|Date | Version
|August 30, 2022| 1.0
|‘Combinations’, ‘Anti-Competitive Agreements’, ‘Appreciable Adverse Effect on Competition’
|List of Legislation Referred.
Abstract– This write-up seeks to study certain key provisions of the Competition (Amendment) Bill, 2022 and its impact on the competition law regime of the country.
The Competition (Amendment) Bill, 2022 (‘Bill’) proposes to provide the Competition Commission of India (‘CCI’) with more freedom, agency, and accountability. The Parliamentary Standing Committee on Finance is reviewing the proposal the Parliament laid down under the Bill.
This article focuses primarily on the fundamental changes proposed by the Parliament concerning combinations and anti-competitive agreements.
- Deal value threshold:The Bill seeks to amend Section 5 of the Competition Act, 2002 (“Act”) by introducing transaction value thresholds for determining whether a merger or acquisition qualifies as a combination and requires notification to the Competition Commission of India. At present, such notification is required based only on asset and turnover thresholds. An additional threshold of value of the transaction has now been introduced. In accordance with this criteria, if the value of the transaction exceeds rupees two hundred crores and where the enterprise which is a party to the transaction has substantial business operation in India, then such transaction shall be a ‘combination’ for the purposes of the Competition Act, 2002. To determine whether such a party has substantial business operations in India, the CCI may make regulations outlining the criteria for determining the same. In accordance with the law as it stands without the modifications proposed in the Bill, it is challenging for the CCI to assess several deals in the digital and infrastructure space where the assets or turnover value fall below the threshold standards. It is noteworthy that upon the amendment of the Act as proposed under the Bill, India would join a growing number of nations that have implemented deal value thresholds in their merger control framework, including Austria and Germany.
- Reduction in the timeline for assessment of combinations: The Bill seeks to reduce the time frame for the CCI to form a prima facie opinion on a combination from the present 30 days under Section 29of the Competition Act, 2002 to 20 days. In addition, it is suggested that the overall period of 210 calendar days given to the CCI to evaluate the combination be lowered to 150 calendar days, with an extension period upto 30 days. Implementing this amendment will require the parties to the combination to provide absolute clarity in the notice to form a combination and increase pre-notification consultations with the Competition Commission of India.
- Proposal of modifications: The Bill proposes to introduce Section 29A to provide an opportunity to the parties to address issues where in the opinion of the CCI, the combination in question has or is likely to have an appreciable adverse effect on competition. This section is intended to empower the CCI to direct parties to such combination, to explain within specified time frame why such a combination should be allowed to take effect. The specified timeframe is 25 days from the receipt of the statement of objections. In cases where the parties have a reason to believe that such issues can be eliminated, they would be permitted to submit suitable modifications to the CCI, along with a reasonable explanation.
B. Anti-Competitive Agreements
- Settlements and Commitments: A new mechanism is proposed to be introduced to permit any enterprise against whom any inquiry has been initiated for acting in contravention of Section 3(4)or 4 of the Competition Act, 2002, to:
- Apply for Settlement: Such enterprise may submit an application to the CCI at any time after the receipt of the report of the Director General but within such time before passing of an order by the CCI.
- Offer Commitment: The enterprise may also offer commitments in respect of such alleged contraventions by submitting an application to the CCI at any time before the passing of the order but within such time before the receipt by the party of the report of the Director General.
However, no appeal is contemplated in respect of the CCI’s decision regarding any application for a commitment or settlement. Adopting these amendments should enable parties to avoid lengthy judicial proceedings’ time, effort, and financial burden.
- Scope of Anti-Competitive Agreements: It is proposed that even entities not engaged in identical or similar trade should be presumed to be part of an anti-competitive agreement under Section 3(3) of the Competition Act, 2002 if they actively participate in the furtherance of such agreement. The Bill also intends to cover parties who facilitate anti-competitive horizontal agreements even if they are not part of the agreement.
- Modification to Appreciable Adverse Effect on Competition (AAEC) Factors: Changes to the factors considered while determining whether an agreement has an appreciable adverse effect on competition as laid down under Section 19(3)of the competition is suggested. The Bill seeks to modify two factors to widen the scope:
- The factor pertaining to the foreclosure of competition is proposed to be substituted with foreclosure of competition by hindering entry into the market, and
- The factor pertaining to the accrual of benefits or harm is proposed to be substituted with the accrual of benefits.
- Period of Limitation: The Competition Act 2002 does not provide for a period of limitation, which must be adhered to by an informant for filing a case before the CCI. This position was clarified in the case of Neha Gupta v. Tata Motors.The CCI observed that the Competition Act, 2002, does not specify any limitation period and that the only limitation period referred to under the Competition Act 2002 is with respect to an appeal before the National Company Law Appellate Tribunal. As opposed to the foregoing position under the present law, a three-year limitation period is proposed to notify the CCI of information about anti-competitive agreements or any abuse of dominance.
- The Competition Amendment Bill presents significant changes as the scope and ambit of ‘combinations, anti-competitive agreements and abuse of dominant position’ has been enhanced.
- A formal process for proposal for modification with respect to the combination is expected be helpful to the industry.
- The effectiveness of the substantive changes sort to be introduced by the Bill would heavily rest on the regulations as and when put in place by the CCI.