Key Features of The Competition (Amendment) Bill, 2023

Key Features of The Competition (Amendment) Bill, 2023

The Rajya Sabha of the Indian Parliament has passed the Competition (Amendment) Bill, 2023, to amend the Competition Act, 2000.

The Bill seeks to amend the Competition Act, 2002, which gives the Competition Commission of India (CCI) its powers to prevent practices that harm competition and the interests of consumers.

The Bill was presented in the parliament in August 2022 and was referred to the Standing Committee on Finance for examination. The Committee presented its report in December 2022 and the Bill was represented in the parliament with few changes in February 2023. The lower house (Lok Sabha) of the parliament passed the Bill on 29 March.

Following are the key features envisaged in the bill:

1. Changes in Review of Combination by Competition Commission of India:

(a) Mergers and acquisitions exceeding Rs. 2000 crore in value must be notified and require approval by the CCI.

(b) The Bill reduces the overall time CCI has to approve merger and acquisition requests as well as the time companies have to respond to objections made by CCI. CCI needs to form its initial (prima facie) opinion in 30 days or else the combination is deemed to have been approved.

(c) The CCI, if it thinks that a combination is likely to harm competition, it will state the objections to the parties identifying the appreciable adverse effect on competition, and then, direct the parties to explain why such a combination should be allowed to take effect.

2. Broadening the scope of anti-competitive agreements (Section 3 of the Competition Act, 2000):

(a) Covering hub-and-spoke cartels: Entities who are not engaged in identical or similar trade, shall also be presumed to be part of an anti-competitive agreement under Section 3(3) if they participate or intend to participate in the furtherance of such agreement. This covers parties who facilitate anti-competitive horizontal agreements, even if they are not part of the agreement.

(b) Covering sellers: The phrase “exclusive supply agreement” has been replaced with “exclusive dealing agreement” to cover the selling side.

(c) Covering sales of goods and services: Anticompetitive conduct like “tie-in arrangement,” “refusal to deal,” “resale price maintenance,” and “exclusive distribution agreement” have all been redefined to cover goods and services.

(d) Covering indirection restrictions: The “resale price maintenance” definition has been redefined to cover “any direct or indirect restriction,” not just an agreement.

(e) Modification to AAEC factors: Under the factors used by CCI to determine whether an agreement has an appreciable adverse effect on competition (AAEC), the Bill modifies two factors: foreclosure of competition and accrual of benefits.

3. Changes to penalties:

(a) Penalty based on income or global turnover: The Bill allows CCI to pass orders in relation to anti-competitive agreements and the abuse of dominant position, by levying penalty that can be up to 10% of the average income or turnover for the last three preceding financial years. Additionally, the turnover will be the global turnover and not just the turnover in India.

(b) Penalty increased for misrepresentation of combination: In case any party makes a false statement or omits material information when seeking approval for a combination, a penalty of up to Rs. 5 crores shall be imposed by CCI.

(c) Liability for both the company and the people in charge: There is a liability for both the company and the people in charge, unless the contravention was committed without the person’s knowledge or if the person had exercised all due diligence to prevent the commission of such contravention.

(d) Power to impose a lesser penalty: There are more criteria under which a lesser penalty may or may not be imposed by CCI.

(e) CCI can recover legal cost: CCI can recover the legal costs or other losses in addition to penalties, which shall be credited to the Consolidated Fund of India.

4. Introduction of a new settlement’s framework and changes to how appeals work:

(a) Settlements and Commitments Framework: If entities are found to engage in anticompetitive agreements or abuse of dominance, they can propose a settlement for the alleged contraventions at any time after the Director General presents their report and before the CCI passes an antitrust order.

(b) Deposit before filing an appeal: The appellate tribunal will not entertain an appeal from any company unless the company deposits 25 percent of the amount of penalty imposed by CCI.

5. Changes in relevant market definition:

(a) Covering supply-side substitutability: The Bill modifies the “relevant product market” definition. The new definition considers two products as part of the same relevant market even if the production or supply of the two is regarded as interchangeable or substitutable by the supplier.

(b) Two more factors that CCI can consider for determining “relevant product market”: The Bill includes the following two factors to the existing list of six factors that CCI uses to identify “relevant product market”:

(i) costs associated with switching demand or supply to other goods or services;

(ii) categories of customers.

(c) Two more factors that CCI shall consider for “relevant geographic market”: Among other factors to determine the “relevant geographic market,” the following have been added:

(i) characteristics of goods or nature of services;

(ii) costs associated with switching supply or demand to other areas.

6. Limitation date on complaints:

The CCI will not entertain any complaint beyond the period of three years from the date of cause of action unless it is satisfied with the reasons given by the parties.