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Competition Amendment Bill, 2022: Key Changes To The Competition Act, 2002 – Antitrust, EU Competition



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On August 5, 2022, the Competition (Amendment) Bill, 2022 (the
Bill”), to amend the Competition Act,
2002 (the “Competition Act”), was
introduced in the Indian Parliament. The timing of approval of the
Bill, and its coming into effect, is uncertain at present.

The key changes proposed by the Bill include:

  • introduction of ‘deal value thresholds’ pursuant to
    which ‘large-value’ transactions will require the
    approval of the Competition Commission of India
    (“CCI”);

  • relaxations for implementation of open offers and stock
    exchange purchases;

  • shortened timelines for review of
    ‘combinations’;

  • amendment of the definition of ‘control’ to include
    ‘material influence’;

  • introduction of ‘settlement’ and
    ‘commitment’ to resolve investigations in respect of
    anti-competitive vertical agreements and abuse of dominance;
    and

  • facilitation of exchange of information between departments of
    the Government of India and the CCI.

Please see below a detailed description of the changes proposed
by the Bill.

Introduction of ‘deal value thresholds’

The Bill introduces ‘deal value thresholds’,
pursuant to which transactions of a value exceeding INR 2,000 crore
will require the prior approval of the CCI, provided that the
parties to such transaction have “substantial business
operations in India
” (“Deal Value
Thresholds
”).

The term ‘value of transaction‘ is stated
to include “every valuable consideration, whether direct
or indirect, or deferred for any acquisition, merger or
amalgamation
”. Further, the term
substantial business operations in India” is
likely to be clarified in regulations issued by the CCI.

The text of the Bill read with the report of the Competition Law
Review Committee (which formed the basis for many key changes
proposed in the Bill) indicates that the Target Exemption
(applicable to transactions where the assets of the target are of a
value of INR 350 crore or less, or turnover is INR 1,000 crore or
less) may not be applicable to transactions which exceed the Deal
Value Thresholds.

Derogation from stand-still requirements in case of open offers
and stock exchange purchases

The Bill proposes that open offers, and acquisitions of shares
or securities on a regulated stock exchange may be implemented
prior to the receipt of the CCI’s approval, provided
that:

  1. the notice of such an acquisition is filed with the CCI in
    accordance with regulations issued by the CCI; and

  2. the acquirer does not exercise any ownership or beneficial
    right or interest in such shares or convertible securities,
    including voting rights and receipt of dividends or any other
    distributions (except in accordance with the regulations issued by
    the CCI in this regard) until the CCI approves such
    acquisition.

Shortened timelines for review of combinations

The Bill proposes a shortening of the timelines for review of
combinations by the CCI:

  • the time period within which the CCI is required to form its
    prima facie opinion on a combination has been reduced from
    30 working days to 20 days; and

  • the maximum period for review of combinations by the CCI has
    been shortened from 210 days to 150 days.

However, the Bill also provides that where a party to a
combination requests additional time to furnish relevant
information or remove defects in the CCI notification, the CCI may
grant such additional time up to a maximum of 30 days.

Definition of ‘control’

The Competition Act currently does not include a qualitative
test for ‘control’ and defines the term
‘control’ as including “controlling the
affairs or management by— (i) one or more enterprises, either
jointly or singly, over another enterprise or group; (ii) one or
more groups, either jointly or singly, over another group or
enterprise
.”

In certain of its previous orders, the CCI has taken the view
that the ability to exercise ‘material influence’ over
another enterprise constitutes ‘control’ for the
purposes of the Competition Act. In its order in UltraTech
Cement Limited/
Jaiprakash Associates
Limited
, dated 10 April 2015, the CCI held as
follows: “in competition law practice, control is
considered as a matter of degree”
and
‘control’ includes “material influence”
which is the lowest level of ‘control’ and implies
presence of factors which give an enterprise ability to influence
affairs and management of the other enterprise including factors
such as shareholding, special rights, status and expertise of an
enterprise or person, board representation, structural/financial
arrangements etc
.”

In accordance with the above, the Bill amends the definition of
‘control’ under the Competition Act to include
the ability to exercise material influence, in
any manner whatsoever, over the management or affairs or strategic
commercial decisions”
of another enterprise or
group.

Introduction of ‘settlement’ and
‘commitment’

The Bill proposes that enterprises facing investigations
relating to (i) anti-competitive vertical agreements under Section
3(4) of the Competition Act, or (ii) abuse of dominant position
under Section 4 of the Competition Act, may settle such proceedings
or offer commitment(s) to the CCI in the following manner:

  1. Settlement: an application for
    ‘settlement’ may be submitted by an enterprise at any
    time after the receipt of the Director General of the CCI’s
    (“DG”) report in respect of its
    investigation into the relevant matter, but before the CCI passes a
    final order; and

  2. Commitment: an offer for
    ‘commitment’ may be submitted by an enterprise at any
    time after the CCI has initiated an investigation, but before
    receipt of the DG’s report.

The CCI may, after taking into consideration the nature,
gravity, and impact of the alleged contraventions (and, in case of
commitments, their effectiveness), accept the settlement or
commitments proposed, on such terms (including implementation and
monitoring of the proposed settlement or commitments) as may be
specified in regulations issued by the CCI.

While considering an application for settlement or commitment,
the CCI is required to provide an opportunity to the concerned
enterprise, the DG, and other parties (as appropriate) to submit
objections and suggestions. The CCI will also have the power to
reject the settlement or commitment if it is of the opinion that it
is “not appropriate in the circumstances”.

No appeal will lie to the National Company Law Appellate
Tribunal (“Appellate Tribunal”)
against any order passed by the CCI under the provisions relating
to settlement and commitment. The CCI may revoke an order passed
under these provisions in certain circumstances, including where
there is incomplete disclosure by the
parties.  

Exchange of information between departments of Government and
the CCI

The Bill provides that the CCI may, for the purpose of
discharging its duties or performing its functions under the
Competition Act, enter into a memorandum or arrangement with any
statutory authority or a department of the Government.

This amendment may enable the CCI to exchange information
regarding investigations or combinations with other statutory
authorities.

Other changes

Other changes proposed by the Bill include:

Definition of the ‘relevant product
market’

The CCI carries out its competition assessment within the
framework of a ‘relevant market’, which comprises of a
‘relevant product market’ and a ‘relevant
geographic market’.

The Bill proposes to amend the definition of the ‘relevant
product market’ to include ‘supply-side
substitutability’ (in addition to ‘consumer-side
substitutability’). The amended definition will include a
market comprising all those products or services “the
production or supply of which are regarded as interchangeable or
substitutable by the supplier, by reason of the ease of switching
production between such products and services and marketing them in
the short term without incurring significant additional costs or
risks in response to small and permanent changes in relative
prices
”.

CCI to issue guidelines

The Bill proposes that the CCI may publish non-binding
guidelines with respect to the various provisions of the
Competition Act (or the rules and regulations made thereunder)
either on a request made by a person, or on its own motion.

The CCI will also publish guidelines on the appropriate amount
of any penalty for contravention of provisions of the Competition
Act.

Appeals

The Bill requires a mandatory deposit of 25% of the penalty for
filing an appeal with the Appellate Tribunal.

Other changes relating to provisions in respect of
notification and approval of combinations by the CCI

‘Turnover’

The Bill clarifies that the term ‘turnover’ will
include turnover certified by the statutory auditor of the relevant
enterprise, based on the last available audited accounts in the
financial year immediately preceding the financial year in which
the notification for approval is filed with the CCI, and shall
exclude the following: (i) intra-group sales, (ii) indirect
taxes, (iii) trade discounts, and (iv) all amounts generated
through assets or business from customers outside India.

Penalty for gun-jumping

Currently, the penalty for gun-jumping (i.e., penalty for
non-furnishing of information on combinations) may extend to one
percent of the total turnover or the assets,
whichever is higher of the relevant combination. The Bill proposes
that the penalty for gun-jumping may extend to one percent of the
total turnover or the assets or, value of the
transaction
, whichever is higher, of the relevant
combination.

Penalty for making a false statement or omission to
furnish material information
has been increased from INR 1
crore to INR 5 crore.

An order of the CCI declaring a combination as void ab
initio will be appealable to Appellate Tribunal.

Appearance of experts

The Bill proposes to clarify that a party may call upon experts
from the fields of economics, commerce, international trade or from
any other discipline to provide an expert opinion in connection
with any matter related to a case.

Other changes relating to Anti-Competitive Agreements and
Abuse of Dominance

Timelines for filing a complaint with the
CCI

Currently, the Competition Act does not prescribe a timeline for
filing a complaint with the CCI.

The Bill proposes that complaints shall be required to be filed
within three (3) years from the date on which the cause of action
has arisen. A delay in filing a complaint or a reference may be
condoned: (i) if the CCI is satisfied that there was
‘sufficient cause’ for not filing the information or
the reference within such period; and (ii) after the CCI has
recorded reasons for condoning the delay in filing.

‘Active participation’ in anti-competitive
agreements

Currently, Section 3(3) of the Competition Act prohibits
anti-competitive agreements between enterprises engaged in
identical or similar trade of goods or provision of services
(i.e., competitors) which determines purchase or sales
prices, limits or controls production, supply, markets, etc.

The Bill proposes to widen the scope of the Competition Act to
include ‘active participants’ to such anti-competitive
agreement (even if such persons are not competitors of other
parties). This amendment is proposed to cover ‘hub and
spoke’ cartels, where the hub (i.e., the organiser or
facilitator) communicates with one or more spokes (i.e.,
competing enterprises) and causes sharing of information between
competitors.

Section 3(4) of the Competition Act to cover ‘any
other agreement’

This amendment is aimed at bringing agreements which may not fit
within the categorization of either a horizontal or a vertical
agreement, under the purview of section 3(4) of the Competition
Act. This could be relevant in the context of digital markets which
may include linkages and arrangements that may not fit strictly
into the existing classification of agreements envisaged under
section 3(4) of the Competition Act.

Officers and employees of the party under
investigation

The Bill proposes that all officers, employees, and agents of a
party which are under investigation shall have a duty to:

  1. preserve and produce all information, books, papers, other
    documents, and records of, or relating to, the party which are in
    their custody or power to the DG; and

  2. provide all assistance in connection with the investigation to
    the DG.

The Bill also proposes that the DG may examine, on oath, any
officer, employee or agent of the party being investigated, in
relation to its affairs, with the previous approval of the CCI.

The term ‘agent’ is defined in relation to any
person, as “any one acting or purporting to act for or on
behalf of such person, and includes the bankers and legal advisers
of, and persons employed as auditors by, such
person
.”

Specific provision to withdraw leniency
applications

The Bill proposes to permit a party to withdraw an application
for lesser penalty or leniency in the manner and within such time
as may be specified by the regulations issued by the CCI. However,
the DG and the CCI shall be entitled to use any evidence submitted
by such party in its application for lesser penalty, except for the
concerned party’s admission of the violation of the
provisions of the Competition Act.

Conclusion

Given that the monsoon session of the Parliament has been
adjourned, the Bill is now expected to be taken up for
consideration in the winter session of the Parliament.

The Bill introduces certain new concepts into the field of
Indian competition law, including Deal Value Thresholds, the
changes to the definition of ‘control’, and mechanisms
to settle certain violations of the Competition Act. It also
provides for practical and much-needed updates to the Indian
competition law regime, including relaxations for implementation of
stock exchange purchases, proposed publication of guidelines for
fines, and reduction of timeframes for CCI’s approval.

To increase the ease of doing business in India within the
regulatory framework of the Competition Act, the CCI will need to
provide timely guidance on the various concepts introduced in the
Bill, and work together with all stakeholders to implement it.

This insight/article is intended only as a general
discussion of issues and is not intended for any solicitation of
work. It should not be regarded as legal advice and no legal or
business decision should be based on its content.



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