By Nandhini, Vivekananda College of Law, Karnataka State Law University.
Introduction:
The “THE COMPETITION (AMENDMENT) ACT, 2023” is an amendment to the Competition Act, 2002, enacted by Parliament in India. This amendment aims to further enhance competition law in India by amending existing provisions and introducing new sections to promote fair competition, protect consumer interests, and ensure freedom of trade. It outlines various regulations and penalties related to anti-competitive practices, mergers, acquisitions, and other aspects of competition policy. The Competition (Amendment) Act of 2023 heralds a transformative phase in India’s competition law landscape, aiming to bolster market competitiveness, safeguard consumer interests, and streamline enforcement mechanisms. Enacted as a response to evolving market dynamics and global trends, this pivotal legislation introduces several significant amendments to the existing framework.
Central to the amendment act is the introduction of a deal value threshold for mergers and acquisitions, mandating reporting to the Competition Commission of India (CCI) for transactions exceeding Rs. 2000 Crores. This amendment seeks to enhance transparency and oversight in high-value transactions, ensuring fair competition and preventing anti-competitive practices. Moreover, the act broadens the scope of anti-competitive agreements and cartel definitions, empowering regulatory bodies to address emerging challenges in market conduct.
Furthermore, the amendment act empowers the CCI with enhanced investigative powers and introduces provisions for settlements and commitments, fostering expeditious resolution of enforcement proceedings. By instituting stringent penalties calculated on global turnover and streamlining complaint mechanisms, the act underscores India’s commitment to fostering a competitive and equitable market environment. In essence, the Competition (Amendment) Act of 2023 represents a landmark step towards promoting economic efficiency, innovation, and consumer welfare in India’s rapidly evolving marketplace.
History of the bill:
The Tribunal Reform Bill 2021 was introduced in the Lok Sabha (a lower house of the Parliament) by the Finance Minister, Ms. Nirmala Sitharaman, on August 2, 2021. The Bill proposes dissolving certain existing appellate bodies. It also offers to transfer their functions (such as appeal adjudication) to other existing judicial bodies, such as a civil court or a High Court. Similarly, The Bill replaces a similar Ordinance promulgated in April 2021.
The inception of competition law in India can be traced back to the Monopolies and Restrictive Trade Practices Act (MRTP) of 1969, aimed at curbing monopolistic practices and fostering fair competition in the domestic market. However, over time, it became apparent that the MRTP Act was inadequate in addressing the evolving economic landscape of the country. In response, the Indian Government established a high-level committee in 1999 to recommend a modern competition legislation aligned with global standards. Drawing insights from international competition laws, the Raghavan Committee submitted its recommendations to the Government in May 2004, culminating in the enactment of the Competition Act in 2002. This Act was designed to promote fair competition and safeguard consumers against anti-competitive practices, establishing the Competition Commission of India (CCI) as its enforcement authority.
Since its enactment, the Competition Act has undergone several amendments, including provisions for mergers and acquisitions in 2007 and heightened penalties for anti-competitive behavior in 2009. In 2023, both Houses of Parliament passed an amendment Bill aimed at bolstering enforcement mechanisms and escalating penalties for non-compliance with CCI directives. The proposed Competition (Amendment) Bill, 2023 aims to overhaul India’s existing competition law framework in response to instances of anti-competitive conduct by prominent corporations, particularly in the technology sector. Notable cases involving Google’s legal dispute with the CCI and allegations of anti-competitive behavior by Amazon have underscored the necessity for these revisions.
Object of the Act:
The primary objective of the Act was to prevent individuals or businesses from engaging in combinations or agreements that could significantly harm competition (AAEC) or exploit their dominant position in the relevant market.
The Competition (Amendment) Act, 2023 aims to:
- Prevent anti-competitive practices: The act seeks to prevent anti-competitive practices such as price-fixing, bid-rigging, and abuse of dominant position by companies.
- Strengthen competition regulation: The act aims to strengthen competition regulation, streamline operations, and foster a business-friendly environment.
- Broaden the definition of cartel: The act aims to broaden the scope of the definition of cartel by including “intention to participate”.
- Increase penalties: The act seeks to increase the penalties for anti-competitive behavior and for furnishing false information.
- Establish a new deal value threshold: The act introduces a new deal value threshold.
- Provide regulatory certainty: The act aims to provide regulatory certainty and trust-based business environment.
- Ensure faster market correction: The act aims to ensure faster market correction.
Important provisions:
| THE COMPETITION (AMENDMENT) ACT, 2023 | ||
| S. No. | PROVISIONS | BRIEF OF PROVISIONS |
| 1. | SECTION 3 Amendment of section 2 | Section 2 of the principal Act is amended to include several new clauses and modifications. A new definition of “commitment” related to section 48B is added after clause (e). Clause (h) is revised to specify that it includes various economic activities of government entities except those related to sovereign functions like atomic energy, currency, defense, and space. A new clause (ka) defines “party” to encompass a broad range of entities including consumers, enterprises, and government bodies involved in proceedings. Clause (l) is updated to reference the Companies Act, 2013 instead of the 1956 Act. Clause (p) is redefined to align with the public financial institutions as per the Companies Act, 2013, including certain state corporations. Clause (t) is revised to define “relevant product market” in terms of interchangeability or substitutability by consumers or suppliers. Finally, a new definition for “settlement” related to section 48A is introduced after clause (u). |
| 2. | SECTION 4 Amendment of section 3 | Section 3 of the principal Act is amended to introduce additional provisos and modifications. In sub-section (3), a new proviso is added to include enterprises or persons not engaged in identical trade but participating in furtherance of the agreement. Sub-section (4) is revised to clarify that any agreements amongst enterprises or persons, not limited to certain types, are covered, and the term “supply” is replaced with “dealing”. A new proviso exempts agreements between enterprises and end consumers from this sub-section. The explanation to sub-section (4) is updated, redefining “tie-in arrangement” and “exclusive dealing agreement,” and including services along with goods in clauses (c) and (d). Clause (e) is modified to include restrictions in agreements to sell goods or provide services. In sub-section (5), a new sub-clause (g) is added to protect other intellectual property rights under existing laws. |
| 3. | SECTION 5 Amendment of section 4 | Section 4 of the principal Act is amended to modify sub-section (2), clause (a). The explanation within this clause is updated by replacing the words “discriminatory condition or price” with “condition or price”. This change broadens the scope of conditions or prices addressed by the clause, removing the specific focus on discriminatory practices. |
| 4. | SECTION 6 Amendment of section 5 | Section 5 of the principal Act is amended with several key changes. Clause (c) is modified to allow for a broader definition of combinations by replacing “India.” with “India; or”. New clauses (d) and (e) are added, setting a threshold value of Rs. 2000 crore for transactions involving acquisitions, mergers, or amalgamations, provided the target enterprise has substantial operations in India. Clause (e) exempts certain combinations from being classified as such if the assets or turnover in India are below a prescribed value. The Explanation section is revised to clarify several terms: “Control” is defined as the ability to influence management or strategic decisions. “Group” includes enterprises where one can exercise significant voting rights, appoint directors, or control management. “Turnover” is specified to exclude intra-group sales, indirect taxes, trade discounts, and foreign-generated amounts. “Value of transaction” encompasses all forms of valuable consideration. The “value of assets” is based on book value, including intangibles like brand value and intellectual property. For partial acquisitions or mergers, the relevant portion’s value or turnover determines applicability thresholds. |
| 5. | SECTION 13 Substitution of new section 18 | Section 18 of the principal Act is replaced with a new provision that mandates the Commission to eliminate practices that adversely affect competition, promote and sustain competition, protect consumer interests, and ensure the freedom of trade in Indian markets. The Commission is also authorized, with prior approval from the Central Government, to enter into memoranda or arrangements with foreign agencies. Additionally, the Commission can enter into similar agreements with any statutory authority or government department for fulfilling its duties and functions under the Act. |
| PENAL PROVISIONS | ||
| 6. | SECTION 27 Amendment of section 42 | Section 42 of the principal Act is amended as follows: In sub-section (2), the reference to fines for contravening specific sections is expanded to include sections 6, 43, 44, and 45, and the term “fine” is replaced with “penalty”. In sub-section (3), the term “fine” is similarly replaced with “penalty”. This change aligns the language and extends the scope of the penalties for non-compliance with the Act. |
| 7. | SECTION 28 Amendment of section 42A | Section 42A of the principal Act is amended to include references to section 6 alongside section 27. This means that the provisions and penalties outlined in section 42A now also apply to violations under section 6, in addition to those under section 27. |
| 8. | SECTION 29 Amendment of section 43 | Section 43 of the principal Act is amended by replacing the phrase “shall be punishable with fine” with “shall be liable to a penalty.” This change updates the language to specify that violations will result in a penalty rather than a fine. |
| 9. | SECTION 30 Substitution of new section for section 43A. | Section 43A of the principal Act is replaced with a new provision. It states that if any person or enterprise fails to notify the Commission under sub-section (2) or (4) of section 6, contravenes sub-section (2A) of section 6, or fails to submit information during an inquiry under sub-section (1) of section 20, the Commission may impose a penalty up to one percent of the total turnover, assets, or transaction value, whichever is higher, of the combination. Additionally, if a notice under sub-section (4) of section 6 is void ab initio, a new notice under sub-section (2) of section 6 can be filed within thirty days of the Commission’s order, and no penalty will be imposed until this period expires. |
| 10 | SECTION 31 Amendment of section 44 | Section 44 of the principal Act is amended by replacing the words “rupees one crore” with “rupees five crore”. |
| 11 | SECTION 32 Amendment of section 45 | Section 45 of the principal Act is amended as follows: (a) The marginal heading is changed from “offences” to “contraventions”. (b) In sub-section (1): (i) The phrase “Without prejudice to the provisions of” is expanded to include “sub-section (6) of section 6 and”. (ii) The term “punishable with fine” is replaced with “liable to a penalty”. These changes update the terminology and expand the scope of the section to include additional provisions. |
| 12 | SECTION 33 Substitution of new section for section 46 | Section 46 of the principal Act is replaced with new provisions concerning penalties for cartel participation. The Commission may impose a reduced penalty on any producer, seller, distributor, trader, or service provider in a cartel who makes a full and vital disclosure about violations of section 3. This reduction is conditional upon the disclosure being made before the investigation report is received and the disclosing party continuing to cooperate with the Commission. If these conditions are not met, or if the disclosure is false or not vital, the reduced penalty can be revoked, and the original penalty imposed. Additionally, the Commission may allow the withdrawal of an application for a lesser penalty within specified regulations. Evidence submitted for a lesser penalty can be used by the Director General and the Commission, except for admissions. If during an investigation, a disclosing party provides vital information about another cartel, they may receive a lesser penalty for the original cartel and potentially for the newly disclosed cartel as well. |
| 13 | SECTION 34 Amendment of section 47 | Section 47 of the principal Act is amended to include the words “and recovery of legal costs by the Commission” after the word “penalties”. |
| 14 | SECTION 35 Substitution of new sections for section 48. Contravention by companies. | Section 48 of the principal Act has been substituted with new sections 48, 48A, 48B, and 48C. Section 48: 1. Corporate Liability: When a company contravenes the Act, those in charge and responsible, along with the company, are deemed to be in contravention and may face penalties up to 10% of the average income for the past three financial years. In the case of cartels, the penalty may be 10% of the income for each year of the cartel’s existence. 2. Exemption from Penalty: Individuals can avoid penalties if they prove the contravention happened without their knowledge or they exercised due diligence to prevent it. 3. Liability of Company Officials: Directors, managers, secretaries, or other officers who consented to or were negligent about the contravention can also face penalties similar to those imposed on the company. Section 48A: 1. Settlement Applications: Enterprises can apply for settlement of proceedings for contraventions of sections 3(4) or 4 after receiving the Director General’s report but before an order is passed. 2. Settlement Considerations: The Commission considers the nature, gravity, and impact of contraventions before agreeing to a settlement, which includes payment and other terms. 3. Opportunity for Objections: The Commission must allow objections and suggestions from involved parties before finalizing a settlement. 4. Rejection of Settlements: If a settlement is not appropriate or no agreement is reached, the Commission will reject the application and continue its inquiry. 5. Non-Appealable Orders: Settlement orders cannot be appealed. 6. Credit to Consolidated Fund: All settlement amounts go to the Consolidated Fund of India. Section 48B: 1. Commitment Offers: Enterprises can offer commitments to address alleged contraventions after an inquiry has started but before receiving the Director General’s report. 2. Consideration of Commitments: The Commission evaluates the effectiveness of the proposed commitments and their terms. 3. Objections and Suggestions: Similar to settlements, objections and suggestions must be considered. 4. Rejection of Commitments: If commitments are not suitable or no agreement is reached, the Commission will continue its inquiry. 5. Non-Appealable Orders: Commitment orders cannot be appealed. Section 48C: 1. Non-Compliance: If an applicant fails to comply with orders under sections 48A or 48B or has not made full and true disclosures, the orders will be revoked. 2. Liability for Legal Costs: The applicant may be liable for legal costs up to one crore rupees, and the Commission can restore or initiate the inquiry. |
Need and Significance:
The Competition (Amendment) Act 2023 makes changes to India’s antitrust enforcement and procedures. The act aims to:
- Improve transparency, efficiency, and deterrence in competition law
- Align India’s regulatory framework with international best practices
- Strengthen competition regulation
- Streamline operations
- Foster a business-friendly environment
- Bring antitrust law at par with changing markets
- Broaden the scope of the definition of cartel by including “intention to participate”
- Increase the review of the agreements/entities by the Competition Commission of India
The act also provides more powers to the CCI by providing the authority to appoint Director General with the approval of the central government.
The Competition (Amendment) Act 2023 makes a number of changes to the Competition Act, 2002, which is the country’s primary competition law.
Criticism and Limitations:
Penalties
The Competition Commission of India (CCI) can impose penalties on the global turnover of products and services. The CCI can also increase penalties after an inquiry into abuse of dominant position or agreements.
Time limit
The amended section 6(2A) reduces the maximum time limit for approval of combinations from 210 days to 150 days.
Limitation period
The CCI is barred from entertaining any matter in relation to anti-competitive agreements or abuse of dominance violations unless the information relating to the same has been filed within three years from the date of the cause of action.
Deal value threshold
The amendment introduces the Deal Value Threshold (DVT) as a new threshold where a transaction will require the CCI’s prior approval. The DVT states that any deal that has a value of more than Rs 2000 crores (approximately USD 242 million) needs to get an approval of CCI before heading towards the combination.
Settlement mechanism
The amendment introduces a mechanism for “settlement” and “commitment”. This allows parties under investigation to offer commitments or settle the matter with the CCI
Conclusion:
The Competition (Amendment) Bill of 2023 stands as a pivotal element in fostering progressive growth and development within the antitrust landscape. This bill has addressed numerous gaps within the existing governance framework. A notable move is the inclusion of “global turnover” as the basis for calculating penalties, a surprising yet significant development. However, certain shortcomings remain, such as the need for a collaborative mechanism to enhance the implementation of the bill, clarifications on “hub and spoke” arrangements, and further guidance on settlement provisions. Additionally, the implications of the reduced timeline should be carefully evaluated and balanced to ensure maximum consumer benefit.
Furthermore, despite the potential advantages of competition, certain sectors, such as coal mining, continue to be dominated by state-owned enterprises like Coal India. Additionally, other sectors that appear open have faced challenges in fully realizing the benefits of competition due to significant government interference, particularly in the power sector. This underscores the necessity for a national competition policy (NCP) in India, similar to those implemented in countries like Australia, Mexico, the United Kingdom, and others.
Despite a preliminary version of the NCP being prepared in November 2011, it remains stagnant within the records of the Ministry of Corporate Affairs, despite the NITI Aayog’s three-year agenda proposing comprehensive competition policy reforms. The NCP of India should prioritize advocating for impartial and open competition, focusing on competitive neutrality to ensure fair competition among all market players. These proposals aim to further enhance and sustain competition in markets, safeguard consumer interests, and uphold the freedom of trade for all market participants. The Competition (Amendment) Bill, 2023 represents a positive step towards establishing a level playing field in the market, promoting equitable competition, and advancing towards a comprehensive and dynamic competition law framework.
References:
- The Competition Amendment Act, 2023. (Act no. 9 of 2023). The gazette of India. https://prsindia.org/files/bills_acts/acts_parliament/2023/The%20Competition%20(Amendment)%20Act,%202023.pdf
2.Competition Commission of India. Government of India. https://www.cci.gov.in/legal-framwork/act
