With a view to updating the Competition Act, 2002 and associated regulations, the Indian Government constituted the Competition Law Review Committee in October 2018. The Committee submitted its report to the Government on 14 August 2019. Based on the recommendations made in the Report, the MCA has introduced a draft Competition Bill, 2020 to overhaul the Act. The Draft Bill proposes certain significant amendments to the Act, including imprisonment for non-compliance with directions of the Director-General; commitment and settlement procedure in non-cartel cases; more expeditious combination review process; and constitution of a Governing Board for non-adjudicatory functions.
Competition Commission of India:
- It is a statutory body of the Government of India, responsible for enforcing the Competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition.
- Objectives of the Commission:
- To prevent practices having an adverse effect on competition.
- To promote and sustain competition in markets.
- To protect the interests of consumers.
- To ensure freedom of trade.
- The Competition Act:
- The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.
What are the functions Competition Commission of India?
- Make the markets work for the benefit and welfare of consumers.
- Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and development of the economy.
- Implement competition policies with an aim to effectuate the most efficient utilization of economic resources.
- Develop and nurture effective relations and interactions with sectoral regulators to ensure smooth alignment of sectoral regulatory laws in tandem with the competition law.
- Effectively carry out competition advocacy and spread the information on the benefits of competition among all stakeholders to establish and nurture competition culture in the Indian economy.
Key Amendments and Analysis:
- Change in the regulatory structure of the CCI: the CCI has been wearing many hats since its inception. It had been vested with adjudicatory, advisory, investigative, quasi-legislative, and advocacy functions. Recognizing this, the CLRC recommended a change in the regulatory structure to make it more robust and effective to deal with the new age issues.
- The Bill provides for the constitution of a Governing Body. The Governing Body would comprise
- the Chairperson of the CCI,
- its six whole-time members,
- the Secretary of the Department of Economic Affairs,
- Ministry of Finance or his nominee,
- Secretary of the Ministry of Corporate Affairs and his nominee, and
- four (4) other part-time members to be nominated by the Central Government.
- They will be Vested with the power to make regulations, take measures to promote awareness and create a National Competition Policy, the Governing Board will exercise general superintendence, direction and management of the affairs of the CCI.
- The CCI will now discharge only the adjudicatory functions.
- Statutory provision to invite public comments: In a very welcome move, the Bill creates an obligation on the Governing Board to seek public comments on all regulations.
- With a limited exception of urgency in public interests, and regulations pertaining to the internal working of the CCI, this provision will bring elements transparency and democratic rulemaking to the system.
- Issuing the penalty guidance: the Bill requires the CCI to issue the much awaited penalty guidelines. The penalty guidance is expected to give recognition to the relevant turnover principles and lay down the manner of determination of the percentage of the penalty and application of aggravating and mitigating factors.
- Streamlining procedure for regulation of combinations: The Bill makes a large number of changes to the regulation of combinations. Some of these, such as, reducing the time-limit for deemed approval from two hundred and ten days (210) days to one hundred and fifty days (150) days, make substantive changes.
- Amendments to streamline the procedure for an inquiry into combinations: currently the sections in the Act leave a lot of glaring gaps in the inquiry procedure. Despite this, the CCI through regulations, notifications and practice has been conducting inquiries into combinations. The Bill seeks to fill some of these gaps, giving statutory sanctity to the practices followed by the CCI. This will also reduce the possibility of appeals against combination orders which have been in the past on account of insufficiency of the statutory provisions.
- New thresholds for merger control: The Bill empowers the CCI and Central Government to define new thresholds for merger notification by introducing a proviso to Section 5.
- Given the dynamic nature of the digital markets, the application of this power requires the exercise of caution. This may result in increased compliance costs for businesses and impact the ease of doing business. It is necessary that the introduction of objective thresholds or criterion is preceded by a detailed economic and legal assessment of the necessity of such thresholds, the basis of the thresholds and the value of the thresholds.
- Expansion of definition of a cartel: the Bill expands the definition of a cartel to include a buyer’s cartel as well. This implies that even in cases of buyer’s cartel, the presumption of appreciable adverse effect on competition (AAEC) will apply to the buyer’s cartel as well.
- Extending protection to holders of intellection property rights: In line with the recommendations of the CLRC, the Bill seeks to widen protection offered to holders of IPR. The exemption for IPR holders is currently restricted to anti-competitive agreements. This brings the much-needed parity between the treatment of anti-competitive agreements and abuse of dominant position.
- The regime of settlements and commitments: In a very significant development, the Bill introduces a system for settlements and commitments permitting the CCI to close the investigation on basis of an application for settlement or commitment moved by the investigated party.
Who will be benefiting the most by the amendments?
- It would benefit the public at large
- The new startups business would be benefitted a lot
- The digital economy
The Bill is a positive step in the direction of an efficient CCI 2.0. While there are some-things that remain desired, one can hope that the consultation process leads to beneficial outcomes and most concerns raised by the stakeholders are appropriately addressed.