Making sense of the changes in competition law | Mint

Making sense of the changes in competition law

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Summary

Parliament has given its approval to the Competition Amendment Bill, 2023, in the ongoing budget session, laying the foundation for more effective oversight. Mint takes a look at what the competition law reforms seek to achieve.

NEW DELHI : Parliament has given its approval to the Competition Amendment Bill, 2023, in the ongoing budget session, laying the foundation for more effective oversight. Mint takes a look at what the competition law reforms seek to achieve.

Why did the law need amendments?

Shifts in economic activity, including the boom in start-ups, growth of the digital economy and the need to improve ease of doing business warranted updates to legislation. The growth in new age businesses meant that entities with huge valuation and market impacting power escaped the Competition Commission of India’s (CCI) merger regulations because they did not meet asset and sale based monetary threshold for seeking CCI clearance. Besides, a new approach to correcting market distortions was needed after penalties imposed by CCI tended to end up in courts, affecting consumers.

What are the major changes?

The amendments passed by both the Houses of Parliament seek to expedite regulatory decisions on mergers and acquisitions and extend CCI’s regulatory reach to transactions valued at more than 2,000 crore even if they do not meet the conventional criteria for merger regulation based on asset and sales. The Bill also proposes greater deterrence by way of higher penalty provisions based on the global sales of corporations. A ‘leniency plus’ scheme aims to encourage entities facing cartel investigations to disclose information about other cartels. The Bill also provides for negotiated settlements.

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When will these be implemented?

Once the Bill receives the President’s ascent, CCI plans to go for public consultation on proposed regulations so that finer aspects of the provisions are drawn up without any unintended consequences. The government wants to introduce the rules and regulations before the year-end. Ministries have to bring rules within six months of a change in law.

What’s the new merger approval timeline?

The Bill proposes to expedite CCI clearance of mergers and acquisitions to within 150 days, down from a maximum of 210 days now. CCI has to frame a first impression of the transaction within 30 days of it getting notified of a deal. If it misses the deadline, the deal is deemed to be approved. However, for this to work, CCI’s manpower needs to be scaled up. It’s still waiting for the government to appoint a chair. But it has secured permission to clear mergers so that economic activity does not suffer.

What about digital competition?

A separate Digital Competition Bill has been suggested by two Parliamentary committees to keep an eye on the digital economy where businesses can quickly attain scale, tip the market and erect entry barriers to new smaller firms. This Bill will likely propose ‘dos and donts’ for large digital economy firms so that market tipping behaviour is nipped in the bud. This forward-looking way is different from the conventional approach in which the regulator steps in after the deed is done.

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