Changes in CCI Law

In a historic and speedy development, the Competition Amendment Bill, 2023 has been passed by both houses of Parliament.

This is the first amendment in the Competition Law regime in India after its enforcement in 2009. These changes are expected to increase the #easeofdoingbusiness, reduce timelines, bring in closer oversight on digital companies and combinations.

1. Deal value threshold in M&A: Currently, combinations are evaluated based on the thresholds of assets & turnover. However, acquisition of asset-light and low-turnover entities for high deal value, with an eye on data, technology & future potential. For eg, in digital space, with relatively insignificant assets and turnover, which would not be captured under the existing provisions. In a digital economy, most #acquisitions take place for data or business innovations. The Bill proposes to evaluate such deals based on the value of transactions. Accordingly, now the additional criteria of deal value would bring transactions exceeding Rs 2,000 crore under the CCI purview even if the conventional asset and turnover thresholds are not met, if the target entity has a substantial business operation in India.
2. Settlement and Commitment: The Bill provides a framework for settlement & commitment for faster resolution of investigations of #anticompetitive agreements and abuse of #dominant position. This will save time and energy of the parties as also of the CCI, and help bring speedy market corrections. Commitments can be offered at any time after an investigation has been initiated but before the investigation report is issued. Settlements can be offered after the investigation report is issued but before the CCI makes its final decision. It will allow companies, including #bigtech to provide commitments to CCI to settle a case, and initiate settlements under the regulations.
3. Leniency plus: A leniency-plus framework being introduced to incentivise any party in a cartel investigation to provide information on other existing cartels for an additional lighter penalty.
4. Penalties on global turnover: The Competition Act empowers the CCI to impose monetary #penalties on firms engaging in #anticompetitive practices. This is usually based on the company's turnover, and in the case of cartels, additionally on company’s profits. There was no clarity regarding the scope of turnover. The new amendment clarifies and expands its scope to include ‘global turnover’. This can, nevertheless, significantly increase the liability of parties, especially of big-tech and #mncs. While this may look punitive, it is relevant that CCI assesses it as a percentage of the turnover, based on the circumstances of the case, and mitigating and attenuating factors etc. This is a deterrent for such companies to stay within law.
5. Reduction of timeline for assessment of combinations: To facilitate faster approval of combinations, the bill seeks to reduce procedural timelines. The new amendment reduces the overall time available for approval from 210 days to 150 days. In addition, prima facia opinion has to be framed within 30 days from the date of receipt of notice, failing which the combination shall be deemed approved. CCI has already introduced the ‘green channel’ route for straightforward cases.
6. Exemption from standstill obligations: Combinations would be exempt from standstill obligations to enable sensitive stock market purchases, subject to the final decision in the concerned matter. Also, the penalty for furnishing false information goes up from Rs 1 crore to Rs 5 crore.
7. Enhanced powers of DG: The powers of the Director General would be expanded with no need for permission from the Chief Metropolitan Magistrate for dawn raids. In addition, he would have powers to keep documents up to 360 days and also to summon ‘agents’ of the companies including CA, CS and legal professionals.
8. Hub and spoke: The scope of anti-competitive agreements is being increased to include ‘hub and spoke’ agreements other than horizontal and vertical agreements which are anti-competitive in nature. It is hoped that the new changes, along with the regulations in due course, will attune the Competition Law regime with global trends, making the enforcement effective and decisions speedier for faster corrections in the market.
9. Defining control: Control in the target company is an important factor that affects CCI’s decision while reviewing a case. However, there was no clarity on what would constitute ‘control’. It has now been spelt out that ‘material influence’ would determine the extent of control.