Video Summary

[RSTV The Big Picture] Draft Competition Commission (amendment) Bill 2020

The Competition (Amendment) Bill, 2020 has been drafted for carrying out amendments in the Competition Act, 2002. The Draft Bill proposes certain significant amendments to the Act, including: imprisonment for non-compliance with directions of the Director General; commitment and settlement procedure in non-cartel cases; more expeditious combination review process; and constitution of a Governing Board for non-adjudicatory functions etc.
By IT's Video Summary Team
March 10, 2020

Contents

  • Introduction
  • Competition Act, 2002
  • Role of CCI
  • Proposed Amendments
  • Change in the regulatory structure of the CCI
  • Statutory provision to invite public comments
  • Issuing the penalty guidance
  • Streamlining procedure for regulation of combinations
  • New thresholds for merger control
  • Expansion of definition of a cartel
  • Extending protection to holders of IPR
  • The regime of settlements and commitments
  • Conclusion

Draft Competition Commission (amendment) Bill 2020

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Introduction

With a view to update the Competition Act, 2002 and associated regulations, the Indian Government constituted the Competition Law Review Committee in October 2018 which submitted its report to the Government on 14 August 2019. Based on the recommendations made in the Report, the Ministry of Corporate Affairs (MCA) has introduced a Draft Competition Bill, 2020 to amend the Act. The draft has been made open to comments from the public until 6 March 2020.

Competition Act, 2002:

  • The Competition Act, 2002 was enacted by the Parliament of India and governs Indian competition law and extends to whole of India.
  •  It replaced the Monopolies and Restrictive Trade Practices Act, 1969.
  • Under this legislation, the Competition Commission of India was established to prevent the activities that have an adverse effect on competition in India.
  • It is a tool to implement and enforce competition policy and to prevent and punish anti-competitive business practices by firms and unnecessary Government interference in the market.

Role of CCI:

  • Chapter III of the Competition Act, 2002 provides for the establishment of Competition Commission of India (CCI).
  • To Prevent practices having adverse effect on competition.
  • To Promote and sustain competition in markets.
  • To Protect the interests of consumers.
  • To Ensure freedom of trade carried on by other participants in markets in India.

Proposed Amendments:

Some of the most significant changes that have been proposed include:

1. Change in the regulatory structure of the CCI:

  • The Bill provides for the constitution of a Governing Body. The Governing Body would comprise the Chairperson of the Competition Commission of India (CCI), its six whole time members, the Secretary of the Department of Economic Affairs, Ministry of Finance or his nominee, Secretary of the Ministry of Corporate Affairs and his nominee, and four other part-time members to be nominated by the Central Government.
  • The Governing Board would be vested with the power to make regulations, take measures to promote awareness and create a National Competition Policy.
  • It will exercise general superintendence, direction and management of the affairs of the CCI.
  • The CCI will now discharge only the adjudicatory functions.

2. Statutory provision to invite public comments:

  • The Bill creates an obligation on the Governing Board to seek public comments on all regulations.
  • With a limited exception of urgency in public interests, and regulations pertaining to internal working of the CCI, this provision will bring elements transparency and democratic rule making to the system.

3. Issuing the penalty guidance:

  • The Bill requires the CCI to issue the much awaited penalty guidelines.
  • The penalty guidance expected to give recognition to the relevant turnover principles and lay down the manner of determination of the percentage of the penalty and application of aggravating and mitigating factors.
  • The CCI has the power to impose prohibitive penalties and in the absence of any guidance the manner in which this penalty was being imposed was shrouded with ambiguities.

4. Streamlining procedure for regulation of combinations:

(i) amendments to streamline the procedure for inquiry into combinations:

  • The Bill seeks to fill some of the gaps in the Act by giving statutory sanctity to the practices followed by the CCI.
  • This will reduce the possibility of appeals against combination orders which have been in the past on account of insufficiency of the statutory provisions.

(ii) providing a statutory basis to various exemptions issued by the CCI:

  • The Bill granted a specific statutory basis to target based exemption; the newly introduced green channel of approval and certain sector specific exemptions granted by the CCI (for instance, to public sector enterprises in oil and gas sector and nationalized banks).

5. New thresholds for merger control:

  • The Bill empowers the CCI and Central Government to define new thresholds for merger notification.
  • The new thresholds will now enable the CCI to make sector specific thresholds based on deal value or size of transaction or any other criterion.
  • The amendment appears to be in furtherance of the CLRC’s recommendation to capture transactions in the digital market.
  • This may result in increasing compliance costs for businesses and impact the ease of doing business.
  • It is necessary that the introduction of objective thresholds or criterion is preceded by a detailed economic and legal assessment of the necessity of such thresholds, the basis of the thresholds and the value of the thresholds.

6. Expansion of definition of a cartel:

  • The Bill expands the definition of a cartel to include a buyer’s cartel as well.
  • This implies that even in cases of buyer’s cartel, the presumption of appreciable adverse effect on competition (AAEC) will apply to buyer’s cartel as well.

7. Extending protection to holders of IPR:

  • The Bill seeks to widen protection offered to holders of intellectual property rights.
  • The exemption for IPR holders is currently restricted to anti-competitive agreements.
  • The Bill also expands the scope of IPRs for which protection is available to IPR holders.

8. The regime of settlements and commitments:

  • The Bill introduces a system for settlements and commitments permitting the CCI to close the investigation on basis of an application for settlement or commitment moved by the investigated party.
  • However, there is a lack of clarity on various aspect such as, whether settlements and commitments would apply to existing cases; whether commitments would be without prejudice and settlements with prejudice; and whether right to claim compensation survives in case of settlements.

Conclusion:

  • The bill is open to public comments and brings the much-needed parity between the treatment of anti-competitive agreements and abuse of dominant position in the market.

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