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Analysis of Draft Competition (Amendment) Bill, 2020

Free and fair competition is one of the piers of a structured market economy. Fostering effectual competition stimulates organizations to spotlight on efficiency and ameliorates customer welfare by proffering considerable option of higher-quality products and amenities at lower costs.

It also boosts magnificent transparency and accountability in government-business correlations and decision making, helps truncate corruption, lobbying and rent seeking. Additionally, it provides opportunities for chiefly based participation in the economy and for apportioning in the benefits of economic growth. Certainly, competition is not an end unto itself, rather a medium to attain economic efficiency and welfare objectives. Hence, it serves as a driving force in the global economy.

With a view to streamline the Competition Act, 2002 and associated regulations, the Ministry of Corporate Affairs (MCA) came out with the proposed emendations to the Competition Act, 2002. MCA structured an independent- headstrong committee aptly called, the Competition Law Review Committee (CLRC) for analyzing the Act and accompanying laws and regulations. In a report presented to the MCA in August 2019, the CLRC provided numerous exhortations for amendments to the substantive and procedural provisions of the Act.

After rumination of the CLRC Report, the MCA came up with the draft Competition (Amendment) Bill. This Bill was issued in the public domain on 20th February 2020 for general comments. The initial glance of the Bill divulges that it entreats to bring about the much-needed lucidity to certain provisions, intensify the transparency in the authorities and revamp the efficiency and robustness of the system.

Remarkable changes propounded in the Bill

An evaluation demonstrates that out of the 50 suggestions recommended by the CLRC, nearby 45 have been embraced by the MCA and encompassed in the Bill.

Some of the most notable amendments that have been submitted comprehend:

Reform in the regulatory structure of the CCI:

The CCI has been wearing many hats since its outset as it had been entrusted with advisory, adjudicatory, quasi-legislate, investigative and advocacy functions. Commending this, the CLRC suggested a transfigure in the regulatory arrangement to make it more effective and robust to deal with the newfangled impediments.
Embracing the recommendation, the Bill provides for the configuration of a Governing body which would comprise:

  • the Chairperson of the CCI,
  • its six whole time members,
  • the Secretary of the Department of Economic Affairs,
  • Ministry of Finance or his nominee,
  • Secretary of the Ministry of Corporate Affairs and his nominee, and
  • four other part-time members to be nominated by the Central Government.

They will be conferred with the authority to make rules, adopt measures to generate awareness and frame a National Competition Policy. Additionally, the Governing Board will exercise general superintendence, direction and management of the matters of the CCI. The CCI will now only carry out the adjudicatory functions.

Furthermore, the Bill also allowscreation of panels with a quorum of three members. Provided the colossal nature of functions to be exercised by the Governing Board, its autonomy is paramount. However, the Bill is silent on the mode of nomination of these members. The selection committee set up under Section 9 of the Act, which frames recommendations for the post of Chairperson and the other members, will not frame any such recommendation for the part-time members. In the interest of maintaining transparency and for shielding independence of the Governing Board, the Selection Committee should be tasked with commending part time members as well.

Statutory provision to solicit public opinions:

In a very propitious move, the Bill build ups a responsibility on the Governing Board to invite public comments on all rules. With a restrictedanomaly of exigency in public interests, and regulations relating to in-house working of the CCI, this provision will bring essential transparency and democratic rule making to the set-up.

Issuing the penalty guidance:

The Bill necessitates the CCI to exude the much- awaited penalty direction. The penalty guidance is anticipated to provide recognition to the pertinent turnover propositions and lay down the means of ascertainment of the percentage of the penalty and application of mitigating and aggravating factors. The CCI has the authority to foist prohibitive penalties and in the truancy of any direction the way in which this penalty was being enforced was enshrouded with obscurities. The guidance may lay out the much-needed lucidity, although the Bill falls short of foisting obligatory time limit within which the penalty directions will be released.

Streamlining process for regulation of combination:

The Bill makes number of changes to the modulation of combinations,significant of these include, decreasing the time-limit for deemed approval from 210 days to 150 days, make substantive changes.

Amendments to streamline the procedure for enquiry into combinations:

Currently the sections of the Act leave a lot of glaring gaps in the enquiry process. In spite of this, the CCI through notifications, regulations and practice has been ushering inquests into combinations. The Bill aspiresto fill some of these gaps, providing statutory paramount to the practices followed by the CCI. This will also decrease the likelihood of appeals against combination orders which have formerly been on account of inadequacy of the statutory provisions.

New thresholds for merger control:

The Bill authorize the Central Government and CCI to expound new thresholds for merger divulgence by setting forth a proviso to Section 5. The pristine thresholds, which can be apprised in public interest, will now warrant the CCI to draw up sector specific thresholds based on size of transaction or deal value or any other criterion. The amendment turns up to be in furtherance of the CLRC's suggestion to seize transactions in the digital market.

Provided the dynamic nature of the digital markets, implementation of this power involvesapplication of prudence. This may out-turn in enlarging compliance costs for the businesses and effect the ease of doing business. It is imperative that the development of objective thresholds or criterion is preceded by a detailed legal and economic assessment of the prerequisite of such thresholds, the basis of the thresholds and the value of the thresholds.

Augmentation of definition of a cartel:

The Bill enlarges the definition of a cartel to encompass a buyer's cartel as well. This entails that even in cases of buyer's cartel, the supposition of substantial unfavourable effect on competition will apply to buyer's cartel as well.

Granting protection to holders of intellectual property rights:

In line with the commendations of the CLRC, the Bill, strives to broaden protection proffered to holders of IPR. The exception for the IPR holders is presently limited to anti-competitive agreements. Hence, this brings the much-needed equivalence between the treatment of anti-competitive agreements and abuse of dominant position.

The system of settlement and commitments:

In a very momentous development, the Bill presents a structure for settlements and commitments empowering the CCI to close the investigation on the basis of an application for the settlement or commitment advanced by the investigated party.

The amendment bill seeks to address the loopholes, weaknesses and procedural issues in the Competition Act, 2002and are pivoted on lubricating the ease of doing business and minimizing the load of the CCI.

Owing to the ongoing COVID-19 pandemic, many people across India are calibrating to thenew actuality of online work, e-education, e-commerce, etc whereby important educational, professional and personal connections are being facilitated by the internet. To its credit, the proposed amendments strive in proliferating the CCI's capability to peruse the combinations (mergers and acquisitions) in technology markets.

Also, apposite to the digital economy, the amendment tries to broaden the definition of what constitutes a cartel. Additionally, the amendment attempts to deepen India's nodal competition authority's (the Competition Commission of India) capability to inquest anti-competitive arrangements. This is significantas the digital economies are multi-sided markets which are prone to rapid network effects.

It is noteworthy that the proposed amendments would benefit the middle rangestartups businesses, the startups in the digital economy and public at large.
Ergo, the Bill is a positive step in the direction of an efficient CCI 2.0.

Written By: Riya Gulati - Paralegal at Law Offices of Caro Kinsella & Youth Ambassador for the ONE Campaign, Ireland. 

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