Introduction: Setting the stage for the Competition (Amendment) Act, 2023
The Competition Act of 20021 was laid to curb abuse of dominance/monopoly which the Monopolies and Restrictive Trade Practices Act, 19692 (MRTP Act) failed to do, in order to sustain healthy competition in the Indian market. The prime aim of the Act was to restrict any person or enterprise from entering such combinations or arrangements which have an appreciable adverse effect on competition (AAEC) or abuse their dominant position in the relevant market.
With the commencement of this Act, Indian market has grown exponentially. There has been an up thrust in the operation of businesses and companies based on internet and technological advancement have been set up. Observing such developments, the Ministry of Corporate Affairs (MCA) in the year 2018, constituted the Competition Law Review Committee (CLRC) to check the implementation of the Act and coherence with India’s ever-growing economic fundamentals. In 2019, certain lacunae were found in the existing framework and therefore several changes were recommended for structured dealing of the market competition.
Further in the year 2022, MCA came up with certain amendments to be made to the Competition Act and the same was referred to the Joint Parliamentary Standing Committee (Standing Committee) for a detailed review and consultation with various stakeholders. MCA, on the suggestions made by the Standing Committee, brought certain additional amendments and the draft was put forth Parliament on 8-2-2023.
Furthermore, after taking the report into account, Lok Sabha passed the Competition (Amendment) Bill, 20233 on 29-3-2023, and the Rajya Sabha without discussion, passed it on 3-4-2023, to amend the two-decade long Competition Act of 2002.
History: Evolution of competition law in India
The Monopolies and Restrictive Trade Practices Act (MRTP) of 1969 marked the beginnings of competition law in India, with the intention of preventing monopolistic practices and promoting fair competition in the Indian market. However, it became clear over time that the MRTP was insufficient to address the changing economic landscape of India.
In 1999, the Indian Government established a high-level committee to recommend a modern competition legislation in line with global trends. The Committee reviewed various competition laws from around the world to identify characteristics that would be relevant to India’s contemporary environment.
The Raghavan Committee submitted their findings to the Government in May 20004, leading to the enactment of the Competition Act in 2002. The Act aimed to promote fair competition and protect consumers from anti-competitive practices, establishing the Competition Commission of India (CCI) to enforce its provisions.
Since its enactment, there have been several amendments made to the Competition Act, including provisions for mergers and acquisitions in 20075 and increased penalties for anti-competitive behaviour in 2009.6 In 2023, another amendment Bill is passed by both the Houses of Parliament, which aims to strengthen enforcement mechanisms and increase penalties for non-compliance with CCI orders.
The proposed Competition (Amendment) Bill, 2023 seeks to revise India’s current competition law in response to instances of anti-competitive conduct by major corporations, particularly in the technology industry. These instances include high-profile cases involving Google’s legal battle with the Competition Commission of India (CCI) and Amazon’s alleged anti-competitive behaviour in India. The proposed legislation was prompted by the Facebook-WhatsApp acquisition, which raised concerns about data privacy and competition in the messaging app market:
(a) Google was fined US$ 21 million by the CCI in 20187 for abusing its dominant position in online search advertising, a decision that was upheld by the Competition Appellate Tribunal in 2020. This case illustrates how powerful corporations can use their market power to limit competition and harm consumers. Data being considered more vital than the monetary value of an entity, tech giants like Google enjoy the opportunity for acquiring firms significant in the data processing realm but lacking in turnover generation. Introducing “deal value threshold” under the proposed amendment would bring these instances under the purview of CCI. Furthermore, expansion of penalty provisions through the current amendment, larger penalties would be imposed over the “global turnover” of enterprises. Such terms could allow CCI to impose greater penalties similar to the European Union, where Google had to incur a fine of over 4 billion USD.
(b) Similarly, Amazon was accused of engaging in predatory pricing and providing preferential treatment for certain sellers on its platform8, which led to an investigation by the CCI and a finding that Amazon had violated competition law.
(c) Finally, the Facebook-WhatsApp acquisition9 also raised concerns about data privacy and competition in the messaging app market, and the CCI found that the acquisition had reduced competitive constraints in the market. However, due to threshold constraints, the Commission could not investigate the issue even though around 130 million users were affected. Acquisitions of such sorts are per se beyond the scope of the CCI as the target company is small enough to escape the Competition Act thresholds. Considering transactional value under the proposed amendment became crucial for expanding the investigative scope of the CCI.
The Competition (Amendment) Bill, 2023 is also modelled after similar laws in other countries, such as Europe’s Digital Markets Act and Australia’s recent legislation requiring tech giants to pay news publishers for their content. If passed, this Bill could significantly impact the operations of large corporations in India and create a more equitable playing field for all businesses.
Key features of the recent Amendment: What’s new and why it matters
The highlights of the 2023 Bill are as follows:
(a) The provision of “deal value threshold” has to be added in Section 510 of the principal Act, which states that any deal that has a value of more than Rs 2000 crores (approximately USD 242 million) needs to get an approval of Competition Commission of India (CCI) before heading towards the combination. Also, the outer time frame for the CCI to pass orders has been decreased from 210 days11 to 150 days.
(b) The proposed Bill has modified the definition of “control” given in Section 512, and defined it as “the ability to exercise material influence over the management, affairs, or strategic commercial decisions”.
(c) The Bill extends the Director General’s powers to investigate defilements under the Act.13 This includes the DG’s power to seek information and papers from legal advisors appointed by the parties. This may be in conflict with the restrictions of lawyer-client confidentiality included in Section 126 of the Evidence Act of 1872.14
(d) The provision for “settlement and commitment” has been modified. As per Section 48-A15 introduced in the Competition (Amendment) Bill, 2023, if a party offers settlement (includes monetary compensation) or commitment (includes both behavioural and structural conduct) then the CCI is authorised to close the proceeding against them as specified under this Bill. Additionally, a regulation can also be brought by CCI in order to explain the manner and implementation of this framework.
(e) The Bill of 2023 proposes to recognise “hub and spoke” arrangement in Section 3(3)16 of the Competition Act, 2002, which means that the parties who are not actively involved in cartel formation but merely intend to participate in its furtherance can also be penalised for such formation, as they act as a “hub” and facilitate/coordinate the cartelisation amongst competitors.
(f) The Bill further widens the ambit of “relevant market” as defined in Section 19 of the principal Act17 by expanding its definition and including the production of services or goods as substitutable by suppliers.
(g) Additionally, the Bill also brought change in the nature of punishment of certain offences including failing to comply with CCI orders on entering into anti-competitive agreements and abusing its dominant position, from fine to penalty.
Comparison and analysis: Old law versus new law and leading examples
Criteria for regulating transactions by their size
The erstwhile law of the Competition Act of 2002 prevents any person, enterprise, or group from “entering a combination which may cause an ‘appreciable adverse effect’ on competition”.18 This framework consists of “threshold” limits19 as to the value of assets and turnovers of the parties, which when crossed; trigger the competition law mechanism. This included “gross assets of more than Rs 1000 crores, or gross turnover of more than Rs 3000 crores”20, amongst others. The 2023 Bill expands such scope, engulfing not just the value of the parties in question, but the transactional value in isolation as well, which is fixed at Rs 2000 crores as the trigger. This directs at the consideration a party is willing to pay for acquiring the target and covers the big tech deals, where the target may not have a large asset base21, generating insignificant revenue, but is valued based on data or innovation.22
The perplexity that whether the target or the acquirer was required to have “substantial business operations” in India was done away with by clearing the ambiguity in the final Bill, that the target is required to have such business operations in India, irrespective of the purchaser’s existence.
Duration for sanctioning combinations
As per the earlier legislation a total of 210 days were granted to CCI to pass an order regarding the combination.23 However, the Bill condenses this time-limit to 150 days, after which, if no decision is taken on the part of CCI, the combination would be deemed approved.
This transformation includes the lessening of the 30-day limit to form prima facie opinion24 to a 20-day limit, from application.
Decreasing the waiting period for approval, this would put undue burden25 on the CCI but considering the Commission’s vast experience in resolving complex competition transactions within sensible time periods enables expeditious and more reliable decisions on matters enhancing business confidence.
Notification before consummation of the combination
Businesses were required to intimate the CCI about the anticipated deal within the time-limit of 30 days of the amalgamation, merger, or agreement’s execution. This amendment would do away with such a timeline and will be determined based on case-to-case circumstances. Flexibility is promoted by this decision for the process of intimation by the parties, which would be done now before consuming the combination deal.
Concept of “control” and its implications for categorising business combinations
“Control” is defined as having control over the management/affairs over an enterprise or group.26 This classifies businesses into a range of enterprises exercising control over other enterprises.
The Bill modifies such description, while making it more precise and specific, as the ability to exercise material influence and impact over the strategic and important commercial decisions of the enterprise, inclusive of its management and crucial affairs. Such a step puts forward greater clarity and lucidity for scrutinising transactions.
Section 3 of the earlier framework states “anti-competitive agreements”27 involving horizontal agreements28 i.e. between enterprises indulged in similar or identical business activities and vertical agreements29 i.e. between parties at diverse stages or levels of the same production chain.
The current Bill adds non-competitor and non-market participant enterprises engaged in dissimilar or different business activities, not actively involved in cartel activities, while merely “intending to participate” or actively co-ordinating in the furtherance of such deals which are rendered as causing AAEC. Such agreements are regulated more effectively when entities that are not directly involved also take part.
Internationally recognised “hub & spoke” arrangements are brought under the umbrella of CCI and this inclusion strengthens the regulation while broadening the scope of CCI’s powers to inquire.
Commitment and settlement in anti-competitive proceedings
Following several provisions like Section 3 (anti-competitive agreements), Section 430 (abuse of dominance), Section 19 (inquiry), etc. the Competition Commission is empowered to initiate inquiry proceedings31 on contravention of such provisions. Further, the present amendment brings in the options of:
(i) settlement, referring to an agreement between the CCI and a party under investigation to terminate proceedings upon payment of a settlement amount by the party; and
(ii) commitment, involving an undertaking given by a party under investigation to modify its conduct or take certain actions to eliminate any concerns raised by the CCI regarding its conduct.
Following which, the CCI may close the inquiry proceedings. What this means for the industry is that the proceedings for dealing with unfair market practices being fast-tracked can be concluded more quickly, encouraging faster resolution and that businesses are motivated to comply with the rules on their ow, promoting a self-regulating phenomenon.
Certain offences being decriminalised
The current mechanism modifies deterring punishment capabilities of the CCI.32 The initially imposed fine is transformed into civil penalty provisions. Under its umbrella, some offences including non-compliance with the CCI’s decisions and Director General’s directions with respect to anti-competitive agreements and dominance abuse also fall. Previously, failure to comply with such orders brought upon a fine extended to Rs 1,00,000 for each day during which this non-compliance continues, subject to a maximum of Rs 1 crore, as settled by the CCI. The proposed change lessens the load on the judicial system and offers a punishment that is more appropriate in relation to specific offences while being proportionate to the contravention.
Under the competition regime, CCI is empowered to impose not more than 10% penalty on the average turnover for the preceding 3 financial years of the party under contravention.33 The Supreme Court cleared the air on this34, by declaring turnover to be “relevant turnover” for imposition of penalty, and not a generally total one. This directs imposition of penalty on that portion of the turnover, which is directly related to the anti-competitive conduct.
The current Bill inculcates “global turnover” into this definition35 and allows CCI to impose fine on all the products and services sold by an enterprise. Overcoming the Supreme Court’s restrictive decision towards anti-trust penalties, this could result in increased penal fines for multi-product global businesses and may prove debatable, while also enhancing the deterrent effect of law. For, business moguls and conglomerates, infringement even via small enterprise divisions, would affect in massive penalty coverage.
The thought of payment of a substantial portion of the company’s turnover i.e. 10% of all its products and services sold, would generate a sense of accountability and the consequence of actions idea in the commercial minds of the promoters and directors involved, resulting in lesser confidence in such anti-competitive conducts.
The Bill widens “relevant product market” to include products and services interchangeable by not only the consumer but the supplier as well, and also recognises buyer cartels. This inculcates the supplier’s perspective as well and is more comprehensive than the previous descriptive constraints.
Director General & Members of CCI
Appointment of Director General (DG) is now given in the hands of CCI, but that too should be made in accordance with the approval of the Central Government. Previously, this power was given only in the hands of the Central Government to appoint the DG. This move here does not bring much change in the scenario as a matter of fact, even though the power and right to appoint the Director General has shifted from the Central Government to the CCI, such an appointment cannot take place without prior approval of the Centre.
Furthermore, according to the Act, individuals serving as the chairperson or members of the CCI are required to possess professional expertise of a minimum of 15 years in specific fields, namely, economics, business, management, law, or competition-related issues. The proposed Bill seeks to augment this criterion by including experience in the realm of technology.
Significant issues and recommendations
Conflict between the Director General’s powers and the rules of evidence in India
Powers of the Director General of CCI36 are extended to receiving cooperation by all employees, officers, and agents of a party under scrutiny, who would provide all data and information with respect to the party involved. The term “agents” here, includes legal advisors, bankers, etc. which in turn is incoherent with the provisions of the Evidence Act, 1872.37 Section 126 specifically lays down that no pleader, lawyer, attorney, etc., should disclose any information without client’s consent, such information being professionally communicated.38 Such exemption is also provided under the Companies Act, 2013.39
However, the DG cannot examine the external legal advisors and only the ones employed by the enterprise itself i.e. the in-house counsel.
Mandatory deposit requirement for challenging the CCI’s orders
Many businesses utilise the review and appeal mechanisms in the Indian legal framework as “delaying tactics” to save themselves. Frivolous appeals to the NCLAT, High Courts and the Supreme Court, lead to a choke in the pipeline of fine imposition, where only 0.8% of the fine imposed from 2012-2018 (i.e. Rs 121 crores out of Rs 13,524 crores) was realised.40
Presently, only on payment of 25% of the amount imposed by CCI’s order or the amount decided by NCLAT, can a party file an appeal to the NCLAT. Such rule, even though hinders the review procedure, promotes abeyance to the CCI’s decisions while the appellate proceedings are undergoing. Similar procedure is also provided under the Consumer Protection Act, 201941 and the Income Tax Act, 1961.42
Inadequate consultation with the stakeholders
The Competition (Amendment) Bill, 2023 has undergone an inadequate consultation process and some provisions were brought upon the table only after it being passed by the Lok Sabha. No “concrete” discussions regarding policy took place before passage. Reportedly, the passage was amidst chaos and confusion, without actual deliberation.43 The antitrust law is here to sustain healthy competition and promote consumer interest, some very crucial parts of Indian economy. Due procedure and rules should be followed for the passage of such an important Act, and any other law for that matter. Any haste would prove detrimental.
IPR as a defence is not permissible in instances where there is abuse of dominance
The former mechanism allows for an exemption of intellectual property rights like patents, copyrights, designs, etc. in anti-competitive agreements44, but does not take into consideration the defence in abuse of dominance cases.
Even though the Competition Law Review Committee had provided for such recommendation encouraging exclusivity in creations, the Bill is silent on this, and the gap remains unaddressed.
Lack of inclusion of ideas
Several proposals with respect to competition advocacy and compulsory dialogue between sector regulators and competition authority were left unconsidered and overlooked.
Fostering a culture of research-driven competition for India’s digital economy
With the transformation of the competition realm worldwide, new challenges to fair competition have arisen, such as higher obstacles for new entrants, excessive dominance of a few firms, low pricing to drive out rivals, strong customer loyalty, positive feedback loops, biased platforms, and consumer irrationality. For India to stay ahead of the curve, it is important to foster a culture of competition that is driven by research and advocacy. Taking steps towards this goal would be beneficial in enhancing the Indian competition regime.
Conclusion: The future of competition law in India
The Competition (Amendment) Bill of 2023 is one of the most important pillars towards progressive growth and development of the antitrust landscape. This Bill has filled various gaps in the existing governance framework. The most surprising move has been considering “global turnover” as the base for calculating penalty.
However there still exist certain lacunas that need to be addressed like the collaborative mechanism for better implementation of the Bill; more clarification and advice is needed on “hub and spoke” arrangements; clarity on settlement provision; additionally, the pros and cons of the reduced timeline should be checked and balanced keeping in mind consumer benefit.
Furthermore, despite the potential benefits of competition, certain sectors such as coal mining have been under the monopolistic control of state-owned enterprises like Coal India, and other sectors that appear to be open have been unable to fully realise the advantages of competition due to significant government interference, particularly in the power sector. This situation persists because of the absence of a national competition policy (NCP). As a way forward, India requires a national competition policy like other countries such as Australia, Mexico, United Kingdom, Denmark, Italy, Turkey, Hong Kong, Malawi, and Botswana. In recent times, the Philippines has implemented NCP. On the other hand, in India, a preliminary version of NCP was prepared in November 2011, but it remains untouched in the records of the Ministry of Corporate Affairs. This is happening despite the NITI Aayog’s three-year agenda that proposed comprehensive competition policy reforms. The NCP of India ought to concentrate on advocating for impartial and open competition by prioritising competitive neutrality. By doing so, the aim is to create fair competition between all players involved.
The proposals aim to further enhance and sustain competition in markets, safeguard the interests of consumers, and ensure freedom of trade for market participants. The Competition (Amendment) Bill, 2023 is a positive stride towards ensuring a level playing field in the market, promoting equitable competition, and proving a progressive step towards an all-encompassing dynamic competition law framework.
†4th year student, BA LLB (Hons.), Rajiv Gandhi National University of Law, Patiala. Author can be reached at <email@example.com>.
††4th year student, BA LLB (Hons.), Rajiv Gandhi National University of Law, Patiala. Author can be reached at <firstname.lastname@example.org>.
9. Meta, Facebook to Acquire WhatsApp (2014) <https://investor.fb.com/investor-news/press-release-details/2014/Facebook-to-Acquire-WhatsApp/default.aspx> (assessed on 3-4-2023).
21. Meta, Facebook to Acquire WhatsApp (2014) <https://investor.fb.com/investor-news/press-release-details/2014/Facebook-to-Acquire-WhatsApp/default.aspx> (assessed on 3-4-2023).
43. Ravisekhar Nair, “Competition Act Amendment: CCI Gets More Enforcement Tools to Address Emerging Challenges”, Moneycontrol (3-4-2023) <https://www.moneycontrol.com/news/opinion/competition-act-amendment-cci-gets-more-enforcement-tools-to-address-emerging-challenges-10356241.html> (accessed on 5-4-2023).