Introduction of Competition (Amendment) Bill, 2020: A step towards revamping Indian Market

Introduction

Post liberalisation in 1991, Indian economic policies had to undergo drastic changes to adapt to the global practices and national agenda. In 2002, the Competition Act[1] was enacted to replace the Monopolies and Restrictive Trade Practices Act, 1969[2], as it was considered insufficient to control anti-competition practises and nurture competition. The Competition Act, focused mainly on abuse of dominance, anti-competition agreements, competition advocacy and regulation of combinations. The Act had been implanted with efficiency, however, with the change in the market trends a need was felt to further analyse the Act in light of the current situations. The Government therefore constituted the Competition Law Review Committee in 2018[3], to study the current market trends and examine whether the Competition Act is in sync with the market practises. The Committee’s mandate was: to suggest any changes in the current regime taking into account the market trends, best international practises, other governmental policies and regulatory mechanisms which overlap the Competition Act, and any other related competition issues. The Competition (Amendment) Bill, 2020 [4] was then drafted based on the recommendations of the Committee.

The Bill aims to bring major changes to the current system. The key takeaways can be classified in the following categories.

Structural Changes 

Taking into account the Supreme Court’s decision in Brahm Dutt v. Union of India[5] and the Delhi High Court’s decision in Mahindra Electric Mobility Ltd.  v. CCI[6], the Committee acknowledged that the functions performed by the Competition Commission of India (CCI) is multifarious and therefore to establish a regulatory body in lines with other regulatory bodies in the country, the Bill introduced the establishment of a governing body[7], consisting of part time members and ex officio members. The objective behind the introduction of governing body is twofold, firstly to reduce the burden on the CCI, as the governing body will be responsible to carry out all the quasi-legislative function and policy decision, and secondly with the introduction of part time members and ex officio members, will bring in external perspective and will strengthen the democratic legitimacy and accountability of the CCI.

The Bill aims to merge the office of Director General (DG) constituted under Section 16 of the Competition Act, as an investigation branch of the CCI. Earlier the DG was not answerable to the CCI, but to the Central Government, however this classification was merely de jure. The Committee while recommending such change took into accounted practices adopted by European Union, China, United States and Brazil, and the Supreme Court’s decision in CCI v. Steel Authority of India Ltd.[8]

Changes in the functioning of the CCI

The Bill introduces provisions recognising the settlement or consent orders, in case of antitrust proceedings. The Bill proposes the introduction of certain provision which permit an investigated party to offer a settlement[9] or voluntary undertake certain commitments[10] in relation to an anti-competitive vertical agreement or abuse of dominance proceeding. The Bill under these provisions envision the mechanism to be adopted to permit such settlement or commitment mechanism. The objective of adoption of such orders was to enable the CCI resolve antitrust cases faster, which would in turn help the businesses to avoid long investigation procedure and uncertainty. This procedural change is a sign of relief to the corporate field.

Changes in provisions relating to combinations

The definition of control under the Act had not defined the minimum standards required to establish such control, therefore the CCI had used the yardstick of the ability to exercise ‘decisive influence’ and ‘material influence’. The Bill proposes to statutorily recognise the standards of ‘material influence’[11]. The introduction of such standards serves twin purpose, firstly, it would bring certainty and consistency in the decisions and secondly, it will ensure that a larger number of transactions are scrutinised while an investment friendly economy is maintained.

The Bill introduces many changes with regards to the regulations of combinations. Some of these are, the principal act prescribed certain specific grounds which would constitute combination and the parties involved in such a transaction would be under an obligation to notify CCI before the execution of any such agreement. The Bill introduces the power of the central government in consultation with CCI to identify any other ground which would constitute combination[12], further the Bill also states that the power would also include the power to delist any ground which would otherwise constitute combination[13]. It is a welcome change as it increase the jurisdictional threshold of CCI, such an amendment would help include a number of digital transactions which were currently out of the scope of scrutiny of CCI, as it did not had any residuary power under the act. 

The Bill purposes to statutorily recognise the Green Channel Process. The rationale behind introduction of such process is to enable fast-paced regulatory approvals for vast majority of mergers and acquisition that may have no major concerns regarding appreciable adverse effects on competition. The aim is to move towards disclosure based regime with strict consequences for not providing accurate or complete information. The power of green channel will also extend to approve resolutions arrived at in an insolvency resolution process under the Insolvency and Bankruptcy Code. Further to ensure time bound assessment of combination a mandatory 30days timeline is also included in the act[14]. The Bill also reduces the time within which the CCI has to issue its preliminary opinion on whether a combination would cause adverse effect on competition, from thirty working days to twenty calendar days[15]. Such timelines would help ease the burden on the parties involved in the transactions.

Inclusion of Technology and New Age Markets

The Bill purposes to expand the scope of the act to include within its scope the digital markets, in order to achieve the said goal the Bill makes a numbers of changes in the existing system. Some of the changes are, express inclusion of hub and spoke arrangement[16], and buyer’s cartel.  The Committee recognised the tactics used by the companies to escape scrutiny under the act and also took into account the orders issued by the CCI in  Hyundai Motors case[17] and Uber case[18], and recommended that the element of ‘knowledge’ or ‘intention’ should not be considered under such agreements.

The Bill seeks to widen the scope of section 3, the principal act restricted the scope of section to horizontal or vertical agreement leading to adverse effect on competition. The Bill intents to include other agreements too, taking into account the decision in Ramakant Kini v. Dr. L.H. Hiranandani Hospital[19] and to expand the scope of the provision to include agreement entered in the digital market. The Bills expressly includes the ‘control over data’ or ‘specialised assets’ under the list of conditions which constitute dominance of a company in the market[20]. The rationale behind such inclusion was to expand the scope of the section to online businesses collecting customer data through user feedback loops, which would have the company have a more targeted approach. 

Changes in the Enforcement Functions

The principal Act did not grant any punitive powers to the DG or the CCI, therefore the institution was toothless in case of noncompliance of the orders. The Bill intends to introduce wide range of powers to the DG as well as the CCI. The Bill introduces provision[21] under which any person who (a) fails to produce any documents, information or record, (b) did not appear before the DG or fail to answer any question by the DG, (c) or sign the note of cross-examination, shall be punishable with imprisonment of term extending up to six months or fine up to one crore rupees. The Bill introduces the maximum cap of penalty as the 10% of income of the individual in the preceding three years, in case of formation of cartels[22].

The Bill intends to adopt practises prevailing in countries like UK, US, Singapore and Brazil, where the cartel under investigation has disclosed some relevant information of some other existing cartel will be liable to lesser punishment[23]. The power to compound offences is introduced in the Bill[24].

Shortcomings in the proposed amendment

  1. The Committee recommended that the governing body should only have the power to perform quasi-legislative functions and policy decision and not the adjudicatory functions, however the Bill does not clearly demarcates such powers. Further the Bill is silent on the procedure of election of the part time member and ex officio members, which raises serious concerns of independence of such members.
  2. The Committee while recommending the adoption of the integrated agency model did not take into account the impact it would have on the system of check and balance established by separating the investigative and adjudicatory branches of an organisation. Such merger is against the principle enunciated by the Supreme Court in Excel Crop Care Ltd. v. CCI[25], wherein the Court accorded greater independence to the office of the DG. The Court held that although the base for any investigation is the allegation made in a complaint, however if any new facts are revealed the office of DG is empowered to include such facts in its report. Furthermore the Bill does not take into account protective measures suggested by the Committee in order to maintain the due process, such as the DG in order to maintain functional autonomy, should directly report to the Chairperson of CCI, the parties should have adequate right to representation and examine evidence, and there should be strong appellate forum. 
  3. The Bill is silent on a number of aspects of the settlement or commitment order, such as whether such order would have a precedential value i.e. whether such an order would have to be taken into account while deciding similar pending cases and whether the right to compensation would survive such order.
  4. The Bill merely introduces the concept of compounding of offences by the NCLAT, but it does not provide for the procedure to be adopted by the NCLAT. Furthermore, the Committee recommended that a Bench of NCLAT should be dedicated to hear appeals under the Act, however the recommendation was not incorporated under the Act. Such an action would have an adverse impact on the effective implementation of the Act. Since COMPAT established under the Act is scrapped, the rate of disposal of appeals have decreased considerably. And if the recommendation is not incorporated in the Act, it will hamper the national initiatives like Make in India. 
  5. The power to review which was initially granted to the CCI, was repealed by the 2007 amendment. However later in Google Inc. v. CCI[26] the Court held that such power of review is inherent in nature. While there have been other contrary judgements, the Committee should have recommended the introduction of the power to review, however no such recommendation was made.

Conclusion

The introduction of the amendment Bill is a welcome step, as the country is at a very critical juncture where it is imperative for the Government to properly assess each recommendation before implementing the same. The Government in order to reap maximum benefit of the huge market, it must maintain a balance between robust administration and market friendly regime. The Bill is currently open for suggestion by the interested stakeholders, but a brief analysis of the proposed amendment reveals that the Government is motivated to implement a regime where the interest of all the stakeholders are taken into account. 


*4th year student, MNLU Nagpur. The author can be contacted at jhs.shivamtripathi@gmail.com

[1] Competition Act, 2002

[2] Monopolies and Restrictive Trade Practices Act, 1969

[3] Government of India, MCA, ‘Government constitutes Competition Law Review Committee to review the Competition Act’ (30 September 2018) <https://pib.gov.in/newsite/PrintRelease.aspx?relid=183835> accessed on 11 March 2020.

[4] Draft Competition (Amendment) Act, 2002 <http://feedapp.mca.gov.in/pdf/Draft-Competition-Amendment-Bill-2020.pdf> accessed on 09 March 2020.

[5](2005) 2 SCC 431

[6] (2019) SCC Online Del 8032

[7] Under Section 8

[8] (2010) 10 SCC 744, para 8. 

[9] Under Section 48-A

[10] Under Section 48-B.

[11] Under Explanation of clause (a), Section 5. 

[12] Under proviso to Section 5.

[13] Under second proviso to Section 5.

[14] Under Section 6(2).

[15] Under Section 29(1-A).

[16] Under Section 3(3).

[17] Fx Enterprise Solutions India Pvt. Ltd. v. Hyundai Motor India Ltd., 2017 SCC OnLine CCI 26 

[18] Samir Agrawal v. ANI Technologies Pvt. Ltd., 2018 SCC OnLine CCI 86 

[19] Ramakant Kini v. Dr. L.H. Hiranandani Hospital, 2014 SCC OnLine CCI 17  

[20] Under Section 19(4)

[21] Under Section 41(8).

[22] Under Sections 27 and 48.

[23] Under Section 46(3).

[24] Under Section 59-A

[25] (2017) 8 SCC 47

[26] 2015 SCC Online Del 8992

3 comments

  • Hiiii I want to take part in act competition ..so plz inform me if something is that..

  • Hiiii

  • The Bills does not include the ‘control over data’ or ‘specialised assets’ under the list of conditions which constitute dominance of a company in the market. The CLRC report said section 19(4) already has an all inclusive scope.

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