By Rupin Chopra and Apalka Bareja
On August 05, 2022, the Central Government introduced the Competition (Amendment) Bill, 2022 in Parliament. The 2022 Bill was sent to the Standing Committee on Finance for review because it proposed amendments in the Competition Act, 2022. Thereafter, the Committee invited comments from various stakeholders and proposed their suggestions in the 2022 Bill. In December 2022, the Standing committee submitted its report and the Bill was re-introduced with few amendments in February 2023. On March 29, 2023, the Lok Sabha passed the Bill. Followed by this, the Rajya Sabha passed the Competition (Amendment) Bill, 2023 on April 03, 2023.
Major Amendments to note about the Competition (Amendment) Bill, 2023
- Reduction of time limit for approval of combinations from 210 days to 150 days
|According to section 6(2A) of the Competition Act, 2002, “No combination shall come into effect until two hundred and ten days have passed from the day on which the notice has been given to the Commission or the Commission has passed orders under section 31, whichever is earlier.”
|The proposed amendment seeks to reduce the maximum time limit for approval of combinations from 210 days to 150 days. As a result, CCI would have a maximum of 150 days from the date of notice of the combination to approve the combination or to pass an order.
|The maximum time limit for the approval of combinations is expected to be significantly reduced by the proposed amendment. This would provide more speedy approvals for combinations for a fair and transparent competition process.
- CCI’s approval required for any Transaction value above Rs 2000 crore
|Section 5 of the Competition Act, 2002 deals with the Regulation of Combinations.
The proposed amendment bill, 2023 seeks to amend section 5 of the Act by inserting a new clause that increase the scope of the CCI’s regulatory authority over combinations.
|The proposed amendment states that the value of any transaction involving the acquisition of control, shares, voting rights, or assets of an enterprise, merger, or amalgamation that exceeds Rs. 2000 crore requires CCI approval.
Further, this provision would apply only if the enterprise being acquired, taken control of, merged or amalgamated has substantial business operations in India, as specified by the regulations.
|By requiring CCI’s approval for transactions that exceed Rs 2000 crore threshold, proposed amendment is likely to have substantial effect for large-scale mergers and acquisitions in India. Also, the amendment seeks to ensure that such transactions do not result in anti-competitive practices and promote fair competition in the market.
- Replacing earlier prescribed timeline of 30 days, intimation about combinations to be made before Consummation of the combination
|According to Section 6 of the Competition Act, 2002, “any person or enterprise, who or which proposes to enter into a combination, shall give notice to the Commission and the fees, disclosing the details of the proposed combination, within thirty days of approval of proposal relating to merger or amalgamation or execution of any agreement.”
|The proposed Competition (Amendment) Bill, 2023 seeks to amend section 6 of the Competition Act and replace the words ‘within 30 days’ with ‘after any of the following, but before consummation of the combination’.
The intimation shall be made after any of the following (i.e., approval of merger or amalgamation or execution of any agreement), but before consummation of the combination.
|Earlier, there was a standard timeline of 30 days. Now the same is proposed to be changed and will depend upon the circumstances of the case. The proposed amendment would bring flexibility to the timeline for notifying the CCI as it would depend upon the circumstances of the case.
- Proposal to compute penalties on the basis of global turnover
|Section 27(b) of the Competition Act, 2002 empowers the commission to “impose such penalty, as it may deem fit which shall be not more than 10% of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to anti competition agreements or abuse.”
|The proposed amendment bill seeks to insert an explanation in Section 27 as follows:
“For the purposes of this clause, “turnover” means global turnover derived from all the products and services by a person or an enterprise”.
|As per the proposed norms, the computation of penalty based shall be based upon the global turnover, which will result in higher penalties for global multi-product companies.
It is important to note that the draft Competition (Amendment) Bill, 2020 presented in the Parliament was based on the report by the Competition Law Review Committee had proposed to insert Section 4A in the Competition Act, 2002 seeking to extend the Intellectual Property Rights Safe Harbour to the Intellectual Property Rights holders in relation to abuse of dominant position under Section 4 of the Competition Act, 2002 extracted below:
“4A. Nothing contained in section 3 or section 4 shall restrict the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred under:
a) the Copyright Act, 1957 (14 of 1957);
b) the Patents Act, 1970 (39 of 1970);
c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
e) the Designs Act, 2000 (16 of 2000);
f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
g) any other law for the time being in force relating to the protection of other intellectual property rights.
(2) Nothing contained in section 3 shall restrict the right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.”
However, the aforementioned was deleted from the 2023 Bill.
These proposals aim to safeguard consumer interests, further promote and sustain market competition, and ensure freedom of trade for market participants. Overall, the Competition (Amendment) Bill, 2023 is a right step towards ensuring fair competition.
Tithi Aggarwal, Junior Associate at S.S. Rana & co. has assisted in the research of this article.