On April 11, 2023, the Competition (Amendment) Act, 2023 ("CAA") received the assent of Hon'ble President of India. CAA introduces several key changes to the Competition Act, 2002, the primary legislation governing competition law regime. Subsequently on 18 May 2023, Ministry of Corporate Affairs notified certain provisions of the Amendment Act. However, given that certain provisions that have been introduced would entail further regulations / guidelines to be issued by the Competition Commission of India ("CCI"), such provisions are likely to be implemented after the relevant regulations / guidelines are so published by the CCI.
The key features of the CAA are summarized as follows.
1. Expanding the scope of anti-competitive agreements and cartel definition:
Considering the fact that many types of anti-competitive agreements in the market still do not come within the purview of the current law, and in an attempt to plug that, CAA has broadened the scope of cartel prosecution to include within the definition of cartel:
hybrid anti-competitive agreements (such as hub and spoke cartels); and
facilitators such as trade associates or intermediaries who are involved in formation of cartels between direct competitors (“spokes”) even though they may not have themselves participate or may not even be in the same line of business have been brough within the definition as long as they participate or intend to participate in the furtherance of such agreements.
CAA has also widened the definition of the anti-competition agreements by replacing the "Exclusive supply agreement" with "Exclusive dealing agreement" with the aim to include not only the purchase side of the exclusive agreement but also the selling side of the exclusive agreements.
2. Introduction of deal value thresholds:
The extant provisions of the Competition Act entail prior approval of the CCI for transactions involving (i) cumulative assets of more than INR 1000 crores, or (ii) cumulative turnover of more than INR 3000 crores unless any of the given exemptions apply. As against this, CAA has now introduced an additional deal value threshold whereby CCI will now be able to review transactions where:
the global deal value exceeds INR 2,000 crore and
the party acquired, taken control of, merged or amalgamated, has ‘substantial business operations in India’ provided no exemption is available.
This will enable CCI to review more transactions which otherwise did not fall within the ambit of the current asset/turnover thresholds.
3. Procedural merger control timelines
In order to expedite the timelines for merger review by CCI, CAA has reduced:
the timeline for formation of a preliminary view on a transaction to 20 calendar days as against 30 working days; and
the timeline for formation of final view to 150 calendar days from 210 calendar days,
post elapse of which the combination shall be deemed to have been approved.
4. Expanding the Definition of Control:
CAA has also expanded the meaning of ‘control’ and now ‘control’ includes the ability to exercise 'material influence' in any manner, over the management or affairs or strategic commercial decisions. This is in line with CCI's decisional practice of material influence to include factors such as shareholding, special rights, board representation or commercial / financial arrangements etc. Accordingly, now combinations involving acquisition of minority take along with certain investor protection rights may require prior intimation to CCI in the event that the acquirer may be able to exercise 'material influence'.
5. Introduction of a Limitation Period and the principle of Res-Judicata:
While the existing provisions did not stipulate any limitation period for filing of an information or reference, CAA has introduced a limitation period of 3 years for filing of a complaint from the date of the cause of action. The delay can however be condoned by CCI on sufficient grounds being shown.
Additionally, CAA empowers CCI to reject a reference if it is based on same or similar facts and issues addressed in a previous order passed by it, thereby incorporating the principles of Res-Judicata.
6. Powers of Director General (“DG”)
Under the current provisions, the power of appointment of the DG for assisting in conducting an investigation/enquiry into contravention of the provisions of the Competition Act was with the Central Government. CAA now empowers CCI to appoint the DG with the prior approval of the Central Government. CAA also provides more teeth to investigating powers to DG so as to now include the power to:
retain documents, information, books, papers etc. seized by it for a period of up to 360 days;
examine the agents of the company (such as bankers or auditors) and legal advisors (i.e., in-house counsel) in addition to officers, employees, etc. under oath as well as to seek assistance of police officers when conducting raids;
seek information from third parties regarding the affairs of company under investigation.
7. Settlements and Commitments
Another notable amendment is the introduction of offering settlements and undertaking commitments for cases involving anti-competitive vertical agreements and abuse of dominance, however, the same is not applicable to cartel cases. As such, a party against whom an enquiry has been initiated can now approach CCI for settlement after the receipt of the report of the Director General but the same must be done before the final order has been passed. Likewise, a party may also propose commitments to CCI at any time after the enquiry has been initiated, however, it must be before the issuance of the investigation report by Director General. This change is likely to result in speedy resolution of the enforcement proceedings and is in tandem with similar provisions on antitrust enforcement followed in EU, USA and other advanced jurisdictions.
8. Issuance of Statement of objections and modifications:
CAA also enables CCI, if it is of the opinion that a combination has or is likely to have an adverse effect upon the competition, to issue a statement of objections to the parties identifying activities resulting in appreciable adverse effect on competition (“AAEC”) and direct them to explain within 25 days as to why the combination is to be allowed. The concerned party may approach the Commission with suitable modifications so as to eliminate the adverse effect of the combination on the market.
9. Waiver from standstill obligations in certain cases:
The extant provisions entail a standstill obligation, whereby a party to a transaction under investigation is not permitted to consummate any part of a transaction until CCI's approval. However, the same has been waived off by CAA provided:
the transaction has been promptly filed with the CCI; and
the acquirer does not exercise any ownership or beneficial rights or interest or receives dividends in such shares/ securities until grant of approval from CCI.
This amendment is likely to result in dilution of earlier standstill obligations.
10. Introduction of “Leniency Plus" policy
CAA has introduced a “Leniency Plus” policy whereby members of cartels under investigation are encouraged to disclose to CCI other cartels operating in markets so as to avail imposition of lesser penalty for the cartel under investigation. Further, CAA now permits parties to withdraw leniency applications which was not possible earlier. These practices are in fact in tandem with similar provisions on antitrust enforcement followed in EU, USA and other advanced jurisdictions.
CAA has enhanced the penalty for furnishing false information or failing to furnish material information in relation to such transactions which a party knows to be material, to INR 5 crores from INR 1 crore. Moreover, under CAA, the penalties can be imposed upon the “global turnover” derived from products and services by CCI. Previously, the Supreme Court in Excel Crop Care Limited v. Competition Commission of India & Anr. had restricted the meaning of the term “turnover” used in Section 27(b) to “relevant “turnover” of products and services that have been affected by such a contravention and not the “global total turnover” keeping in view global best practices and the doctrine of proportionality. However, the effect of said judgment now stands nullified by Parliament vide this amendment. This provision would now have the effect of imposition of higher penalties for those companies which have global operations as compared to their Indian counterparts engaging in similar anti-competitive activities domestically.
12. Mandatory Deposit for Appeal to NCLAT:
CAA has also prescribed mandatory pre-deposit of 25% penalty as condition precedent to admission of appeal for hearing before NCLAT.
Undoubtedly, Competition Amendment Act, 2023 is a step in the right direction not only to plug certain loopholes which were observed in the functioning of the Act over time, but to also ensure that India has a robust competition regulatory framework in line with global best practices followed in jurisdictions like that of USA and EU.
While provisions such as those relating to introduction of a limitation period of 3 years, deal-value based thresholds, expanding the scope of cartel prosecution to treat cartel facilitators to now be at par with cartel participants, and including anti-competitive agreements operating at different levels to have presumed to have caused an AAEC are indeed a welcome development, however, provisions such as those relating to global turnover for computation of penalty or mandatory pre-deposit of 25% penalty are retrograde in nature likely to result in obstacles in smooth implementation of the law.
The above article is authored by Mr. Sumit Jay Malhotra, Principal Associate. The article was originally published by AXFAIT (https://www.axfait.com/post/highlights-of-competition-amendment-act-2023)