News Highlights:
- Rajya Sabha passed the Competition (Amendment) Bill amid disruptions without any debate.Â
- The Competition (Amendment) Bill 2022 amended The Competition Act of 2002.
Key Takeaway:
One of the major changes in the amended law is that it allows the Competition Commission of India (CCI) to penalise entities found engaging in anti-competitive behaviour based on their global turnover.
Competition Act, 2002
- About:
- The Parliament of India enacted the Competition Act 2002, which governs Indian competition law.
- It replaced the archaic Monopolies and Restrictive Trade Practices Act of 1969.
- Under this legislation, the Competition Commission of India(CCI) was established to prevent activities that have an adverse effect on competition in India. This act extends to the whole of India.
- The Competition Act of 2002 was amended by the Competition (Amendment) Act 2007 and again by the Competition (Amendment) Act 2009.
- Features of Competition Act 2002
- Anti-competitive agreements: The competition law prohibits any agreement between two or more enterprises or persons to maintain market competition and safeguard consumers’ interests within India. Such agreements can be vertical or horizontal. Vertical agreements are those agreements between enterprises at different stages of production, while horizontal agreements are those between enterprises at the same production level.
- Anti-abuse of dominance: Any enterprise will be punished if it abuses its dominant position.
- Anti cartels: If any agreement between enterprises or individuals hurts competition, it will be considered a criminal offence.
- Combination regulations: The Commission will decide on mergers and acquisitions only if it does not harm competition in the market.
- Informative nature of this act: To secure transparency and avoid misunderstandings between enterprises or individuals, an enterprise shall inform CCI regarding their dealings that are likely to affect competition in the market before taking such action or entering into such agreement.
Competition (Amendment) Bill, 2022:
- Highlights of the Bill:
- Regulation based on Merger and Acquisition: The Bill seeks to amend the Competition Act 2002 to regulate mergers and acquisitions based on the value of transactions. Deals over Rs 2,000 crore transaction value will require CCI’s approval. The Bill proposes to reduce the timeline for the CCI to pass an order on such transactions from 210 days to 150 days.
- Expansion of the scope of entities: The Bill expands the scope of entities that can be convicted as part of anti-competitive agreements. Currently, enterprises or persons engaged in similar businesses can be held as part of anti-competitive agreements. The Bill also expands this to include enterprises or persons not involved in similar businesses.
- Framework for settlement and commitment: The Bill provides a framework for settlement and commitment to faster resolution of investigations of anti-competitive agreements and abuse of dominant position.
- Decriminalises certain offences under the Act: The Bill decriminalises certain offences under the Act by changing the nature of punishment from the imposition of fines to civil penalties. These offences include failure to comply with orders of the CCI and directions of the Director General related to anti-competitive agreements and abuse of dominant position.
Key Features of the Competition (Amendment) 2022 Act:
- Transaction value:
- The Act prohibits any person or enterprise from entering into a combination which may cause an appreciable adverse effect on competition.
- Combinations imply mergers, acquisitions, or amalgamation of enterprises.
- The prohibition applies to transactions where parties involved have: cumulative assets of more than Rs 1,000 crore or cumulative turnover of more than Rs 3,000 crore, subject to certain other conditions.
- The Bill expands the definition of combinations to include transactions over Rs 2,000 crore.
- Approval time for combinations:
- The Act requires the CCI to pass an order on an application to approve combinations within 210 days.
- The Bill reduces this time limit to 150 days.
- Definition of control for classification of combinations:Â
- For classification of combinations, the Act defines control as control over the affairs or management by one or more enterprises over another enterprise or group.
- The Bill modifies the definition of control as the ability to exercise material influence over management, affairs, or strategic commercial decisions.
- Anti-competitive agreements:Â
- Under the Act, anti-competitive agreements include any agreement related to the production, supply, storage, or control of goods or services, which can cause an appreciable adverse effect on competition in India.
- Any agreement between enterprises or persons engaged in identical or similar businesses will adversely affect competition if it meets certain criteria.
- These include: Directly or indirectly determining purchase or sale prices, Controlling production, supply, markets, or provision of services, or Directly or indirectly leading to collusive bidding.
- The Bill adds that enterprises or persons not engaged in identical or similar businesses shall be presumed to be part of such agreements if they actively participate in the furtherance of such agreements.
- Anti-competitive proceedings:Â
- Under the Act, CCI may initiate proceedings against enterprises on the grounds of entering into anti-competitive agreements or abuse of dominant position.
- Abuse of a dominant position includes discriminatory conditions in purchasing or selling goods or services, restricting the production of goods or services, or indulging in practices leading to the denial of market access.
- The Bill permits CCI to close inquiry proceedings if the enterprise offers settlement (may involve payment) or commitments (may be structural or behavioural).
- CCI may specify the manner and implementation of the framework of settlement and commitment through regulations.
- Decriminalisation of certain offences:Â
- The Bill changes the nature of punishment for certain offences from the imposition of fines to penalty.
- These offences include failure to comply with orders of CCI and directions of the Director General about anti-competitive agreements and abuse of dominant position.
Pic Courtesy: Freepik
Content Source: The Hindu