Competition Law: Scope Of Cartels, DG Powers Among Key Provisions Notified By Government
Centre notifies clarificatory provisions of the Competition Amendment Act; withholds implementation of several key changes.
Inclusion of hub-and-spoke cartels, penalty quantum and enhanced powers of anti-trust regulator's investigation agency are some of the key provisions of the Competition Amendment Act that have been notified by the government.
The Competition Amendment Act, 2023, had received the Parliament and presidential assent last month. It had brought some major changes to the competition law, including the introduction of a deal value threshold for merger control, changes in the definition of material influence, a settlement mechanism for anti-competitive agreements, and a revision of the basis of penalties. However, the Ministry of Corporate Affairs is yet to notify any of these significant changes.
For now, effective May 18, the following provisions have come into effect:
Hub and Spoke Arrangements
Companies, which are not engaged in identical or similar business activities, can also be held liable for an anti-competitive horizontal agreement if they participate in facilitating such an agreement.
Such arrangements are implemented vertically through restrictions placed on suppliers or retailers, without any direct contract between similarly placed parties.
The definitions of anti-competitive agreements was amended to include such arrangements.
The limitation period to report any conduct barred under the Competition Act can now only be done within three years from the date of the cause of action.
However, the CCI is free to condone such a delay if there are sufficient reasons for it. Prior to the amendment, there were no restrictions on when the information could be filed.
From now on, the CCI can choose to not examine a complaint of an anti-competitive agreement or abuse of dominance, if it has already decided on it or substantially the same facts and issues in a previous order.
Although the provision in the Amendment Act that makes way for penalties to be calculated basis global turnover has not been notified, the ministry has notified some provisions in respect of penalties.
The maximum penalty for submitting false information and omitting to present material information can now go up to Rs 5 crore. This was increased from the existing penalty of Rs 1 crore.
Additionally, any challenge against the CCI's decision will require a 25% deposit of the penalty for the appeal to be entertained.
The Director General, CCI's investigative arm, can now investigate not just the parties in contravention of the Act but also their agents.
'Agents' here include bankers, legal advisors and auditors of such parties. The DG will also have the power to seize and search, if required, any information, basis an order of the Chief Metropolitan Magistrate. Provisions stipulating the manner in which these documents shall be handled has also been notified.
In order to enhance the transparency to the rule-making process, the notified provision will require the CCI to publish draft regulations for public consultation. It also requires the CCI to publish a general statement before the regulations are notified.
Prior to the amendment, there was no provision that mandated public consultation with respect to the regulatory process.