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Competition Amendment Bill, 2022

Generally, competition refers to vying between individuals, economic and social groups, organizations, enterprises, and companies that strive to achieve a common goal. Nowadays, competition has arisen worldwide, especially for companies as they compete with each other to expand their businesses, generate more revenue and gain more market shares for themselves, which in turn promotes the viability and economic growth of the country.

However, to avert this competition from becoming aggressive and belligerent and for it to continue maintaining its consumer friendliness various countries have enacted laws or statutes to regulate competition. In India, the Parliament enacted the Competition Act, of 2002 ("the Act"), the successor of the Monopolies and Restrictive Trade Practices Act, of 1969, with the intention of promoting fair competition among the existing enterprises, protecting the interest of the consumers, and to ensure the entry of new enterprises is not restricted by the ones already prevailing in the market.

The Act prevented and punished anti-competitive activities if followed by the firms. Some of these activities include exclusive arrangements with the supplier to supply goods to one customer generally in a certain geographical area or fixing of prices among businesses or when large enterprises reduce the price of the goods or services to such an extent that it becomes difficult for small businesses to compete, thus the latter is forced out of the market.

Moreover, the purview of anti-competitive activities encompasses the pursuit of the enterprises which impose unfair and discriminatory conditions in the sale and purchase of goods or services thereby substantially reducing competition in the market. In other words, the enterprises abuse their dominant position prevalent in a market in order to drive out their competitors.

Further, the Act is also equipped in administering combinations so formed between two or more enterprises through merger, acquisition or amalgamation. Thus, the Act governs the regulation of combination so that no appreciable adverse effect on competition is formed.

The recent Competition (Amendment) Bill, 2022 ("the Amendment Bill") aims at amending the Act by widening the scope of anti-competitive agreements. Along with regulating combinations based on the value of the transaction and decriminalizing certain offenses, in doing so, changing the nature of punishment.

Competition (Amendment) Bill, 2022

The Ministry of Corporate Affairs, an Indian Government Ministry, concerned with the administration of the Competition Act, of 2002, established Competition Law Review Committee (Committee) in 2018 to facilitate a strong competition regime in India. This Committee in its 2019 report gave suggestions to amend the Act and regulate the market competition.

After swotting through the suggestions of the Committee the Indian Parliament introduced the Competition (Amendment) Bill, 2022 before the Lok Sabha on 5th August 2022 and was referred to the Standing Committee on 17th August 2022. The purpose of this Amendment Bill is to make significant changes in reciprocity with the Act for the latter to remain at par with the ongoing development and evolution of competitiveness between the enterprises in the market.

As per sub-section 3 of section 3 of the Act any agreement formed between enterprises, associations of enterprises, persons, associations of persons, any person and enterprise or practice carried on, or decision was taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which leads to Appreciable Adverse Effect on Competition.

The Amendment Bill intends to amend the sub-section by inserting the provision that even if an enterprise, association of enterprises, person, or association of persons though not engaged in identical or similar trade shall also be presumed to be a part of the such anti-competitive agreement if they actively participate in them. Thus, the Bill recognizes 'Hub and Spoke cartels'.

Further, section 4 of the Act prohibits enterprises from abusing their dominant position in the market by preventing the imposition of any unfair or discriminatory condition or price, including predatory price, in the purchase or sale of goods or services.

Moreover, the Act in section 41 provides with duties of the Director General to investigate under the directions of the Competition Commission of India ("CCI") or assist the CCI in the investigation. The Director General is conferred with the same powers as that of CCI under the Code of Civil Procedure, 1908 while trying a suit, those being: summoning and enforcing the attendance of any person and examining him on oath; requiring the discovery and production of documents; receiving evidence on affidavit; issuing commissions for the examination of witnesses or documents; requisitioning, subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872, any public record or document or copy of such record or document from any office.

The Amendment Bill expands the power of the Director General by giving authority to summon and examine the agents of the company, that is, any person acting or purporting to act for, on or behalf of the company, potentially including its bankers, legal advisers, and auditors, in addition to the company's employees and officers.

Furthermore, the Bill provides the 'Scheme of Settlements and Commitments'. This scheme can be implemented against the enterprises that are involved in the formation of the anti-competitive agreement and/or abuse of dominant position. Under this scheme, CCI is permitted to close its inquiry against the enterprise through either settlement, that is, if the enterprise is willing to pay a monetary penalty or voluntarily suggests some relevant behavioral remedies to CCI, in altercation for terminating the proceedings viz. commitment. This would increase the potential for effective dispute resolution and speedy disposal of cases.

Section 5 and 6 of the Act provides for the regulation of combinations so formed through a merger, an amalgamation of companies, acquisition or control, shares, voting rights, or assets of one enterprise by another enterprise or group.

In the Amendment Bill 'Deal Value Threshold' has been introduced to regulate mergers and acquisitions in the digital market. The Deal Value Threshold states that the CCI shall be notified by the enterprises whose value of merger or acquisition crosses the Rs. 2000 crore threshold and has substantial business operations in India.

Analyzing The Amendment Bill, 2022

With the constant change in the market, especially in the digital era, the Act suffered with its own lacunas. The amends made by the Bill augments the scope of the aforesaid Act as it widens the scope of the anti-competitive agreement, increases the ambit of powers confined to the Director General, and advances the regulations of Merger and Acquisition of the enterprises.

As per the Act, an anti-competitive agreement can only be bifurcated into two categories, namely, vertical agreement and horizontal agreement, however, with digitalization, this divergence cannot be limited to these agreements. The amendment proposed includes even those agreements that may be formed between enterprises, persons, and associations that are not engaged in identical or similar trade. This empowers CCI to investigate those markets as well.

Though, the Bill does not prompt much concern for recognizing the scrutiny that would ensure punishment of only that violation, with regards to abuse of dominant position, which causes appreciable adverse effects on competition.

Moreover, the amendment in the section of combination predicaments 'substantial business operation in India' of an enterprise whose value of merger or acquisition crosses the Rs. 2000 crore threshold is quite vague. The scope of substantial business operating in India needs more clarity for it to ensure there is no inconvenience caused to the enterprises entering into global mergers and acquisitions.

Nowadays, there is a major increment in the competitiveness of companies in the worldwide market, particularly, in the digital era. For the companies to be in line with the practice followed it is important for the statutes to be commensurate with these developments. The objective of the amendments introduced by the proposed Bill equalizes enterprises in the Indian market with the enterprises in the global market. Thus, the Amendment Bill streamlines and rationalizes the Competition Law regime in India.

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