Home / Opinion / Views /  The Competition (Amendment) Bill 2022: A low-key bill with wider implications

The Competition (Amendment) Bill 2022: A low-key bill with wider implications

Further, requiring the CCI to mandatorily issue penalty guidelines and give reasons in case of any divergence from these will give India Inc much-needed certainty.  (Photo: HT)Premium
Further, requiring the CCI to mandatorily issue penalty guidelines and give reasons in case of any divergence from these will give India Inc much-needed certainty.  (Photo: HT)

The competition amendment bill to be taken up by Parliament aims to improve our regulatory set-up by increasing the CCI’s accountability, giving it flexibility and having it invite policy inputs.

The budget session of Parliament has resumed. Of the pieces of legislation to be taken up, the Competition (Amendment) Bill, 2022, has been fairly low key. It has not attracted scrutiny like India’s farm laws or regulation of crypto assets. However, it significantly overhauls the Competition Act of 2002 and would have far-reaching implications. Some of its key changes can be classified under the following three attributes:

Accountability: Increasing transparency and strengthening the accountability of our competition regulator, the Competition Commission of India (CCI), is a key objective. The bill proposes a board with part-time members to supervise CCI activities. This would bring its regulatory architecture at par with that of financial regulators like the Securities and Exchange Board of India (Sebi), Insurance Regulatory and Development Authority and Pension Fund Regulatory and Development Authority.

Infusing accountability in law-making is another box the bill checks. It mandates the CCI to engage in public consultation prior to issuing regulations. This is a progressive move and will prevent legislative mis-steps.

Further, requiring the CCI to mandatorily issue penalty guidelines and give reasons in case of any divergence from these will give India Inc much-needed certainty. Till recently, the CCI had recovered less than 1% of the penalties it imposed. The amendment will hopefully result in realistic impositions, prevent protracted litigation and improve recovery. Also, the CCI would have to issue a show-cause notice that specifies legal contraventions before passing an adverse order.

Enforcement efficiency: A significant step is the introduction of settlement and commitment mechanisms, whereby the CCI could engage in structured negotiations with parties and arrive at mutually-workable solutions without having to go through lengthy formal proceedings. While Sebi has been passing settlement orders for over a decade, the CCI was only empowered to take action for abuse of dominance or anti-competitive agreements in the form of final orders in proceedings before it. Enforcement efficiency is also sought to be enhanced by making appeals to the National Company Law Appellate Tribunal conditional on a pre-deposit of up to 25% of the penalty imposed by the CCI. Given that the CCI is empowered to impose significantly large penalties, this change is likely to deter frivolous appeals. Several other amendments, such as a shortening of the merger review period from 210 to 150 days and introduction of a green channel for merger applications, should increase enforcement efficacy and comfort India Inc.

Flexibility: The bill recognizes that traditional business models are undergoing rapid transformation with the advent of a digital economy. The CCI is presently only allowed to examine agreements made between businesses at the same level of production (such as competitors that form a cartel) or businesses that are in a directly upstream or downstream market (such as agreements between a manufacturer and distributor). If the parties do not fall in either of these brackets, anti-competitive agreements between them can go unchecked. An example is a hub-and-spoke cartel, wherein a hub, such as a trade association that is neither a horizontal or vertical part of the business chain, facilitates a cartel among competitors. With the increasing digital platformization of the economy, such hub-and-spoke cartels will become more prominent. The bill not only expressly recognizes hub-and-spoke cartels, it also has a catch-all provision to enable the CCI to deal with anti-competitive pacts irrespective of the structural relationships between parties.

The merger review process is also sought to be made more flexible. Certain categories of mergers that had to wait for CCI approval would be allowed to attain full consummation without any standstill obligation under the new green-channel process. Certain other mergers, such as open offers/hostile takeovers and block deals, will be allowed consummation with limited restrictions. The government’s power to exempt transactions from a merger review will also be broadened. These measures could significantly reduce the cost of regulatory delays in the execution of merger deals.

The bill scores well on each of the above and sticks to the Centre’s “minimum government and maximum governance" motto. The only grouse is that it does little to address competition concerns in digital markets, one exception being an amendment that provides room for the government to introduce new thresholds such as on deal value for merger notification. Presently, the criteria to notify mergers go by the relevant entities’ assets and turnover. Often, mergers in digital markets are between entities that do not have significant assets or turnover, but are still very significant (such as Facebook-WhatsApp). The flexibility to introduce new thresholds will let the CCI review such mergers.

In terms of regulating anti-competitive conduct by digital platforms, the bill does not bite the bullet. It was released for public comments in 2020, and given the rapid developments in digital markets and global regulatory responses, it seems to have got dated already. This may be why other stakeholders such as the department of consumer affairs and the department for promotion of industry and internal trade under the commerce ministry are often seen stepping onto the CCI’s turf when it comes to regulating anti-competitive conduct in digital markets.

Vedika Mittal Kumar is a senior resident fellow and team lead, Vidhi Centre for Legal Policy, who assisted the Competition Law Review Committee.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

Trending Stocks

×
Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout