file thorough notifications.
  • Settlement and Commitment – Section 48A has been proposed as a resort for disbursal of Anti-Trust cases initiated, the Bill propose to provide option to party against whom such case is initiated to opt for settlement by making an application before the Commission. The Bill aims to permits Commission under Section 48B to close inquiry proceedings through acceptance of Commitment by the enterprise against whom inquiry is initiated for alleged Abuse of Dominant Position or Cartelisation among different levels. Commitment simply means behavioural or structural promises by enterprises.
    This is adopted under Amendment Act which may impact the accompanying regulations providing clarity on the benefits of early closure, this will probably encourage parties to conclude processes promptly while also allowing for market adjustments. We anticipate that the settlement mechanism will be available in all instances that are now pending before the CCI but have not yet received final orders.
  • Leniency in Penalty – The Substituted Section 46 under sub-clause 4 provides that if any producer, seller, distributor, trader or service provider makes disclosure of existing of another cartel during investigation, the Commission has power to impose lessor penalty upon such person.
    The objective is to encourage additional cartel disclosures by granting incentives to the disclosing party. May result in disclosure of more cartels in related or different businesses in on-going cartel investigations.

Key Definitions

Terminology Earlier Definition New Definition
Enterprise Includes a person or a department of the Government, who or which is, or has been, engaged in any activity … either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places Includes a person or a department of the Government, including units, divisions, subsidiaries, who or which is, or has been, engaged in any economic activity… either directly or through one or more of its units or divisions or subsidiaries
Relevant Product Market Comprises of goods and services regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use Additionally, includes goods and services the production or supply of, which are regarded as interchangeable or substitutable by the supplier, by reason of the ease of switching production between such products and services and marketing them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices
Group means two or more enterprises which, directly or indirectly, are in a position to exercise certain number of voting rights, appoint more than 50% of members to Board of other enterprise or control the management or affairs of the other enterprise means two or more enterprises where one enterprise is directly or indirectly, in a position to exercise certain number of voting rights, appoint more than 50% of members to Board of other enterprise or control the management or affairs of the other enterprise
Control Includes controlling the affairs or management Means the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decisions
Tie-in Arrangement Includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods Includes any agreement requiring a purchaser of goods or services, as a condition of such purchase, to purchase some other distinct goods or services
Exclusive Dealing Agreement Includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person Includes any agreement restricting in any manner the purchaser or the seller, as the case may be, in the course of his trade from acquiring or selling or otherwise dealing in any goods or services other than those of the seller or the purchaser or any other person, as the case may be

Conclusion

The Amendment Act was approved by the President on April 11, 2023, but its provisions won’t take effect until the Central Government publishes a notice of the enforcement date in the Official Gazette.

It is expected that the Central Government will only enforce the “deal value threshold” and other restrictions once the necessary stakeholder discussions are finished and the regulations are published. These provisions, along with others, require more clarification from subordinate legislations. However, we anticipate that the Central Government will announce the final self-sufficient provisions very shortly.

The Amendment Act’s overall goal is to confront new difficulties with a variety of new tools, some of which have been tried and true while others are still in the testing stage. With the right direction, we anticipate that the Competition Act 2.0 will usher in a period of a more robust regime characterized by stepped-up enforcement and elevated compliance.

Disclaimer

The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.

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