The Competition Act (amendment) of 2022, introduced in the Lok Sabha, also proposed provisions to have “transaction value” as a criterion for notifying combinations to the Competition Commission of India (ICC). These changes aim to catch up with the business models of new age companies, broaden the scope of anti-competitive agreements, and provide time approvals for combinations.
These changes are based on recommendations provided by the Competition Law Review Committee, set up by the government to review changes that need to be made to the law.
“There has been a significant growth in Indian markets over the past decade and a paradigm shift in the way businesses operate,” said Union Minister for Finance and Corporate Affairs Nirmala Sitharaman in the design statement. of law. “After consideration of the recommendations proposed by the committee, public consultations and in order to provide regulatory certainty and a business environment based on trust, it is considered essential to amend the aforementioned law.”
Until now, corporate transactions such as mergers and acquisitions had to be notified to the ICC only if the parties involved in the transaction had assets or turnover above a certain threshold. More specifically, if the asset size of the company was greater than Rs 2,000 crore or if the turnover of the company was greater than Rs 6,000 crore, the approval of the CCI was required.
The government has now introduced an additional criterion: the value of the transaction. If the total value of the deal is greater than Rs 2,000 crore, it will have to be notified to the antitrust regulator. This change is aimed at bringing the binomial e-commerce and startups within the rules. Until now, such agreements did not have to be notified as companies in the sectors are typically asset-light, below the prescribed minimum threshold.
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“Apparently this change was introduced to address certain types of transactions such as those in digital markets that may not require notification below the existing jurisdictional threshold,” said Vaibhav Chouske, partner, JSA Associates. “These transactions are currently out of control as the CCI has no residual jurisdiction to assess unreported transactions even if their potential competitive harm is evident.”
Other amendments include a three-year limitation period for submitting information on anti-competitive agreements and abuse of dominant position before the ICC, changes to the definitions of certain terms such as “firm”, “relevant product market”, “group” and “check” to provide clarity.
The government also plans to introduce a “framework of agreements and commitments to reduce litigation” and incentivize parties in an ongoing cartel investigation in terms of lesser penalties to disclose information about other cartels.
“The introduction of settlement rules will allow the CCI to effectively address competition cases in a timely and effective manner without being involved in a protracted litigation,” said Samir Gandhi, head of competition law firm, AZB Partners. “However, cartel cases are excluded from the scope of the transaction as they have a significant negative impact on the competitive market.”
Currently, if the ICC opens an investigation, it is followed by a commission order.
Among other amendments, the government proposed that the ICC appoint the director general after approval by the central government and the issuance of guidelines, including sanctions against the commission.
The bill also proposed to reduce the time for the approval of the combinations by the ICC to 150 days from the current 210 days. Furthermore, the ICC will be required to form a prima facie opinion on the agreement within 20 days for quick approval. A provision has also been proposed for the resolution of cases under the competition law.
The government has also introduced stricter criminal provisions by increasing the sentence to Rs 3 crore along with three years of imprisonment or both, if either party contravenes orders issued by the National Company Law Tribunal. The court is currently examining competition appeals.