AZB Partners – Competition Law 2.0 – A New Beginning?

By August 8, 2022 No Comments
The Competition (Amendment) Bill, 2022 (Bill), which was introduced in the Indian Parliament, proposes significant changes to the Competition Act, 2002 (‘Act’). The Bill primarily tracks the draft Competition (Amendment) Bill, 2020 (‘2020 Draft Bill’), with some incremental changes. We had summarised and discussed the changes made in the 2020 Draft Bill, which can be accessed here.

The Bill excludes some of the proposed text in the 2020 Draft Bill. For example, the Bill does not: (a) introduce a Governing Board to work alongside the Competition Commission of India (‘CCI’); and (b) include specific text for assessing buyers’ cartels.

A summary of the key amendments proposed to the Act by the Bill is set out below:

i.   Merger Control

•   Introduction of Deal Value Threshold: The Bill requires notification of transactions that exceed a global deal value of INR 2000 crores (approx. USD 251.74 million), subject to either party having substantial business operations in India.

a.  This threshold has been introduced as part of the larger jurisdictional thresholds;

b.  This threshold will not be affected by the small target based de minimis exemption;

c.  The CCI will issue regulations to determine the scope of ‘substantial business operations’;

d.  The deal value will include every valuable consideration (direct or indirect or deferred); and

e.  The primary objective of introducing deal value threshold in the 2020 Draft Bill was to address certain types of transactions (particularly in digital markets) that may not require notification under the existing jurisdictional threshold. However, the Bill does not appear to introduce deal value threshold only with respect to transactions in digital markets and is rather open ended.

•   Shortened Review Timelines: The Bill proposes to shorten the review timeline from the current 210 days (from the date of notification) to 150 days, with a provision to extend it by 30 days. Under the Bill, the CCI is required to form its preliminary view on a transaction within 20 calendar days (as opposed to the current timeline of 30 working days). If the CCI does not issue an order within these timelines, the combination will be deemed approved. This increases the notifying parties’ responsibility to provide comprehensive information to the CCI and reduces the number of follow up questions from the CCI.

•   New Threshold of Control: The Bill formalises a lower threshold of ‘control’, i.e., the ability to exercise material influence, in any manner, over the management or affairs or strategic commercial decisions. The CCI in its decisional practice has considered material influence to include factors such as shareholding, special rights, status and expertise of a person, board representation or commercial / financial arrangements.

•   Derogation from Standstill Obligations for Stock Market Purchases: The Bill proposes to exempt combinations from the standstill obligations under Section 6(2A) of the Act, if the combinations involve: (a) an open offer; or (b) an acquisition of shares or securities, through a series of transactions on a regulated stock exchange. The acquirer, in the above cases, would be allowed to acquire shares but cannot exercise any ownership or beneficial rights or voting rights or receive dividends / any other distributions, till the CCI approves such acquisition. This amendment enables time sensitive on market stock purchases while fulfilling the notification requirements of the CCI.

•   Increased Penalty for Making False Statement or Omission to Submit Material Information: The Bill increases the maximum penalty to INR 5 crores (from INR 1 crore).

ii.   Antitrust

•   Inclusion of Limitation Period: The Bill introduces a limitation period of three years (from the date on which cause of action arose) to file a complaint with the CCI. However, the CCI is empowered to condone delays.

•   Introduction of Commitments and Settlements: The Bill introduces provisions allowing parties to offer settlements and voluntarily undertake certain commitments. Commitments can be offered at any time after an investigation has been initiated but before the investigation report is issued. Settlements can be offered after the investigation report is issued but before the CCI issues its final decision. Commitments or settlements can be offered for both anti-competitive vertical agreements and abuse of dominant position, but not cartelisation.

While considering the applications for settlement / commitment (the Bill prescribes a fee to submit these applications), the CCI will have to provide an opportunity to the concerned parties, the Director General (‘DG’), and to other third parties to submit their objections or suggestions. The CCI’s decision on settlements / commitments will not be appealable. Further, the order accepting settlement / commitments can be revoked if the applicant did not make full and true disclosure, or there has been a material change in the facts. The introduction of these amendments could potentially save parties the time, effort and legal costs involved in lengthy litigation processes.

•    Expansion of DG’s Powers: The Bill allows the DG to retain documents, information, books, papers, etc. requisitioned by the DG during the investigation for up to 360 days. Apart from summoning and examining officers, employees, etc. of a company under investigation on oath, the Bill allows the DG to examine ‘agents’ on oath. ‘Agents’ include bankers, legal advisors, and auditors of a company under investigation. It’s unclear whether the scope of the provision extends to external counsel.

•   Expanding Powers of Granting Leniency: A welcome development in line with the jurisdictions like United Kingdom, United States of America, Singapore and Brazil, where a party implicated in a cartel investigation makes a true and vital disclosure of another undisclosed cartel, the CCI is empowered to grant an additional lesser penalty for the cartel already being investigated.

•   Withdrawal of Leniency Application: The Bill allows a leniency applicant to withdraw its application. However, the DG / CCI may use the information in the withdrawn leniency application for the purposes of investigation, except the admissions of the leniency applicant.

•   Expanding the Scope of Cartels to Include ‘Hub and Spoke’ Arrangements: The Bill expands the scope of cartels to include ‘hub and spoke’ arrangements implemented by entities involved at different levels of the value chain. The Bill allows CCI to proceed against any entity which acts in facilitating a horizontal agreement or cartel, in whatever capacity.

•   Provision to Avoid Multiple Proceedings: The Bill allows the CCI to reject an information, if the same is based on same / similar facts and issues addressed in a previous order issued by the CCI.

•   Provision Enabling Parties to Call Experts: The Bill allows parties to call upon experts in the field of economics, commerce, international trade, or any other discipline to provide their opinion before CCI.

iii.  Others

•    Appointment of the DG: The Bill empowers CCI to appoint the DG with the prior approval from the Central Government (instead of the Central Government directly appointing the DG).

•   25% Pre-deposits of Penalty on Appeal: The Bill proposes a pre-deposit of 25% of the penalty imposed by the CCI in order to file an appeal before National Company Law Appellate Tribunal.

•   Issuance of Guidelines: The Bill requires the CCI to publish guidelines regarding the appropriate amount of penalty to be levied for any contravention of the Act.

•   Transparency in Making Regulations: The Bill requires the CCI to invite public comments before publishing regulations.