Lok Sabha Passes Competition Amendment Bill: Here Are The Top Five Changes
The Lok Sabha passed Competition (Amendment) Bill, 2023 with 13 amendments.
The Lok Sabha on Wednesday passed the Competition (Amendment) Bill, 2023, which seeks to amend the Competition Act, 2002.
This includes several key amendments to the existing framework, such as an expansion of the scope of cartel prosecution, the introduction of a deal value threshold for mergers and combination, and the modification of ‘turnover’ to mean global turnover, among others.
The Bill was brought up in the lower house of parliament in August last year. It was later referred to a parliamentary committee, which suggested significant modifications to the proposed amendment.
Upon consideration of the suggestions, the Ministry of Corporate Affairs proposed various additional amendments to the Act, which was taken up for consideration on Wednesday.
Here are some of the key changes to the Act:
Introduction Of Deal Value Threshold
The amendments propose to introduce a deal value threshold as a condition to regulate mergers and combinations. This is in addition to the existing assets and turnover based thresholds for merger control.
According to the bill, entities are expected to seek approval from the Competition Commission if the deal value exceeds Rs 2000 crore and if both companies (acquiring and the target) have substantial business operations in the country.
Tweaks were later made to this proposed amendment, limiting substantial operation requirement only to the target entity, on recommendations made by the parliamentary panel. According to the committee, the proposed amendment lacked clarity and was capable of bringing transactions with no anti-competitive effects under CCI’s radar.
Material Influence As The Basis of Control
Control in the target company is an important consideration that affects CCI’s approval. The government has now spelled out ‘material influence’ as the basis for control in the latest amendment to the Competition Act.
The amendment was brought on the recommendations of the Competition Law Review Committee, which suggested material influence as an adequate basis of control. Prior to the amendment, CCI relied on various standards, from decisive control to material influence, in determining control. The present amendment puts the practice into words.
Introduction Of Settlement Mechanism
In an effort to reduce litigation and allow easier resolution of disputes, a settlement mechanism is now being introduced under the Act. This, however, would only be available in cases of abuse of dominance and in cases of anti-competitive agreements between parties in the supply chain.
Cartels wouldn’t be able to avail settlement despite recommendations made by the parliamentary committee. According to the committee, cartels should be allowed to take part in the settlement mechanism, as all of them are not necessarily anti-competitive.
Global Turnover As Basis For Penalty
The Competition Act empowers the Competition Commission to impose monetary penalties on companies engaging in anti-competitive practices. This is usually based on the company's turnover. However, there was no clarity in the Act as to the scope of turnover, whether it refers to the ‘relevant turnover’ or the total turnover.
The apex court in 2017 cleared the air around it in the case of Excel Crop Care Ltd., by limiting it to the relevant turnover. The present amendment clarifies and expands its scope to include global turnover. This can significantly increase the liability of parties on the occasion of infringement.
Reduction In Procedural Timelines
In order to facilitate faster approval of mergers, the bill seeks to reduce various procedural timelines for merger approval. Currently, mergers and combinations that fall within the threshold stipulated by the Act cannot be undertaken without an approval from the commission.
The present amendment reduces the overall time available for approval from 210 days to 150 days. The time for first phase approval of the merger is also reduced from 30 working days to 30 calendar days.
In an earlier version of the amendment, the government proposed to reduce this timeline to 20 days, which was later modified on the recommendations of the parliamentary committee. The committee had expressed its concerns about the burden that reduced timelines might have on the commission.