During the past few months, a number of important legislative and institutional changes have taken place in the competition law regulatory framework.
The Competition (Amendment) Act, 2023 (amendment act), was passed into law in April, as an amendment to the Competition Act, 2002 (act). Most of the amendments came into effect on 18 May. Those now applicable include the formal recognition of supply-side factors in the definition of a relevant product market (section 2(t)); the recognition of hub and spoke cartels (the proviso to section 3(3)), and the expansion of the scope of vertical anti-competitive agreements by making the list of such agreements an inclusive one (section 3(4)(i)).
Amendments relating to penalties and procedures now in effect include a restriction on the filing of information, that is a complaint, after three years from the date on which the cause of action arises, unless the Competition Commission of India (CCI) is satisfied that such delay is justified (section 19); the penalty for false statements or omissions in furnishing material information has been increased from INR10 million (USD121,500) to INR50 million and non-compliance may attract further penalties (section 44, which itself is subject to the penalties in section 42), and appeals to the National Company Law Appellate Tribunal over penalties or fines imposed by the CCI will now require a pre-hearing deposit of 25% of the fine or penalty.
Other noteworthy amendments that are yet to take effect include the introduction of the leniency plus framework (section 46); the introduction of the settlements and commitments framework (sections 48A and 48B), and the introduction of deal value thresholds for combination notification purposes, that is where the deal value exceeds INR20 billion (section 5(d)). Also waiting is the reduction of the maximum standstill period for a combination from 210 days to 150 days (section 6(2A)); the recognition of the difficulties of regulating open offers and instituting a separate filing framework for them (section 6A), and the imposition of penalties based on total global turnover (sections 27 and 43A).
Reasons preventing the immediate implementation of these provisions may be first, the need for the CCI to issue regulations. For example, deal value thresholds will only apply to transactions where the target entity or the merging or amalgamating entities have “substantial business operations in India as specified by regulations”. Second, the CCI may not have the staff numbers required to handle the increased workload resulting from the shortening of procedural timelines.
Other matters affected the CCI as to its composition and operation. Following the retirement of the chairperson in October 2022, another member took the position in an acting capacity. Pending a new appointment, it appeared the CCI was inquorate. Under section 8, read with section 22 of the act, the CCI must have a minimum of three members. In February 2023, the government invoked the doctrine of necessity, allowing the CCI to resume decision-making in applications for merger approval. In the subsequent case of Alliance of Digital India Foundation v Competition Commission of India, Delhi High Court held the CCI could not be prevented from discharging its administrative and adjudicatory role by the apparent lack of a quorum. Section 15 of the act provides that no “act or proceeding of the Commission shall be invalid merely by reason of any vacancy in, or any defect in the constitution of, the Commission”.
A new CCI chairperson was appointed in May and the problem resolved itself. However, as the two remaining members will retire by September 2023, unless their tenure is extended, the need for new appointments is pressing.
Another notable change is the addition of the word technology in sections 8 and 9 of the act. This is now a factor relating to the professional expertise that may be considered in appointing CCI members. Given the CCI’s current focus on technology markets and the likelihood of legislation focusing on regulating digital markets, having a professional from the technology sector involved in the decision-making process at the CCI will be welcome.
With more changes on the horizon, interested parties should watch the competition sector with interest in anticipation of further CCI developments.
Modhulika Bose is a counsel at P&A Law Offices.
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