Abstract
The Competition Act of 2002 has recently been amended by the Parliament . This research paper will try to evaluate the major changes brought in the following act along with its impact over the growing Indian Economy. As we know that the shape of the Indian market is changing with the advent of new technologies and hence the existing act was not in a position to explain those things. So, the amendment has came into force which makes the law on competition in market much more relevant and comprehensive.
Keywords
Competition Commission of India, Cartel, Merger, Acquisition, Competition Act, Monopoly, Leniency.
Introduction
In India, before globalization, to control the market there existed a law known as Monopolies and Restrictive Trade Practices Act,1969.The main aim of this act was to curb the concentration of wealth in few hands and to limit monopolistic practices. However, with the globalization, Privatization and Liberalization (popularly known as LPG regime) of market, this act was not sufficient to fulfill the needs of that time and hence , it became necessary to bring another law which can deal with the challenges of the market .Hence, after various discussions , the Competition Act of 2002 was brought into force. The main purposes for the enactment of this act were- to promote and safeguard the interest of the consumers, to maintain the competition present in the market, to stop companies engaging into anti- competitive practices , to prohibit them to abuse their dominant position and hence, to ensure that freedom of trade should be maintained. However, over the time, this act was amended several times in 2007 then in 2009, in 2012 and now the recent amendment in 2023. The amendment in 2023 has brought some of the most significant changes in the act. The changes are intended to improve the competition, simplify procedure, and create an atmosphere which is favourable to the business.
Research Methodology
This research paper gives an overview of the major amendments done in the Competition Act of 2002 . This paper draws a comparison between the new amendments with the old one .The researcher has given some suggestions at the end of this paper. The information mentioned in the paper is from secondary sources like news articles, websites, and government guidelines.
Review of Literature
“The Competition (Amendment ) Act, 2023- A game changer for Merger and Acquisition”- This article has been written by Aayushi Singh and Pavitra Dubey . This article gives us an insightful approach towards the competition law in India. The authors have done a very good work in explaining the amendments in a most comprehensive way. The authors have started the article with a historical background regarding how was the competition in the market before the act and how over the years the market has been expanded due to which the competition has also increased and hence there was a need to regulate the competition for which the act has came into force. The article has mentioned the historical evolution of the competition law. After this, they have mentioned about the recent amendments in the act in comparison to the old law. They also have raised significant issues regarding the new law and have given recommendation as how to fill out these loopholes still present in the act. Moreover, they have written a very nice and helpful article which will help the readers to understand the recent amendments and how it will affect the market.
Major changes in the Competition Act : Comparison and analysis with old law
- One of the changes that has taken place is in Section 5 of the Act which mention about the mergers, acquisitions and amalgamation of enterprises. Initially, the role of Competition Commission of India was to give permission to the enterprises in mergers, acquisitions and amalgamation if both the parties have assets of more than 1000 crore rupees or if the turnover of both the parties is more than 3,000 crore rupees. Now, after the amendment, a third provision is added in which if a enterprise has a transaction value of more than 2,000 crore rupees and the party getting acquired has significant business operations in India then the approval of Competition Commission of India is necessary. Hence, this act has provided a clarity on merger and acquisition.
- Now, there is a question then who will be the controlling entity in the merger/acquisition?
- Before the amendment, the answer of this question was the company who will manage the affairs or who will take the major decision will be considered as the controlling entity.
- However, after the amendment the answer of this question has changed. Now, the company who will have the ‘material influence’ which means the company who will provide the entire financial resources and handle the management will be considered as the controlling entity.
- The amendment has given the timeline to form ‘Prima facie view’ which means the time required by Competition Commission to form an initial view and check if the deal violates the Competition Law will be of 30 days. The amendment has also changed Section 6 which earlier mentioned that the Competition Commission of India should give its final decision regarding combination in 210 days which is now reduced to 150 days and if the commission will not give its final decision in this time limit then their approval regarding combination would be presumed and However, it can be extended by 30 days in certain cases. The Government has reduced the time limit so that our country can promote the ease of doing business and make India a business friendly nation.
- The amendment has made significant changes in the provision which mention about the punishment of Cartelization. Cartels are most egregious violation of competition law. They are considered as the most harmful anti-competitive practices and are prohibited in various jurisdictions. The competitors of Cartel do not compete directly instead they opt for collusion due to which the consumers lose the benefit of competition and hence they are presumed to have an appreciable adverse effect on competition.
- The 2002 Act mentions that only the Parties which are involved in anti-competitive agreements will be punished. However, the Government has introduced a new term ‘Hub and Spoke Cartel’ which means the non- competitor company which will help the competitors to enter anti-competitive agreements will also get punished now. Also, the Companies which are not in the Cartel but they have an intention to enter the Cartel will be punished too as this practice of Cartelization will not only affect the small companies but it will also impact the consumer.
- According to 2002 Act, the penalties for the companies which are violating the norms were determined on the basis of ‘Turnover’. However, the Supreme Court in the case ‘Excel Crop Care Vs Competition Commission of India’ (2017) held that the turnover mentioned in the act is to be interpreted as the “Relevant Turnover” which does not include the entire turnover. It only includes the money earned though the impacted goods or services.
- The new provision in the amendment act has imposed higher penalties over companies and penalty have to be calculated over ‘Global Turnover’ which means the penalty will be imposed over the money earned using all the goods and services not only on the impacted goods and services.
- The amendment will allow the settlement between the parties and the parties can also make commitments to resolve the issue. The Competition Commission of India will be the deciding authority about how the settlements, commitments and compensation will take place between the parties. The provisions regarding to the appointment of Director general has also been changed. As earlier, the director general was appointed by the Central Government but now, he can be appointed by the CCI with the prior approval of the Central Government.
- The composition of commission given in Section 8 of the act through the amendment has included a new criteria for appointment of the CCI members which is of ‘Technology’ as now the technology based startups are increasing so this criteria has been added. The act has also changed its leniency regime which means where a party implicated in a cartel investigation makes a true and vital disclosure of an alleged violation or another undisclosed cartel, CCI is empowered to grant an additional lesser penalty for the cartel already being investigated.
- Prior to the amendment the CCI used to impose the penalty of 10% on total relevant turnover. After the amendment, it will impose the penalty of 10% on total Global turnover.
- The Act has also imposed serious penalty rather than fine if the companies have failed to comply with the orders of CCI and Director General under section 42 and 43 of the Competition Act.
- Prior to the amendment if a party gives false information or omits any information which is required for seeking approval for combination then the penalty was 1 crore. Now, After the amendment the penalty is increased to 5 crore.
Impact on Indian Economy
Indian economy is the most rapidly growing economy in the world. As the Digital world is expanding with the advent of new technologies, the e- commerce market is also increasing very rapidly. In the next three years, the country is expected to become $5 trillion economy, the third largest in the world. With these amendments, the government has created a safe space for small startups so that they can also expand their scope of business. Now, the big businesses cannot abuse their dominant position and cannot indulge themselves even indirectly into the anti-competitive trade practices. These amendments will help the government to reduce regulatory hurdles .These amendments have provided a greater clarity to businesses operating in India and reduce the burden on the companies. The inclusion of global turnover in the definition aims to enhance transparency and accountability in the market. The ease of doing business has also been improved which means the country’s image has been improving globally and all these factors will automatically help in bringing foreign investment in India which will enhance our economy.
Suggestions
The government has done a very commendable effort in bringing these amendments. The way they have substituted the word Global turnover in place of relevant turnover is impressive .However, there are still many voids present in the act . There is still a need for clarification on the ‘ Hub and Spoke’ arrangement. In Section 5 Explanation the word material influence is used and there is a need to explain that term. Apart from this, the appointment of Director General is in the hands of CCI with the prior approval of the government, in my opinion this will create a biasness in the commission so, to create transparency in the commission I think Government should select a DG. The act has also made amendments regarding to leniency . This will help to sync antitrust law in the country. As the world is moving towards Digitalization, the digital markets are also expanding. However, there is a provision regarding IPR law in the competition act but it is not sufficient to deal with changing times so, there is again a need to enforce some provisions regarding to IPR as well. With this expansion, the big technology companies are creating a monopoly For example, Amazon have a tendency to preference its service over others and also it shares the data gathered from one company to benefit another company. Due to these anti-competitive practices the big tech companies are trying to abuse their dominant position and for this, the government had to bring on some more provisions to regulate competition in the digital market. Also, the government should promote competition advocacy and make effective steps to implement it as well.
Conclusion
The amendment act have tried to establish a strong and efficient framework for the benefit of business and consumers. The amendment also ensures that companies cannot escape from the liabilities. The amendment have brought a ray of hope for all the budding startups and small businesses that seek to compete with big businesses by fostering a fair and competitive market environment.
Submitted by
Tanisha Madhyani
Law centre-1, Faculty of Law, University of Delhi