The Competition Amendment Act 2023 in India has ushered in significant changes to the country’s competition law landscape. As the government aims to create a more competitive and fair marketplace, it is crucial to understand the challenges and opportunities that this amendment presents. In this article, we will delve into the key provisions of the Competition Amendment Act 2023, exploring the implications for businesses, consumers, and the legal community.
The competition law journey in India began with the Monopolies and Restrictive Trade Practices Act (MRTP) of 1969, aimed at curbing monopolistic practices and promoting fair competition. However, over time, it became evident that the MRTP Act couldn’t adequately address the changing economic landscape. In 1999, the Indian Government established a committee to recommend a modern competition legislation in line with global trends. The Raghavan Committee, which reviewed competition laws from around the world, submitted its findings in May 2000, leading to the enactment of the Competition Act in 2002. This Act was designed to promote fair competition, protect consumers from anti-competitive practices, and establish the Competition Commission of India (CCI) to enforce its provisions.
Since its inception, the Competition Act has undergone several amendments, including provisions for mergers and acquisitions in 2007 and increased penalties for anti-competitive behavior in 2009. In 2023, another amendment act was passed to enhance enforcement mechanisms and penalties for non-compliance with CCI orders. The Competition (Amendment) Act, 2023 is a response to instances of anti-competitive conduct by major corporations, particularly in the technology industry. It draws inspiration from similar laws in other countries, such as Europe’s Digital Markets Act and Australia’s legislation requiring tech giants to compensate news publishers for their content. This Act would significantly impact the operations of large corporations in India and promote a more level playing field for all businesses.
Major Objectives of the Act
The Act introduces changes like expanding the definition of anti-competitive agreements, increasing penalties for such behavior, reducing the CCI’s merger review time frame, introducing a new framework for case settlements, penalizing based on global turnover, using Deal Value for M&A notifications, and setting a 3-year limitation period for filing information.
Old Law vs. New Law: A Brief Comparison
Under the previous law, the Competition Act of 2002 prevented parties from entering combinations that might have an appreciable adverse effect on competition. Threshold limits, such as gross assets and turnover values, triggered the application of competition law. The 2023 Act expands the scope by considering not only the value of the parties involved but also the transactional value, focusing on what one party is willing to pay for the target. This addresses deals in the technology sector where the target may not have significant assets or revenue but is valued for data or innovation.
The Act also reduces the time for CCI to make decisions from 210 days to 150 days, which may put pressure on the CCI but aims to expedite decision-making. It eliminates the 30-day limit for forming a prima facie opinion and reduces it to 20 days from the date of application.
The Act introduces flexibility in notifying the CCI about deals, moving away from a fixed timeline to case-by-case determination. It also refines the definition of “control” to be more specific, focusing on the ability to influence strategic decisions.
In terms of anti-competitive agreements, the Act extends regulation to non-competitor and non-market participant enterprises engaged in different business activities but intending to participate in cartel activities. This aligns with international “hub and spoke” arrangements.
The introduction of settlement and commitment options allows for faster resolution of proceedings, encouraging compliance with rules. Additionally, the Act replaces fines with penalties for certain offenses, aligning punishment with the severity of contraventions.
The inclusion of “global turnover” in penalty calculations may lead to higher penalties for global businesses. However, it also raises concerns about the impact on smaller divisions within companies.
Expanding the definition of “relevant market” to consider products and services interchangeable by both consumers and suppliers offers a more comprehensive perspective. The Act also adjusts the appointment process for the Director General and CCI members, with CCI having a role, subject to central government approval.
Key Highlights of the 2023 Amendment Act
The 2023 Act introduces several significant changes, including:
Merger Control Provisions
Introduction of Deal-Value Based Thresholds
- The Amendment has introduced a new criterion, known as the ‘deal value’ threshold (DVT), alongside the existing asset value and turnover-based criteria for assessing the requirement to notify the Competition Commission of India (CCI). Under this criterion, the CCI can review transactions if: (i) the global deal value exceeds INR 2,000 crore; and (ii) the party involved has ‘substantial business operations in India,’ subject to exemptions.
- This move aligns India with several other countries in adopting the DVT in their merger control regulations. It expands the CCI’s oversight to transactions involving ‘asset lite’ and ‘low revenue’ companies. The Amendment defines ‘value of transaction’ to encompass all valuable considerations, whether direct, indirect, or deferred. The specific tests for determining ‘substantial business operations in India’ will be detailed in forthcoming regulations/guidelines.
Procedural Merger Control Timelines
- The Amendment accelerates merger review timelines by reducing the time for forming an initial view on competition law concerns (from 30 working days to 30 calendar days) and for reaching a final decision on a transaction (from 210 calendar days to 150 calendar days). This change means quicker approvals for non-problematic transactions. Parties are now encouraged to engage in pre-filing consultations with the CCI to avoid potential notification issues.
Widening the Scope of ‘Control’
- The Amendment redefines ‘control’ to its lowest standard, ‘material influence,’ aligning with the CCI’s evolving interpretation of ‘control.’ This change means that even transactions involving minority investments with certain investor protection rights may require prior CCI notification if the acquirer gains ‘material influence.’
Exemption from Standstill Obligations in Certain Cases
- The Amendment exempts open market purchases and transactions on regulated stock exchanges from the standstill obligations of the merger control regime, provided the transaction is timely notified to the CCI and the acquirer refrains from exercising ownership or beneficial rights in the shares or securities until CCI approval. This change simplifies the process for transactions involving listed companies, facilitating time-sensitive market-related purchases without stringent regulatory requirements.
Extending the Ambit of Gun-Jumping Provisions
- In line with the proposed DVT introduction, the Amendment empowers the CCI to penalize parties up to 1% of the ‘deal value’ of a transaction for gun-jumping, expanding beyond the existing asset value and turnover-based thresholds.
Penalties Based on ‘Global Turnover’
- The Amendment broadens the basis for imposing penalties from ‘relevant turnover’ (as per the Excel Crop Case) to ‘global turnover derived from all products and services.’ This change may lead to larger penalties for multi-product/service conglomerates with global operations for similar anti-competitive behavior, potentially raising concerns about proportionality and fairness.
Expanding the Scope of Cartel Prosecution
- The Amendment extends cartel prosecution to hybrid anti-competitive agreements (e.g., hub-and-spoke cartels) and individuals who ‘intended to participate’ in the cartel but did not. This change broadens the CCI’s authority to treat cartel facilitators and agreements across different value chain levels as anti-competitive.
Commitments and Settlements
- The Amendment introduces a mechanism for commitments and settlements, allowing parties to propose commitments or settlements in antitrust cases (excluding cartels). Parties can propose commitments after the investigation begins but before the Director General’s report, while settlements can be offered after the report but before the CCI’s final decision. Additionally, the Amendment enables compensation claims even after Supreme Court orders.
- The CCI must invite objections/suggestions from informants, DG, settlement applicants, and third parties before adopting a commitment or settlement proposal, and such orders are not appealable. This mechanism aims to correct anti-competitive practices swiftly, reduce CCI investigations, and ease its resource burden.
Enhancing the Leniency Regime
- The Amendment introduces a ‘leniency plus’ policy, allowing leniency applicants in one cartel to disclose another cartel and receive a reduced additional penalty for the cartel already under investigation. The CCI can impose the full penalty if leniency applicants fail to comply with conditions or provide false evidence.
- Parties can withdraw leniency applications, but the CCI may use the information provided as part of its investigation. This ‘leniency plus’ policy enhances the existing leniency regime, encourages cooperation, and helps uncover multiple cartels.
Public Consultation for Regulations/Guidelines
- The Amendment mandates transparency in making regulations/guidelines, requiring the CCI to publish drafts, invite public comments, and issue a general statement of response. Certain situations exempt public consultation.
Enhanced Penalty for False Information or Omission
- The Amendment increases penalties for furnishing false information or failing to provide material information in transactions requiring CCI approval. Penalty guidelines will be published to ensure proportionality in penalty computation.
Director General Appointment Process
- The CCI gains the power to appoint the Director General with prior Central Government approval, ensuring a checks and balances mechanism.
Widened Powers of the Director General
- The Amendment grants the DG expanded investigative powers, including examining agents, seeking information from third parties, and retaining information/documents for up to 360 days.
Introduction of Limitation Period and Res-Judicata
- The Amendment introduces a three-year limitation period for filing information or references related to antitrust violations and allows the CCI to reject information based on the same or similar facts and issues addressed in previous CCI orders.
Partial Penalty Amount Deposit Before the Appellate Tribunal
- The Amendment mandates the deposit of 25% of the penalty amount for appeals by erring companies at the National Company Law Appellate Tribunal (NCLAT).
While it introduces several challenges for businesses and regulators, it also presents numerous opportunities for promoting fair competition, protecting consumer interests, and strengthening enforcement mechanisms. Notably, the recognition of hub-and-spoke cartels and mandatory public consultation for regulations/guidelines are significant developments.
To thrive in this evolving legal landscape, businesses must proactively assess their practices and ensure compliance with the amended competition law. The legal community should be prepared to navigate the complexities of the new provisions and provide guidance to clients in adapting to the changing regulatory environment.
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Written by – Ananya Chaudhary
 The Competition (Amendment) Act, 2023: A Game Changer for Mergers and Acquisitions, SCC Online Blog (Jun. 5, 2023), https://www.scconline.com/blog/post/2023/06/05/the-competition-amendment-act-2023-a-game-changer-for-mergers-and-acquisitions/#fn5.
 Competition Act, 2002, S. 3.
 Competition Act, 2002, S. 5.
 Competition Act, 2002, S. 5.
 Competition Act, 2002, S. 6 (2A).
 Competition Act, 2002, S. 29.
 Competition (Amendment) Act, 2023 Comes Into Effect ‘Partially’ (Jun. 1,2023)https://www.mondaq.com/india/cartelmonopolies/1323342/competition-amendment-act-2023-comes-into-effect- partially.
 Excel Crop Care Ltd. v. CCI, (2017) 8 SCC 47.
 Competition (Amendment) Act, 2023, S. 27.
 Supra note 8.