The long-awaited Bill to amend the Competition Act, 2002, was finally tabled in the Lok Sabha recently.
The Competition (Amendment) Bill, 2022:
It seeks to amend the Competition Act, 2002.
The Act establishes the Competition Commission of India (CCI) for regulating market competition.
The key changes proposed by the Bill include:
introduction of ‘deal value thresholds' pursuant to which ‘large-value' transactions will require the approval of the Competition Commission of India (“CCI”);
relaxations for implementation of open offers and stock exchange purchases;
shortened timelines for review of ‘combinations';
amendment of the definition of ‘control' to include ‘material influence';
introduction of ‘settlement' and ‘commitment' to resolve investigations in respect of anti-competitive vertical agreements and abuse of dominance; and
Facilitation of exchange of information between departments of the Government of India and the CCI.
Introduction of ‘deal value thresholds'
The Bill introduces ‘deal value thresholds', pursuant to which transactions of a value exceeding INR 2,000 crore will require the prior approval of the CCI, provided that the parties to such transaction have “substantial business operations in India” (“Deal Value Thresholds”).
Derogation from stand-still requirements in case of open offers and stock exchange purchases
The Bill proposes that open offers, and acquisitions of shares or securities on a regulated stock exchange may be implemented prior to the receipt of the CCI's approval
Introduction of ‘settlement' and ‘commitment'
The Bill proposes that enterprises facing investigations relating to
anti-competitive vertical agreements under Section 3(4) of the Competition Act, or
abuse of dominant position under Section 4 of the Competition Act, may settle such proceedings or offer commitment(s) to the CCI in the following manner:
Settlement: an application for ‘settlement' may be submitted by an enterprise at any time after the receipt of the Director General of the CCI's (“DG”) report in respect of its investigation into the relevant matter, but before the CCI passes a final order; and
Commitment: an offer for ‘commitment' may be submitted by an enterprise at any time after the CCI has initiated an investigation, but before receipt of the DG's report.
Penalty for gun-jumping
Currently, the penalty for gun-jumping (i.e., penalty for non-furnishing of information on combinations) may extend to one percent of the total turnover or the assets, whichever is higher of the relevant combination.
The Bill proposes that the penalty for gun-jumping may extend to one percent of the total turnover or the assetsor, value of the transaction, whichever is higher, of the relevant combination.
The issue of Hub-and-Spoke Cartels:
A Hub-and-Spoke arrangement is a kind of cartelisation in which vertically related players act as a hub and place horizontal restrictions on suppliers or retailers (spokes).
Currently, the prohibition on anti-competitive agreements only covers entities with similar trades that engage in anti-competitive practices.
This ignores hub-and-spoke cartels operated at different levels of the vertical chain by distributors and suppliers.
To combat this, the amendment broadens the scope of ‘anti-competitive agreements’ to catch entities that facilitate cartelisation even if they are not engaged in identical trade practices.
Officers and employees of the party under investigation
The Bill proposes that all officers, employees, and agents of a party which are under investigation shall have a duty to:
preserve and produce all information, books, papers, other documents, and records of, or relating to, the party which are in their custody or power to the DG; and
provide all assistance in connection with the investigation to the DG
The Bill also proposes that the DG may examine, on oath, any officer, employee or agent of the party being investigated, in relation to its affairs, with the previous approval of the CCI.
Specific provision to withdraw leniency applications
The Bill proposes to permit a party to withdraw an application for lesser penalty or leniency in the manner and within such time as may be specified by the regulations issued by the CCI.