The Competition Law Review Committee (CLRC), an independent committee set up by Ministry of Corporate Affairs, under the Chairmanship of Secretary, Corporate Affairs was instituted in October, 2018 to examine and recommend amendments to the Competition Act which had not undergone any amendments for the past 13 years. Based on their report submitted in August 2019, the Draft Competition Law Amendment Bill, 2020 was released on February 12th 2020 calling for public comments on the same.
The draft bill seeks to introduce very significant changes to the Act with the aim of making the Act more effective, removing the errors of the previous Act and simplifying various procedures under the Act. While some of these changes are positive and welcoming, some have major drawbacks.
The draft bill has introduced various amendments to the Act. These include the following –
AMENDMENTS TO DEFINITIONS
The definition of ‘enterprise’ under Section 2(h) has been broadened to include units, divisions, subsidiaries, all entities engaged in any kind of economic activity with a view to bring in more entities under the umbrella of competition law.
Cartel, under Section 2(c), was widened to include buyer’s cartel as well. The definition of ‘relevant product market’ under Section 2(t) was also broadened by inclusion of supply side interchangeability and substitutability in addition to consumer side.
The definition of ‘control’ under Section 5 has been amended from control the management or affairs of the Company to singular or jointly ability of an enterprise or a group of to exercise ‘material influence’ over the management or affairs or strategic commercial decisions. But the meaning of ‘material influence’ is not defined in the Act. In addition to this, the Central government is allowed to prescribe any other percentage other than 26% voting rights under the definition of ‘group’.
AMENDMENT TO STRUCTURE OF COMPETITION COMMISSION OF INDIA (CCI)
The bill brought in structural changes to CCI. Finally complying with the direction of the Supreme Court in Brahm Dutt v Union of India (AIR 2005 SC 730) where the Supreme Court, on the basis of doctrine of separation of powers, ordered CCI to constitute two separate bodies – advisory and regulatory body and adjudicatory and appellate body, the bill provides for establishment of a governing body which shall perform quasi-legislative functions, thus reducing the burden on CCI. The body shall consist of part time members appointed by Central Government, thereby encouraging external experts in the field, and ex-officio members. The rationale behind the establishment of governing body is to ‘bring in an external perspective, objectivity and more transparency in the functioning of the CCI’ and ‘ensure a more robust governance structure for the CCI by bringing in an external perspective as well as strengthening the democratic legitimacy and accountability of the CCI’, but this seems to be a miss since the Act is silent on the qualification and the procedure of nomination of the part-time members. Due to Central Government’s power of appointment of the part time members, CCI’s independence from the Central Government shall be hampered.
The bill also proposes to integrate Director General with CCI. The power of appointing the DG shall be shifted from the Central government to the CCI. This proposal is also criticised since it would lead to concentration of power. This amendment also goes against the principle pronounced by the Supreme Court in Excel Crop Care Ltd. v. CCI ((2017) 8 SCC 47I), according independency of the investigative wing from the regulatory and adjudicatory wing.
ENFORCEMENT CHANGES TO CCI
Settlement and Commitment mechanism
Settlement and commitment mechanism via insertion of Section 48A and 48B, cooperative provisions were introduced for all combinations except for cartels. It provides that, if the CCI concludes that there exists a prima facie case of contravention of provisions of Competition law, the party, can compromise with CCI by either compensating for the loss or segregating the clauses which are anti-competitive by undertaking to change conduct in future. This is a welcoming move since it leads to early closure of cases and reduces burden on the CCI.
LENIENCY PLUS PROGRAMME
Leniency plus was introduced as an extension to Leniency programme as an amendment to Section 46 of the Act. If an informant (an entity) discloses information of anti-competitive activities regarding a market where it has significant interest along with another market where it is not a significant player, leniency ie, reduced penalties shall be given in both markets. This is a non appealable provision.
The bill proposes penalties to investigating parties who don’t cooperate or comply with the Director General in the process of investigation for any contravention of the Act. These may include producing any information or document, appearing before the Director General etc as ordered by the Director General. These penalties are in addition to those imposed by the CCI for non-compliance with the CCI’s orders.
PROTECTION TO INTELLECTUAL PROPERTY RIGHT (IPR) HOLDERS
The bill proposes for an extension of IPR safe harbour to dominance case via insertion of Section 4A. IPR holders enjoyed exemption under Section 3 of the Act but this wasn’t a blanket exemption as it did not provide protection in cases of abuse of dominance under Section 4. Under the new bill, the safe harbour provision was extended to Section 4 as well ie, even in cases of abuse of dominance for reasonable reasons as thought fit by the CCI. This move may not be very welcoming since it is a blanket restriction and the coverage of the term ‘reasonable reasons’ is not known which can lead to exploitation and biasness.
AMENDMENT TO PROVISIONS RELATING TO COMBINATIONS
Another significant amendment introduced by the bill is the Central government’s power to notify new threshold for merger control under Section 5 of the Act. The Bill introduces size of transaction and income criteria as new thresholds in addition to value of assets and turnover, in order to include more transactions including digital ones within the jurisdiction of CCI.
In order to ensure an expedient and speedier process of approval of a combination, the time period of deemed approval is reduced from 210 days to 150 days along with an extension of 30 days as an amendment to Section 6. In addition to this, phase 1 approvals have been reduced to 20 calendar days from 30 working days to expedite the process.
The Green channel approval process was given a statutory recognition under the new bill. It was introduced earlier through Regulation 5A in 2019, but given a more enabling effect now through the new bill. It provides that the Central government, in consonance with CCI, can allow certain non-contentions transactions and combinations ie, only conglomerate mergers without going through the hassle under Section 5 and 6 of the Act.
INCLUSION OF TECHNOLOGY AND NEW AGE MARKETS
The bill proposes for a hub and spoke arrangement by widening the scope of section 3 to include all types of agreements including those entered in the digital market. The Bills expressly includes the ‘control over data’ or ‘specialised assets’ under the list of conditions which constitute dominance of a company in the market.
While most of these changes are welcoming and shall bring about positive changes in competition law in India, the drawbacks require re-consideration. The recommendation of CLRC regarding a separate bench of NCLAT for competition cases was not implemented in the new bill. This recommendation is of vital importance since NCLAT is already overburdened with company law and insolvency cases and competition law cases is at the bottom of their list.
The bill had a good opportunity to implement the direction of Delhi High Court in Mahindra Electric Mobility Ltd and Anr v Competition Commission of India (2019 SCCOnline Del 8032) for presence of a mandatory judicial member while passing all final orders to overlook the adjudicatory functions of the CCI, but the Bill has no mention of the same.
Lastly, the Bill also had a good chance to include CCI’s power to review, in accordance with the order of Delhi High Court in Google Inc. v. CCI (2015 SCC Online Del 8992), where the Court held that power to review was an inherent power, but this was also not enacted in the Bill.
Thus, the Bill is definitely a step forward but requires correction in few aspects.
ABOUT THE AUTHOR
Niharika Avvaru is a fifth year law student at School of law, Christ (Deemed to be University), Bengaluru.
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Kindly note that the views and opinions expressed are of the author and not of the Indian Journal of Law and Public Policy.